Hyundai Motor recorded the largest sales in history in the global market last year due to the increase in sales of high-value-added vehicles, including hybrid vehicles and the Genesis brand. However, it was found that operating profit decreased compared to the previous year due to increased expenditure on sales provisions caused by the decline in the value of the Korean won.
Hyundai Motor reported on the 23rd that its consolidated sales amounted to 175.2312 trillion won, an increase of 7.7% compared to the previous year, marking an all-time high. Operating profit decreased by 5.9% to 14.2396 trillion won, but net profit increased by 7.8% to 13.2299 trillion won.
◇ Increasing provision burden due to strong dollar... Double-digit decline in fourth quarter operating profit
The sales for the fourth quarter last year amounted to 46.6237 trillion won, a 11.9% increase compared to the same period the previous year. Hyundai noted that the sales volume of high-value-added vehicle types expanded mainly in advanced markets such as North America, and sales showed double-digit growth rates due to price increases of major models and favorable exchange rates. The average exchange rate of the Korean won against the dollar in the fourth quarter of last year was 1,396.8 won, which represents a 5.8% increase compared to the same period the previous year.
However, the strong dollar and weak Korean won had a negative impact on operating profit. This was due to the sharp increase in the size of sales provisions as a result of the rise in the exchange rate of the Korean won against the dollar in the global market. Sales provisions refer to accounting for the costs associated with providing warranties and services when selling a vehicle. Since these costs are accumulated in dollars, an increase in the value of the dollar also increases the amount of provisions when converted to Korean won.
Hyundai Motor's operating profit for the fourth quarter last year was 2.8222 trillion won, which is a sharp decline of 17.2% compared to the same period the previous year, and the operating profit margin was only 6.1%. The net profit for the fourth quarter was reported at 2.4742 trillion won.
Total sales volume for the fourth quarter decreased by 2.2% to 1,066,239 units compared to the same period last year. In the domestic market, sales dropped by 4.6% to 189,405 units due to a decline in consumer sentiment caused by the worsening economic situation and supply disruptions due to heavy snowfall. Meanwhile, overseas, sales in North America increased by 4.4% compared to the same period last year to 294,384 units, but overall sales decreased by 1.6% to 876,834 units due to declining demand in China and Europe.
However, sales of eco-friendly vehicles showed a noticeable increase, primarily centered on high-value-added hybrid vehicles. Global sales of eco-friendly vehicles in the fourth quarter last year reached 209,641 units, a 21% increase compared to the same period the previous year, due to strengthened hybrid lineups and expanded sales of hybrid sport utility vehicles in North America. Hybrid vehicle sales totaled 145,732 units, while electric vehicle sales reached 53,035 units.
◇ Slowing growth rates in major markets and ongoing electric vehicle chasm forecast
Hyundai Motor predicted that external uncertainties, such as slowing growth rates in major markets and the electric vehicle chasm (temporary demand slowdown), will persist this year. Accordingly, it noted that it would prepare sector-specific countermeasures and scenarios to systematically address these uncertainties.
Hyundai plans to focus on enhancing risk management capabilities, securing quality, improving costs, streamlining sales, fostering internal innovation, and strengthening internal and external communication. In the sales sector, it aims to start local production of electric vehicles in the North American market and increase the production of hybrid vehicles, which have recently seen a sharp rise in global demand.
Hyundai also announced its sales and performance targets, as well as investment plans for this year. The annual wholesale sales target has been set at 4.17 million units. It also set the sales growth target at 3% to 4% compared to the previous year, and the operating profit margin target at 7% to 8%.
In addition, to respond to the transition to software-defined vehicles (SDV), establish an electric vehicle supply chain in the United States, and continuously secure future technological capabilities, it plans to invest a total of 16.9 trillion won, including 6.7 trillion won in research and development, 8.6 trillion won in capital expenditures, and 1.6 trillion won in strategic investments.
Last year's year-end dividend was set at 6,000 won per share. Consequently, the annual dividend for 2024 is set at 12,000 won per share, including a total of 6,000 won from dividends in the first to third quarters, which is a 5.3% increase compared to the previous year. This is the largest amount ever as part of the 'three-year medium-term shareholder return' policy that stipulates a dividend payout ratio of over 25%.