Hyundai Motor's operating profit for the second quarter this year plummeted nearly 16% compared to the same period last year. Although sales increased by over 7% due to rising domestic and foreign sales, it failed to maintain profitability due to the high tariff of 25% imposed by the U.S. since April. Nevertheless, Hyundai Motor's policy is to respond flexibly according to market conditions rather than immediately raising U.S. sales prices to offset tariff expenses. The company is determined to localize parts procurement further and enhance the production efficiency of finished vehicles to safeguard both market share and profitability.
◇ Operating profit of 3.6 trillion won, below expectations… revenue grows 7.3%
Hyundai Motor announced on the 24th that its operating profit for the second quarter this year was recorded at 3.6016 trillion won, a decrease of 15.8% compared to the same period last year. This level is below the securities industry consensus estimate of 3.5331 trillion won compiled by financial information provider FnGuide. The operating profit margin also dropped from 9.5% to 7.5%, a decrease of 2.0 percentage points. As a result, the operating profit for the first half stands at 7.2352 trillion won, down 7.7% from the same period last year.
In contrast, the revenue for the second quarter increased by 7.3% compared to the same period last year, reaching 48.2867 trillion won. This is higher than the market expectation of 46.5177 trillion won. Total revenue for the first half was 92.6945 trillion won, exceeding last year's first half of 85.6791 trillion won.
Despite revenue growth, the retreat in operating profit is due to the 25% automobile tariff that the Donald Trump administration began imposing in April. Until the end of last month, Hyundai Motor managed to avoid raising sales prices thanks to inventory secured before the tariff was imposed. This means that the full impact of the tariff was not reflected in the second quarter, yet the company still suffered a hit of about 830 billion won.
A Hyundai Motor official said, "Growth in sales in key markets like Korea, the U.S., and Europe enabled surface-level growth, but the impact of U.S. tariffs, intensifying competition, and the rise in global incentives and sales expenses have slowed profit and loss."
In reality, Hyundai Motor's vehicle sales are on the rise. The company's global wholesale sales in the second quarter reached 1,065,836 units, an increase of 0.8% compared to the same period last year. In the domestic market, sales of the Palisade and Ioniq 9 new models increased by 1.5% year-on-year, reaching 188,540 units; abroad, U.S. sales recorded a 3.3% increase to 262,305 units.
◇ Cautious about price increases in the U.S.… "Continuing as a fast follower"
While Japan successfully negotiated to lower the automobile tariff from 25% to 15% with the U.S., Korea is still in negotiations. If this continues, Hyundai Motor is projected to face a tariff impact exceeding 1 trillion won in the third quarter. A Hyundai Motor official noted, "The impact of tariff and changes in trade environments will act as risk factors in management activities."
Hyundai Motor has plans to respond to the U.S. tariff with short-term measures and long-term strategies. First, in the short term, the company has decided to maintain the 'fast follower' posture as it has done so far. Lee Seung-jo, head of Hyundai Motor's planning and finance division (vice president), stated, "Rather than leading price increases based on tariff rates, we plan to closely monitor market conditions and respond flexibly," adding that the company is adopting a strategy to defend market share while maximizing profits in the U.S. market.
For the long-term strategy, Hyundai Motor plans to reduce expenses through localizing parts and increasing local production of finished vehicles, as well as cutting material and processing costs. In particular, a task force is currently operational to facilitate parts localization. The vice president stated, "We have received estimates from over 200 parts suppliers and are reviewing the optimal approach to determine whether exporting from Korea or local sourcing is better," adding, "We are also implementing production efficiency methodologies from the HMMA (Alabama plant), which has been operational for 20 years, at HMGMA (MetaPlant America), and the effects are expected to emerge in the third quarter."
Hyundai Motor has also decided to maintain the growth outlook announced earlier this year. In January, the company set its annual wholesale sales target at 4.17 million units, with a goal for consolidated revenue growth (guidance) of 3.0% to 4.0% and an operating profit margin target of 7.0% to 8.0%. The head of the division stated, "Market uncertainties, including the impact of tariffs, continue to persist," and said, "We will strive to communicate with the market regarding the guidance update as early as possible, especially after visibility on tariff policies is secured post-Aug. 1."