Kia revises up 2023 OP target after record Q2 earnings, to expedite EV push  

Kia Corp. has revised upwards its operating profit target for this year to up to 12 trillion won ($9.4 billion) after reporting its best-ever quarterly earnings in the second quarter on the brisk sales of sport utility vehicles with higher margins, coupled with the normalized global car output and the favorable foreign exchange rate.

The sibling of South Korea’s biggest carmaker Hyundai Motor Co. on Thursday announced that its consolidated operating profit in the April-June period reached 3.40 trillion won, up 52.3% from the same period of last year.

Kia reported a new record quarterly operating income after its previous record of 2.87 trillion won in the first quarter.

The result also came above the market consensus of 3.14 trillion won.

Kia shares ended up 0.6% at 83,100 won on Thursday.

INDUSTRY’S HIGHEST OPERATING MARGIN

Sales also jumped 20% on-year to a record of 26.24 trillion won in the second quarter, while net income climbed 49.8% to 2.82 trillion won, the highest result.

Kia’s operating margin hit 13% in the quarter, the highest in the global auto industry.

“While (overall) car demand remained solid, (our car) sales gained further traction from the normalization of car production,” Kia said on Thursday.

“Coupled with the favorable foreign exchange rate, a rise in sales of vehicles with higher profitability and lower incentives also helped the company post the highest-ever revenue and operating profit.”

The Korean currency traded around 1,300 won per US dollar on average in the first half of this year, weaker than around 1,230 on average a year ago.  

Buoyed by the stellar results, Kia upgraded this year’s operating profit guidance to up to 12 trillion won from the earlier target of 9.3 trillion won.

The sales guidance for this year was also revised upwards to over 100 trillion won from 97.6 trillion won, while that of the operating margin to up to 12% from 9.5%, the company said in a separate regulatory filing on the same day.

KIA CARS BECOME MORE POPULAR ABROAD

Kia sold 807,772 cars in total globally in the second quarter, up 10.1% from a year ago on the strong demand for its sport utility vehicles and eco-friendly car models including all-electric cars.

Its car sales grew in overseas markets more rapidly than at home.

It delivered 151,000 units at home in the second quarter, up 7.1% on-year, while its car sales North America and Europe jumped 18.7% and 17.0% to 261,000 units and 167,000 units, respectively.

Kia expanded its market share in the US in the first six months of this year to 5.1% from 4.9% on brisk sales of SUVs.

The company plans to enhance its marketing campaign to further up its SUV sales in the US in the second half while focusing on lease sales of its electric vehicles to benefit from tax credits for EVs under the US Inflation Reduction Act (IRA).

The EV9 is set to hit the US market in November.

Its market share in Western Europe slipped to 4.6% from 5.2% in the first half of this year but total shipments increased to 305,000 units from 294,000 units on strong SUV sales.

It expects its car sales momentum would remain resilient in the region in the second half following the expansion of its plant in Slovakia and an anticipated rise in exports from Korean plants.

It also aims to diversify its EV lineup in China with the addition of the EV6 in June and EV5 in November to regain ground in the world’s biggest auto and EV market later this year.

ACCELERATED EV DRIVE

Kia sold a total of 150,000 units of eco-friendly cars in the second quarter, up 13.1% from a year ago. Their share in its entire car shipments added 1.2 percentage points to 18.9%.

Sales of hybrid models grew 22.1% on-year to 82,000 units while EVs sold 44,000 units, up 1.4%.

The company said it sold 1,300 units of the EV9 in less than a month since its launch on June 19, exceeding its initial target, according to the company’s conference call on Thursday.

Kia plans to sell about 7,000 units of the EV9 monthly in the global market.

To foster its EV global sales in the second half, the company may offer bigger incentives on EV purchases in the global market, Joo Woo-jeong, executive vice president and chief financial officer of Kia, said during a conference call on Thursday.

“To keep our market share, we are contemplating whether to focus on profitability or car price to make a breakthrough in the global EV market facing abnormally fierce competition,” said Joo. “Our EVs are still profitable.”

The company may start offering incentives for its EVs next year when it rolls out new EV models, Joo added.

Kia plans to launch more affordable EVs next year to lower the overall EV prices as the price and battery charging convenience are keys to the popularization of EVs, said Jung Seong-kook, the vice president and head of Investor Relations Group at Kia.  

Kia will join Hyundai Motor to forge an EV charging alliance with BMW, General Motors, Honda, Mercedes-Benz and Stellantis to get the upper hand in EV battery charging accessibility and pricing, Jung said.

Earlier today, Hyundai Motor said it will partner with the six major global carmakers to build a charging network across North America to counter Tesla Inc.’s superchargers.

They will set up a joint venture to install at least 30,000 chargers around the region, the Korean auto giant said.

Write to Il-Gue Kim at black0419@hankyung.com

Sookyung Seo edited this article.