Kia's Q3 net is down due to engine provision

Kia headquarters in Seocho District, southern Seoul. [YONHAP]

Kia reported 458.9 billion won ($320 million) in net profit in the third quarter, significantly lower than a market consensus of 1.07 trillion won compiled by market tracker FnGuide.

The figure was down 60 percent on year, though the decline was mainly due to accounting reasons. The company provisioned 1.54 trillion won for complaints over its Theta II gasoline direct injection (GDi) engine.

Revenues were a record 23.2 trillion won, up 30.5 percent on year, beating the market expectation of 22.3 trillion won. Operating profit plunged 42.1 percent to 768.2 billion won, falling considerably short of a consensus of 1.95 trillion won.

"Sales grew, especially of high-margin models such as the EV6, and the shortage issue for particular auto parts improved," said Joo Woo-jeong, a Kia executive vice president during a conference call Tuesday.

"But the decline in profitability was inevitable due to the huge engine provision."

Kia sold 752,104 vehicles globally in the third quarter, up 9.9 percent on year. Domestic sales increased 6.2 percent while overseas sales were up 10.7 percent.

Of them, 123,000 vehicles were environmentally-friendly cars including pure electric vehicles (EVs) and hybrids. Eco-friendly vehicles accounted for 16.8 percent of Kia's total sales in the third quarter.

Kia said it has orders for about 1.2 million vehicles, half from the Korean market and another half from overseas.

"Though we produced more vehicles than last year, it largely fell short of our initial target due to the lingering Russia-Ukraine War," Joo added.

"The situation will likely continue in the fourth quarter as well, so the backorders will likely increase."

When asked about Kia's countermeasures to respond to the U.S. Inflation Reduction Act, Joo hinted at the possibility of starting EV production at its U.S. plant. Kia has a manufacturing plant in Georgia, which is now running only for combustion engine vehicles.

"We are considering various ways including using the U.S. plant to produce EVs," Joo said. "But if that comes to happen, we will have to have a thorough review on choosing which EVs will be produced in the factory considering efficiency and profitability."

BY SARAH CHEA [chea.sarah@joongang.co.kr]