Kia expects stellar Q2 after reporting record operating profit in Q1

Kia Corp., the smaller sibling of South Korea’s largest automaker Hyundai Motor Co., presented a rosy earnings outlook for the second quarter after reporting its biggest-ever quarterly operating profit of 2.87 trillion won ($2.1 billion) in the first quarter of this year thanks to the brisk sales of premium models with higher price tags.   

Kia on Wednesday announced in a regulatory filing that its consolidated operating profit for the January-March period stood at 2.87 trillion won on sales of 23.69 trillion won. Both figures, which jumped 78.9% and 29.1% on-year, respectively, were its best-ever quarterly results, breaking the previous records marked in the previous quarter.

Its net profit also more than doubled to 2.12 trillion won over the same period.

The upbeat results helped Kia post an operating margin of 12.1%, up 3.3 percentage points from a year ago and the highest margin for a global finished car maker for the quarter and better than Tesla Inc.’s 11.4%.

This suggests Kia has succeeded in restructuring its product mix with more lucrative models that also helped improve its brand’s reputation overall.

With higher profit-generating models, the company expects another strong quarter in the second quarter, traditionally a peak season for car sales, despite ongoing global economic uncertainties stemming from high interest rates, volatile foreign exchange rates and the ongoing Russia-Ukraine war.  

Kia will bump up sales of eco-friendly cars and lucrative sport utility vehicle (SUV) models in the current quarter with better incentive plans and price strategies that can further boost its profitability, the company said in a statement.

NO MORE BIG DISCOUNTS ON KIA CAR PRICES

Kia attributed its strong results for the first quarter to robust car sales on eased automotive chip shortages and higher car prices on strong demand for its premium models like SUVs and environmentally friendly cars.

The strong US dollar against the Korean currency also buoyed the company’s profitability, added the company, noting that the won depreciated 5.9% on-year to 1,276 per dollar on average in the first quarter.

It shipped a total of 768,251 units globally in the first three months of this year, up 12.0% from the same period a year ago. Domestic sales added 16.5% to 141,740 cars and overseas shipments increased 11.1% to 626,511 units.  

With brisk sales of premium models, its global average car sale price in the first quarter jumped 12.7% from the prior year to 3.27 million won. But it managed to cut incentives in the US market in the quarter to $671 from $682 a year ago.

Sales of its profitable SUVs including the Carnival, Sorento and Sportage accounted for 66.1% of Kia’s entire car shipments in the quarter, up 4.8 percentage points from the same period of last year.

Its green car sales including those of electric vehicles also climbed 21.1% to 133,000 units after the demand for its eco-friendly cars increased not only in its traditional key EV markets  -- the US and Western Europe -- but also in Korea and India.

Their share in Kia’s entire car sales also expanded by 2.3 percentage points to 18.1%.

The company pins high hopes on the EV9, its flagship large electric sport utility vehicle, due to hit the market in the first half of this year.

BULLISH ON CAR SALES IN 2023

Kia plans to expand its quarterly EV sales to about 80,000 units in the final quarter of this year from about 40,000 units in the first quarter with a focus on Europe, Korea and emerging markets like India.

In response to the US Inflation Reduction Act (IRA) that excludes Kia and Hyundai Motor from the list of EV makers subject to the country’s generous tax break benefit, Kia will seek to take measures to bolster its EV momentum in the world’s second-largest auto market, the company said.              

Packed with premium car models, Kia is poised to rake in more than 10 trillion won in operating profit this year, a historic high.

If that becomes true, the combined operating profit of Kia and Hyundai Motor could top 20 trillion won this year after Hyundai Motor on Tuesday reported a record-high quarterly operating profit of 3.6 trillion won for the first quarter.

The siblings’ combined operating profit for the first quarter amounted to 6.47 trillion won, larger than the estimated 5.07 trillion won operating profit of Toyota Motor Corp., last year’s global No. 1 car seller.

Kia shares ended down 1% at 85,700 won, taking a breath after posting gains for two straight sessions.

By Nan-Sae Bin  

binthere@hankyung.com


Sookyung Seo edited this article.