Theta engine issues push Hyundai Motor into the red in Q3Hyundai Motor’s quarterly performance slipped into the red during the third quarter due to problems with its Theta 2 gasoline engine.
According to its performance announcement on Monday, Hyundai Motor raised 27.6 trillion won ($24.4 billion) in revenue during the July to September period, a 2.3 percent increase on year. The company recorded a net loss of 189 billion won during the same period, while its operating loss was 314 billion won.
Both figures had turned from profits last year.
This is the first time since 2011 that the automaker has reported losses in its quarterly performance.
“After the second quarter as major markets started reopening borders, vehicle demand has been recovering and so has our sales,” Hyundai said in a statement. “But still, the Covid-19 effect persists and so has the on-year decline trend in our sales figures.”
The company sold a total of 997,842 vehicles worldwide between July and September, a 9.6 percent decline on year.
Domestically, the number of vehicles sold increased 21.9 percent, but in overseas markets, which take up a larger portion of sales, the figure dropped 15 percent.
Kia Motors recorded revenue of 16.3 trillion won, up 8.2 percent on year, in the third quarter. Net profit during the period totaled 133.7 billion won, down 59 percent on year, while operating profit declined 33 percent on year to 195.3 billion won.
Last week, Hyundai Motor and Kia Motors announced they are provisioning 3.36 trillion won for costs related to the Theta 2 gasoline engine, which would go down in their third quarter books. This engine has caused problems in both carmakers’ vehicles over the past decade, in and outside Korea.
“We applied the most conservative standards possible on the engine-related provision, taking into consideration quality-control costs that could occur in the future,” Hyundai said.
But exempting quality-control costs, third-quarter operating profits greatly outperformed market expectations, both companies claimed. Before the provisioning announcement, analysts’ consensus was for a 1.1-trillion-won operating profit for Hyundai Motor and 576.8 billion won for Kia Motors.
The quarterly revenue increase on year came at a difficult time for Korea’s largest carmaker, given the ongoing Covid-19 crisis and the stronger won against the U.S. dollar compared to last year.
“The on-year increase was possible thanks to improvements in our product mix as sales of high-value-added models like our SUVs and Genesis were strong, and incentives cuts,” Hyundai said in a statement.
The outlook for the rest of 2020 was not entirely rosy: Demand was slowly showing signs of recovery across multiple markets, but the fear of a second Covid-19 wave remains. Developing countries are still struggling to recover from the first wave of the pandemic and the value of the won remains an issue.
In its Monday statement, Hyundai added that it will make fundamental reforms across the company to put a stop to outbreaks of “repetitive” quality issues and enable the carmaker to detect problems before the market does.
Hyundai Motor is currently dealing with another issue regarding its Kona electric vehicles. More than a dozen have caught fire since its 2018 release, and while the incidents have caused no injuries, the cause of the issue still remains unclear.
Investigations are underway, conducted by the government, Hyundai and its Kona battery supplier, LG Chem.
BY SONG KYOUNG-SON [email@example.com]
More in Industry
Contract signed for Covid-19 vaccine
Teas the season
Empty Chairs at Empty Table
Is China's post-Thaad ban on Korean games finally over?
Local fast fashion booms as Uniqlo tanks, pandemic hits