Hyundai takes a hit from slow car demand

Hyundai Motor’s operating profit in 2017 fell below 5 trillion won ($4.7 billion) for the first time in seven years due to lukewarm demand in major global markets, the company’s earnings report showed Thursday.

Korea’s largest automaker sold 4.5 million cars last year, down 6.4 percent from the previous year. Operating profit was 4.5 trillion won, down 11.9 percent from the previous year. Hyundai’s operating profit has been on a downward slide since hitting a peak of 8.7 trillion won in 2011.

Revenue, though, inched up 2.9 percent to 96.3 trillion won last year.

The number of cars sold in Korea last year was favorable, at 688,939, up 4.6 percent. However, overseas sales fell 8.2 percent to 3.8 million.

“Sales in Korea was secured despite a labor union strike thanks to new cars like the Grandeur, Kona and G70,” said Koo Za-yong, Hyundai’s vice president in charge of investor relations, during a call with analysts.

But he acknowledged that slow demand in major markets like the United States and China “was not easy to break through.” The number of cars sold in China, the world’s largest auto market, dropped from 11.4 million in 2016 to 785,000 last year.

The automaker pledged to overturn the downward trend by expanding its eco-friendly lineup and launching new models. It has set a goal of selling 4.6 million cars this year.

Hyundai also hopes to find a winning strategy in flexibly responding to local markets. The automaker has broken down its centralized management system to empower regional affiliates.

“Tepid demand in the United States and China is expected to continue into this year,” Koo said. “We will respond more flexibly to market demand with the company’s new regional management system.”

Sensing the continued popularity of sport utility vehicles, Hyundai plans to launch eight new SUV models by 2020 and ramp up its eco-friendly offerings. Together with affiliate Kia Motors, Hyundai plans to expand the lineup of green models from 13 to 38 by 2025. The number of electric vehicles will grow to 14, the automaker said, in hopes of securing the No. 3 spot in the global electric car market.

Kia also posted its 2017 earnings on Thursday. Operating profit dropped from 2.4 trillion won in 2016 to 662.2 billion won in 2017. The company had to make a 1 trillion won payment to its workers after losing a court battle against its labor union, which claimed that bonuses and lunch fees should have been part of their wages.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]