Hyundai Motor's operating profit for the third quarter of this year plunged nearly 30% from a year earlier. Despite logging the highest third-quarter revenue on stronger sales at home and abroad, the company took the full hit from the 25% high auto tariff imposed by the U.S. administration since April. Even so, Hyundai said it will respond not by immediately raising prices but by cutting vehicle costs and ramping up local production of high-margin models such as hybrids (HEV, Hybrid Electric Vehicle).
◇ Shock of U.S. tariffs sends operating profit to 2.5 trillion won… revenue up 8.8%
Hyundai Motor said on the 30th that its third-quarter operating profit fell 29.2% on-year to 2.5373 trillion won. That slightly beat the 2.4514 trillion won consensus compiled by financial data firm FnGuide. The operating margin fell 2.9 percentage points from a year earlier to 5.4%, the lowest since the third quarter of 2022.
Revenue, by contrast, came to 46.7214 trillion won, up 8.8% from a year earlier, topping the securities market forecast of 45.6732 trillion won. Net profit fell 20% on-year to 2.5482 trillion won. While Hyundai posted its highest-ever third-quarter revenue, operating profit shrank by about 1 trillion won from a year earlier (3.5809 trillion won).
Despite revenue growth, operating profit retreated as the U.S. administration's high tariffs kicked in in earnest. Hyundai said third-quarter operating profit fell by 1.8 trillion won due to the U.S. tariff impact. Through the second quarter, the company had limited the decline thanks to inventory secured before the tariff took effect, but from the third quarter the impact was fully reflected. The hit from tariffs in the second quarter was about 830 billion won.
At an earnings conference call the same day, Lee Seung-jo, head of Hyundai Motor's planning and finance division, said, "Operating profit declined, but we partially offset the tariff impact by aggressively executing a preemptive contingency plan." He added, "Through non-price measures such as cutting material costs, we are offsetting 60% of the amount imposed by tariffs."
In fact, Hyundai's global sales increased. The company sold 1,038,353 vehicles in global markets in the third quarter, up 2.6% from a year earlier. Domestic sales rose 6.3% to 180,558 units on new model effects such as the Palisade HEV. Overseas sales climbed 1.9% to 857,795 units from a year earlier. U.S. sales fell by about 10,000 from the second quarter, but rose 2.4% from a year earlier to 257,446.
◇ Hyundai Motor: "We will respond to uncertainty with new models and cost reductions"
Hyundai positively assessed the conclusion on the 29th of U.S.-Korea talks to lower tariffs to 15%, but projected that uncertainties such as slowing sales in emerging markets will persist. It said it is calculating on the premise that the reduced tariff will be applied retroactively from Nov. 1. Lee said, "With the talks bearing fruit, tariff uncertainty is easing and more predictable operations going forward will have benefits beyond the monetary amount," adding, "There is a tariff impact, but we will strengthen our fundamentals."
First, Hyundai plans to respond to the market by aggressively rolling out new models. About 40 new models, including the GV90, are slated for next year. Lee said, "Starting in the fourth quarter, we are entering a 'golden time' with continuous new model launches," adding, "As new models roll out, incentive costs will fall and the sales mix will improve." The company also plans to expand U.S. local production of high-profit models such as the Palisade HEV to cope with uncertainty.
It will maintain its current 'fast follower' stance. Lee said, "We are closely monitoring the market. We will decide later how to handle (prices) depending on market conditions," adding, "We will decide within a range that does not undermine customer value." Lee also said, "We have decided to reexamine our existing mid- to long-term cost-reduction roadmap and are crafting measures to reduce manufacturing costs."
Hyundai signaled its commitment to meeting its 2025 annual guidance even as uncertainty persists. At its CEO Investor Day in September, the company released revised guidance including a 5.0%–6.0% target for revenue growth from last year and a 6.0%–7.0% target for consolidated operating margin.