Hyundai Motor sells less but makes more in Q1

Hyundai Motor's factory in St. Petersburg, Russia [HYUNDAI MOTOR]

Hyundai Motor sold less cars in the first quarter but its revenue and net profit beat expectations as more expensive cars such as Genesis models and SUVs sold well.

The Korean automaker’s revenue came to 30.3 trillion won ($24 billion) during the January-March period, recording a year-on-year increase of 10.6 percent. Its net profit posted 1.8 trillion won, a 16.8 percent year-on-year jump.

Both figures beat the market forecasts compiled by FnGuide of 29.8 trillion won in revenue and 1.5 trillion won in net profit.

“Although a shortage of automotive semiconductors and other components lead to sales deduction in the first quarter, operating profit increased thanks to the improved sales situation in which Genesis models and SUVs were sold more, on top of the favorable exchange rate,” Hyundai Motor said in a release Monday.

“Business uncertainty is expected to continue this year as the chip shortage is showing slower-than-expected recovery and the supplies of other components are being disrupted as well due to lockdowns in some parts of China.”

The business environment for automakers including Hyundai Motor was dismal in the first quarter following the onset of the Russia-Ukraine conflict on top of a continued shortage of chips and key components.

Hyundai Motor sold 902,945 units in the first quarter, 9.7 percent less than the same period last year.

Its domestic sales came to 152,098 units, recording an 18 percent year-on-year drop. Its overseas sales came to 750,847, or 7.8 percent less than the first quarter of last year.

"Risk grew in the first quarter due to conflicts in Russia," said Seo Gang-hyun, Hyundai Motor's chief financial officer. "Hyundai Motor's sales in Russia decreased by 25 percent in the first quarter."

Sales of cars in Russia account for approximately 5 percent of Hyundai Motor's global sales. It also runs a factory in St. Petersburg that has an annual production capacity of 230,000 units.

The St. Petersburg factory has been shut down since March as its parts supply was disrupted due to the conflict. The Korean automaker said it has set up a contingency plan to respond flexibly to changing conditions in Russia. Parts that used to be exported to Russia will be redirected to Hyundai Motor's other factories, the carmaker said.

In order to protect the profitability of its Russian corporation, Hyundai Motor said it will reduce the operation cost of its factory and downsize its incentives and marketing costs.

Despite the lingering risks, however, Hyundai Motor expects solid demand for cars for the duration of the year as the demand for cars from last year remains unresolved due to the supply disruption.

"As of March, there are some 520,000 cars waiting to be delivered to customers, which is 29 percent more than the previous year," said Koo Za-yong, vice president at Hyundai Motor.

The carmaker said it will maintain its goal of improving its annual revenue by 13 to 14 percent for 2022, which was announced early this year. It also said it is aiming for an operating profit rate of 5.5 to 6.5 percent for this year.

Hyundai Motor shares closed 1.11 percent higher than the previous trading day on Monday at 182,000 won per share.

Kia's earnings hovered over market expectations as well, with its revenue at 18.4 trillion won, a 10.7 percent year-on-year increase, and net coming in at 1 trillion won, a 0.2 percent drop.

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