Hyundai Motor's operating profit in the first quarter of this year fell by more than 30% from a year earlier. Sales increased as eco-friendly vehicles such as electric and hybrid cars performed well, but profitability deteriorated sharply due to the high U.S. tariff imposed since Apr. last year, resulting in weaker-than-expected results.
Hyundai Motor said on the 23rd in its earnings conference call that first-quarter operating profit on a consolidation basis was 251.47 billion won, down 30.8% from the same period a year earlier. Securities firms had put the average forecast (consensus) at around 278 billion won, but operating profit fell short of that.
Revenue rose 3.4% year over year to 4.59389 trillion won, but net income fell 23.6% to 258.49 billion won.
◇ Revenue hits a first-quarter record high… U.S. tariff impact at 860 billion won
Hyundai Motor's revenue marked the highest on record for a first quarter. Total sales volume in the global market came to 976,219 units, down 2.5% from a year earlier, but revenue continued to grow as sales of high value-added models, including hybrids, increased.
Domestic sales fell 4.4% year over year to 159,066 units amid rising wait times for new models. Hyundai Motor plans to roll out a raft of new cars starting with a Grandeur facelift. Overseas sales also slipped 2.1% to 817,153 units. U.S. sales, however, edged up 0.3% to 243,572 units.
In the global market, sales of eco-friendly cars rose 14.2% year over year to 242,612 units as electric and hybrid cars gained popularity. Of these, electric vehicle sales were 58,788 units and hybrid cars were 173,977 units. In particular, hybrid sales set a quarterly record high.
The impact of U.S. tariffs in the first quarter of this year was tallied at 860 billion won. After the Donald Trump administration took office, the United States imposed a 25% tariff on all imported cars starting in Apr. last year. Under the Korea–U.S. Free Trade Agreement (FTA), domestic companies such as Hyundai Motor and Kia that had exported cars to the United States tariff-free also became subject to tariffs. As a result, operating profit plunged compared with the first quarter of last year, when exports were tariff-free.
In addition, an increase in sales warranty provision due to the stronger dollar is also analyzed to have significantly weighed on operating profit. A sales warranty provision is an accounting recognition of the cost of free warranties and services provided when selling cars. Because this expense is set aside in dollars, the provision amount converted into won increases when the dollar strengthens.
A Hyundai Motor official said, "Despite a decline in global demand due to geopolitical issues and one-off factors worsening profitability, our global market share rose from 4.6% to 4.9%, and our U.S. market share increased from 5.6% to 6%."
◇ Heightened uncertainty amid global tensions… difficulties likely to persist
Hyundai Motor projected that difficulties will continue in the second quarter, with global tensions such as a U.S.–Iran war unresolved and trade conflicts between countries intensifying. It said it will secure new growth drivers by focusing on key new models launched this year.
Genesis, Hyundai Motor's luxury brand, will unveil the GV90 this year, a large flagship electric sport utility vehicle (SUV). Hyundai Motor also plans to launch full-change new models of the Avante and Tucson, as well as facelifted versions of the Grandeur and Santa Fe this year.
Hyundai Motor said it has drawn up a "contingency plan" and will concentrate companywide capabilities to offset factors hurting profitability, such as tariff impacts. The policy is to reexamine from scratch all procedures related to spending, including business planning, budget setting, and expense execution.
Meanwhile, Hyundai Motor decided to pay a quarterly dividend of 2,500 won, the same as the quarterly dividend for the same period a year earlier, under the value-up program released last year.