In chaotic world, Hyundai Motor is ruling the road
Despite a pandemic, war, inflation and an auto chip shortage, Hyundai Motor is on a roll, having made smart strategic bets on SUVs and electric vehicles (EVs).
Last week, Hyundai Motor reported net profit of 3.08 trillion won ($2.35 billion) in the second quarter, 55.6 percent higher than a year earlier, on record revenues of 36.0 trillion won, up 18.7 percent. Operating profit was a record 2.98 trillion won, up 58.0 percent on year.
The key to the strong performance was selling fewer yet pricier cars, specifically high-end Genesis vehicles, SUVs and EVs overseas.
The good results came despite a fall in unit sales in North America, the company's largest market, of 19.0 percent to 243,000 units. In Europe, however, unit sales rose 5.9 percent to 157,000 thanks to an increase in EV sales. India saw the steepest increase, an 18 percent jump to 136,000 units sold.
Sales declines were most visible in China, which accounted for 9 percent of total unit sales in 2021, and Russia, which accounted for 4 percent. Sales dropped 52 percent on year in China in the second quarter to 44,000 units, and by 71 percent in Russia to 18,000.
The automaker has been building up its market share in the U.S., which accounted for about 19 percent of total unit sales in 2021, especially with SUVs.
Hyundai Motor sold 369,535 cars in the U.S. so far this year, and 76 percent, or 279,358 units, were recreational vehicles (RV), which includes SUVs and crossover utility vehicles.
In 2021, RV sales accounted for 65 percent of Hyundai's sales in the U.S., up from 2019’s 48 percent.
Hyundai Motor's market share in the U.S. is now 5.2 percent, up from 4.7 percent two years ago.
“One of the big trends in the U.S. market, everybody knows, is SUV growth,” said Jose Munoz, global chief operating officer of Hyundai Motor, during an interview with journalists at the CES 2022 in January.
“So with the launch of our SUV and the focus that we have put in developing these vehicles with the launch of the new Tucson, the new Santa Fe, and also the Santa Cruz, we have been able to get to around 65 percent. If we look back a few years, we were about 35 to 37 percent.”
The Tucson SUV was the top selling model for the company in the U.S. in the first half of this year with 84,071 units sold. The Santa Fe SUV followed with 57,895 units, and then the Elantra sedan with 48,844. The Palisade SUV and Kona also sold well.
The luxury Genesis brand also turned in a strong performance. Genesis sold 25,668 cars, including 8,313 GV70s and 7,605 GV80s in the first half of the year.
Robust sales of EVs, especially in Europe and the U.S., also helped the bottom line.
EV sales jumped 49.1 percent in the April-June period compared to last year, according to Hyundai Motor. The Ioniq 5, which began selling last December in the U.S., sold 7,448 units there in the second quarter and 16,699 units worldwide.
Kia, Hyundai's smaller affiliate, saw a 78.9 percent increase in EV sales on year in the April-June period, to 133,000.
Hyundai and Kia sold 17,979 EVs in the U.S., which is about 9 percent of their total sales in the country. The Korean automakers ranked second in terms of market share for EVs following Tesla's 66 percent share.
In the April-June period a year ago, the Korean carmakers sold only 4,804 EVs in the U.S., claiming a market share of 3.8 percent.
Moreover, lower dealership incentives — the money paid to dealers to boost sales — and a weakening won against the dollar also improved the bottom line.
Low levels of inventories in the first half of this year reduced dealership incentives by about 70 percent on year, according to industry analysts. Incentives are paid to dealers to encourage sales when demand is low.
“About four-months worth of back orders, or 1.2 million orders, are stacked up at this point,” wrote Kim Jun-seong and Jang Jae-hyuk, Meritz Securities analysts, in a report released Thursday. “That means that in order for Hyundai Motor’s global inventory level, which is currently at a record low, to go up, the waiting back orders should be fulfilled first.”
The currency situation helped as well. The won traded at 1,290 won per dollar on average in the second quarter, which is up 138 won year on year. Hyundai reported that the weak currency has added about 641 billion won to its operating profit of 2.98 trillion won.
Hyundai plans to produce Santa Fe Hybrid EVs in its Alabama factory starting in October to meet rising demand for eco-friendly vehicles. The Ioniq 6 will go on sale in some parts of Europe at the end of this year, and in the first half of next year in North America.
BY SHIN HA-NEE [firstname.lastname@example.org]