Hyundai Motor logs highest-ever Q3 revenue; margin drops

Hyundai Motor Co. on Thursday reported its worst quarterly profit margin for this year, despite delivering its highest-ever revenue for a third quarter, on a drop in sales volume and aggressive sales promotion in overseas markets.

Sports utility vehicles and high-end cars such as Genesis and hybrid models led its sales higher as the softening Korean won made its vehicles more affordable than other foreign brands.

But the hefty sales incentives it offered in the US and Europe, including warranty extensions on its Santa Fe SUVs, ate away at its profit margins, while rising inflation increased labor costs.

Its operating profit slid 6.5% on-year to 3.6 trillion won ($2.6 billion) in the July-September quarter on a consolidated basis. It missed market expectations of 3.9 trillion won.

Its operating profit margin came in at 8.3%, compared with 9.5% in the second quarter and 8.7% in the first quarter of this year.

In comparison, its revenue rose 4.7% on-year to 42.9 trillion won ($31 billion) in the quarter, in line with market consensus. It marked the strongest revenue for a third quarter in its history.

Hyundai Motor's global sales decreased 3.2% on-year to 1,011,808 units in the third quarter. Hybrid vehicles accounted for over 10% of them.

In North America, the warranty extension for Grand Santa Fe (Maxcruz) was largely blamed for profit margin falls, incurring additional liabilities of 320 billion won.

In the domestic market, its sales edged up 1.8% to 169,901 units, led by SUVs and hybrids such as the revamped Santa Fe hybrid.

Hyundai gave a cautious outlook, citing a slowing economy, the won’s weakness and interest rate cuts, as well as escalating geopolitical risks such as the conflict in the Middle East and the prolonged war between Ukraine and Russia.

Further, intensifying competition with Chinese electric vehicle makers poses a threat to Hyundai amid a prolonged EV chasm, or a slowdown in demand.

As part of cost-cutting efforts, Hyundai is considering replacing some EV batteries with lithium iron phosphate (LFP), cheaper than ternary batteries, a Hyundai Motor executive said during its earnings call.

OP MARGIN GUIDANCE

Hyundai Motor is sticking to its operating profit margin guidance of 8-9% for all of 2024. 

“Taking into account the fourth quarter, we believe we can meet our operating profit margin guidance of 8-9%,” the executive added.

It has decided to pay a 2,000 won dividend per share for the third quarter, matching its dividend payments in the first and second quarters.

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

Yeonhee Kim edited this article.