Kia(000270) said in a filing on the 24th that its preliminary operating profit on a consolidation basis in the second quarter this year was 2.6286 trillion won, down 4.9% from the same period a year earlier.
Revenue for the same period rose 12.6% to 33.0371 trillion won, marking a quarterly record. Net profit came to 2.3277 trillion won, up 2.6%.
Kia said that although it achieved both record-high sales and record revenue in the second quarter this year, operating profit fell due to factors such as increased sales warranty provisions stemming from incentive policies and the won's weakness.
Sales warranty provisions are expenses allocated for quality assurance, including after-sales service (AS) and defect repairs for vehicles sold. Pricing policies to respond to Chinese electric vehicle (EV) brands also had an impact.
However, Kia noted that with sales robust, its operating margin has been on a steady rise since hitting a low in the third quarter last year, indicating a recovery in fundamental profit strength.
Kia's operating margin was 5.1% in the third quarter last year due to factors such as U.S. automobile tariff impositions. It then recorded 6.6% in the fourth quarter last year and 7.5% in the first quarter this year, and 8% in the second quarter this year.
The cost of sales ratio was 81.7%, up 1.7 percentage points from a year earlier. Higher incentives and the impact of U.S. tariffs were significant. Excluding tariff effects, the cost of sales ratio was 79.2%, and the selling, general and administrative expense ratio was 10.3%, down 0.3 percentage points year over year.
Kia's total wholesale sales in the second quarter this year were 851,639 units, up 4.5% from the same period last year. The share of domestic sales (154,816 units) was 18.2%, and overseas sales (696,823 units) were 81.8%.
Global local sales, which represent retail sales, were 839,000 units, up 5.8% over the same period. Kia said it achieved record sales despite instability in the Middle East and weaker consumer sentiment in China.
A sharp increase in retail sales of electrified vehicles (xEV) drove overall volume growth. Kia's xEV retail sales in the second quarter this year were about 296,000 units, up 60% from a year earlier. During the same period, the xEV sales share also rose 11.9 percentage points to 35.3%.
Among them, EV sales jumped 88.4% to 110,000 units. Hybrid electric vehicles (HEV) sold 178,000 units, with volume up 61% from a year earlier.
By market, second-quarter sales in the domestic market rose 8.6% to 154,000 units. In the United States, 224,000 units were sold, up 2.8%.
Kia said EV unit sales in the domestic market jumped 123.4%, leading overall sales, while in the United States, hybrid sales rose 151.6%, and sales increased thanks to the new Telluride effect.
In Western Europe, aided by the full-fledged expansion of EV sales, 151,000 units were sold, up 12.9% from a year earlier. Kia's global market share in the second quarter was 4%, up 0.3 percentage points year over year.
Kia plans to achieve this year's target of 10.2 trillion won in operating profit, based on sustained demand for EVs and HEVs.
In Korea, it plans to maintain the No. 1 EV share while aiming for record EV sales. In the United States, it will boost profitability with the Telluride and the Sportage Hybrid, which will be mass-produced for the first time at a local plant.
In Europe, it plans to strengthen new EV pricing competitiveness through local production of the EV2 and EV4. It will also aggressively target the light commercial vehicle market with the purpose-built vehicle (PBV) PV5, and bolster HEV competitiveness with the Seltos Hybrid and the K4 Hybrid.
In emerging markets including India and Latin America, it will continue to push the rollout of market-tailored strategic models and expand supply volumes.
Jung Sung-guk, Kia's head of IR and strategic investment (executive vice president), said, "We will continue to maintain solid profit strength by improving our sales mix toward high value-added vehicles and pursuing cost reductions on multiple fronts."