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Earnings

Hyundai Motor Q1 net profit triples; chip shortage dims Q2 outlook

Apr 22, 2021 (Gmt+09:00)

The Genesis X, Hyundai Motor’s premium EV concept coupe
The Genesis X, Hyundai Motor’s premium EV concept coupe


South Korea’s top automaker Hyundai Motor Co. said on Thursday its first-quarter net profit nearly tripled to the highest level in four years, driven by pricey sport utility vehicles and premium Genesis models.

But the company warned of tough business conditions in the second quarter due to the worsening shortage of automotive chips.

Net profit in the January-March quarter jumped to 1.52 trillion won ($1.36 billion) from 552.7 billion won in the year-earlier period, the company said in a regulatory filing.

Operating profit increased 92% on year to 1.66 trillion won from 863.8 billion while revenue rose 8.2% to 27.39 trillion won from 25.32 trillion. The operating profit was the highest since the second quarter of 2016, when it posted 1.76 trillion won in profit.

The company’s operating profit margin also improved to 6% in the first quarter from 3.4% a year earlier.

The company said the rollout of pricier vehicles such as the Genesis GV70 SUV and the new Tucson models in the domestic market resulted in the decent first-quarter showing. In overseas markets, despite weak sales in Europe amid the global COVID-19 pandemic, strong sales in emerging markets such as India and Latin America helped increase total global auto sales, it said.

Hyundai’s global auto shipments rose 10.7% year on year to about 1 million units in the first quarter. Its Korean sales increased 16.6% to 185,413 cars, while overseas sales increased 9.5% to 814,868 cars.

SUVs accounted for 44.3% of its total sales in the first quarter, while the Genesis cars took up 4.3%.

The company said its strong first-quarter results were also thanks to a lower comparison base in the year-earlier period, when the entire auto industry was reeling from the outbreak of the pandemic.

Demand for new Hyundai cars has been solid so far this year.

In the US, Hyundai and its sister firm Kia Corp. posted their best-ever March and first-quarter sales in a market where the South Korean companies are working to refine their profiles as makers of premium models.

In a bid to enhance its presence in the luxury segment on the global stage, Hyundai said it is taking its Genesis models to China, the world’s largest car market.

Earlier this week, Hyundai unveiled an electric version of its premium brand Genesis at the opening of Auto Shanghai 2021.

Hyundai Motor Q1 net profit triples; chip shortage dims Q2 outlook

On Thursday, Kia Corp. also reported strong first-quarter results.

Net profit in the January-March period stood at 1.03 billion won ($926 million), almost quadrupled from a year earlier.

Operating profit more than doubled to 1.07 trillion won while sales rose 13.8% to 16.6 trillion won.

Q2 OUTLOOK CLOUDED BY CHIP SHORTAGE

The strong quarterly results of the two car-making units of the Hyundai Motor Group come as car manufacturers are struggling with a global shortage of semiconductors used in vehicles. Hyundai Motor said it intermittently halted some of its assembly lines in Korea due to a short supply of automotive chips.

While global auto peers such as Volkswagen AG and General Motors Co. were forced to halt production due to the chip shortage, Hyundai managed to stave off production cuts in the first quarter thanks to its healthy chip inventory.

However, the global chip supply disruption is dimming Hyundai Motor’s outlook for the second quarter, with company officials saying its auto production will be more severely damaged by short chip supplies going forward.

Chipmakers expect the shortage to continue at least until the end of 2021.

The Genesis SUV GV70 was unveiled on Dec. 8, 2020 
The Genesis SUV GV70 was unveiled on Dec. 8, 2020 

SOLID-STATE BATTERY

During a conference call with analysts on Thursday, Hyundai Motor also revealed plans to sell EVs equipped with its own solid-state battery by 2030. This is the first time the carmaker specified a timeline for the plan.

The company said it is working on manufacturing both a lithium-ion battery and a solid-state battery in-house. Hyundai has been buying batteries from LG Energy Solution Ltd. and SK Innovation Co.

"We are researching and developing lithium-ion and solid-state batteries with an objective of internalizing the battery manufacturing technology," said Koo Za-yong, head of Hyundai Motor's investor relations, during the conference call.

Solid-state batteries are considered safer and more energy-efficient than lithium-ion batteries as they don't use liquid electrolytes, which are volatile and highly vulnerable to external shock. No battery maker or automaker has yet developed a solid-state battery ready for mass production.

Write to Byung-Uk Do and Il-Gue Kim at dodo@hankyung.com

In-Soo Nam edited this article.

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