China sales the lone bright spot for Hyundai, Kia

Hyundai Motor and Kia Motors reported a mixed first-half performance in the world’s three largest markets - United States, Europe and China - but analysts predict a better second half with the resumption of weekend production.

According to data from Hyundai Motor and U.S.-based Automotive News, combined sales of Hyundai and Kia were 638,361 units, down 1.1 percent from the first half of last year.

Their combined share of the U.S. was 8.2 percent in the January-June period, a 0.7 percentage point drop from 2012.

Kia sold 277,351 units in the first six months of this year, 3.9 percent less than last year, while Hyundai rose 1.2 percent year-on-year to 361,010 units.

However, even Hyundai’s slight sales increase was not impressive in light of overall U.S. auto sales growth of 7.5 percent with 7.8 million vehicles sold.

In Europe, Hyundai and Kia combined total for 399,047 in sales in the first half, down 1.5 percent from a year ago, according to data from the European Automobile Manufacturers’ Association. Hyundai sales fell 3.6 percent to 223,594, while Kia had a 1.3 percent increase to 175,453 vehicles sold.

However, their combined market share increased 0.3 percentage point to 6.2 percent from a year ago, as their competitors struggled in the European economic slowdown. Hyundai and Kia’s European market share ranked eighth.

Hyundai said weekend overtime work stoppages earlier this year were a major reason for poor sales in the United States and Europe because some models are built in Korea and exported.

Overtime work resumed about two months ago, and the company estimated the March to May work disruption caused 1.7 trillion won ($1.5 billion) in damage.

However, experts said sales should improve in the second half, especially in the United States with facelift models due to be released.

“With growing demand in the U.S. auto industry, new models and an easing of supply shortages, Hyundai and Kia’s second-half U.S. sales are estimated to reach 377,000 units and 294,000 units, respectively,” said Seo Sung-moon at Korea Investment & Securities.

While sales in the United States and Europe were not impressive, Hyundai Motor Group said sales in China, the world’s largest auto market, were at record levels.

Two Korean automakers, which run joint companies in China, said combined first-half sales in China were 787,308 vehicles, a 32.6 percent increase from a year earlier. Beijing Hyundai sold 510,842 vehicles and Dongfeng Yueda Kia 276,466.

Experts said sales in China increased sharply because both companies operate large factories there and tailor models to the market.

For instance, sales of three generations of the compact Avante in China - Elantra, Yuedong, Langdong - were 217,488 units, up 52.7 percent from a year ago, while sales of the small SUV Tucson ix (ix35 in China) increased 74.3 percent to 72,048.

“With the full operation of Hyundai’s third plant in Beijing and good sales of localized models, we achieved 53 percent of our annual sales goal of 1.47 million units in this first half,” said a Hyundai Motor Group official.

Analysts said Korean automakers will keep cruising in China despite possible local government restrictions on vehicle registration due to increasing traffic congestion and pollution.

“Hyundai and Kia’s market share in China was 9.2 percent in 2010, but it increased to 9.6 percent in 2011 when Beijing started its vehicle registration restriction,” Seo said. “Hyundai’s wage bargaining with the union is also expected to not be as fierce as last year.”

BY JOO KYUNG-DON [kjoo@joongang.co.kr]