Hybrids, SUVs drive Hyundai Q2 profits to record high

Hyundai Motor Co. posted its strongest quarterly results in the second quarter, with brisk sales of high-margin models such as hybrid cars and sports utility vehicles (SUVs) offsetting a sharp decline in electric vehicle sales.

Hybrid cars and SUVs made up around 70% of the cars Hyundai sold in the quarter. The proportion of hybrids in total Hyundai car sales rose to its highest-level level of 11.6% -- the first time hybrid variants took up more than 10% of Hyundai’s vehicle sales in a single quarter.

South Korea’s largest carmaker expects to continue its record-setting run in the second half of this year as it is slated to roll out facelifts of other hybrids and SUVs, amid the softening won that boosts the conversion value of overseas sales.

On Thursday, Hyundai Motor reported 4.28 trillion won ($3.1 billion) in second-quarter operating profit, its strongest quarterly profit and a 1.0% rise from the year prior. Sales climbed 6.65% to its record high of 45.02 trillion won over the same period.

A DIP IN SALES VOLUME

In terms of sales volume, it sold fewer cars than in the year-earlier period. It sold 1,057,168 units in the April-June quarter, compared with the 1,059,713 units in the second quarter of last year.

Amid the slowing EV uptake, Hyundai has shifted its focus toward hybrids. Hybrid car sales soared 26.4% on-year to 122,421 units in the second quarter. In contrast, EV sales contracted 24.7% to 58,950 units over the same period.

“Hybrid cars are about 20% more expensive than internal combustion engine cars of the same type, so they generate higher margins,” said a car industry official.

“Unlike other automakers that released hybrids for only a few models, Hyundai Motor has launched hybrids for almost all of its models,” he added.

SUVs, FOREIGN EXCHANGE GAINS

SUVs made up 58.4% of Hyundai Motor sales in the second quarter, a 56.1% surge from the year prior. SUVs are about 30% more expensive than sedans manufactured on the same platform.

The won softened 4.3% on-year to the dollar in the second quarter on average, lifting its operating profits and sales by 400 billion won and 572 billion won, respectively, after the dollar-to-won conversion.

A decline in the costs of raw materials such as aluminum and steel sheets beefed up its bottom line as well. Manufacturing costs accounted for 78.4% of vehicles' sales prices in the second quarter, down 0.5 percentage point on-year.

AVERAGE SELLING PRICE

In the second half, Hyundai Motor will continue to focus on high-margin hybrids and SUVs even at the cost of a drop in sales volume.

Its sales target of 4.24 million units for this year almost matches its 2023 sales volume of 4.22 million units.   

Its average selling price has been on the rise. Its vehicles were priced at 53.2 million won on average in South Korea in the first quarter of this year, up 41% from the 37.7 million won in 2019.

In overseas markets, its passenger cars and SUVs were sold at 64.2 million won and 68.8 million won on average in the first quarter of this year, respectively. These are about double their price tags set five years before.

Over the same period, the domestic price of its SUVs jumped 47% to 52.2 million won from 35.4 million won on average.

Hyundai has been on a record-setting run since its sales reached the 100 trillion won milestone in 2019. For full-year 2024, it is on track to achieve around 170 trillion won in sales, which would mark a fresh record high for the company, according to industry officials.

On a second-quarter conference call on Thursday, Hyundai Motor Chief Financial Officer Lee Seung Jo said the company is expected to benefit from the weak won and brisk sales in the US in the second half of this year.

He said the company will also expand its EV lineup.

Hyundai will pay a dividend of 2,000 won per share for the second quarter.

Write to Jae-Fu Kim at hu@hankyung.com
 


Yeonhee Kim edited this article.