Korea’s Hyundai Motor Group set to outperform Toyota in Q1 operating profit

Hyundai Motor Co., left, and Kia Corp. buildings in Seoul [Courtesy of Hyundai Motor Group]

South Korea’s Hyundai Motor Group (HMG) outperformed its archrival Toyota Motor Corp. of Japan, world’s top-selling automaker, in terms of first-quarter operating profit on the back of high margin.

Kia Corp., the second-largest automaker after Hyundai Motor Co., posted record earnings on Wednesday for the first quarter. Its operating profit reached 2.87 trillion won ($2.1 billion) in the January-March period, up 78.9 percent from the same period a year ago, and sales 23.69 trillion won, up 29.1 percent. The automaker’s operating margin, measured by dividing the operating profit by total revenue, stood at a record 12.1 percent.

Kia’s robust performance was driven by the high popularity of its recreational vehicles (RVs) and eco-friendly cars. The automaker sold 768,251 units at home and abroad in the first three months of the year, up 12 percent from a year ago.

In the U.S., sales of Kia’s Telluride, one of its popular sport utility vehicles (SUVs), increased by 23.2 percent to 27,000 units during the cited period. Sales of Sportage SUV also jumped 92.5 percent to 32,000 units.

When adding Hyundai Motor’s record earnings, HMG’s first-quarter operating profit came to 6.5 trillion won, which is higher than Toyota’s estimated 5.08 trillion won for the same period.

Last year, Toyota was the world’s top automaker in terms of the number of units sold while Germany’s Volkswagen Group topped global sales.

HMG’s first-quarter performance is comparable to those of the two top automakers.

According to an analysis by Maeil Business Newspaper and Samsung Securities Co. on the first-quarter earnings of major automakers including their estimates, Hyundai Motor and Kia’s combined operating profit was the second-highest after Volkswagen Group at 10.2 trillion won. Their operating margin was also second-highest after Tesla Inc. at 11.4 percent. Toyota’s corresponding figure is estimated at 5.9 percent.

The analysis excluded luxury automakers like Mercedes-Benz in the analysis as the number of cars sold is relatively small to other peers.

Local brokerage firms expected the Korean automakers to enjoy continued robust earnings for a while.

“There is a shortage in the inventory of internal combustion vehicles and related fixed costs have declined,” said Im Eun-yeong, an analyst at Samsung Securities. “Competition with internal combustion vehicles has become less fierce as automakers are using existing factories to produce electric vehicles. We expect such a market environment to go on for at least two years.”

It remains uncertain, however, whether Hyundai Motor and Kia’s operating margins will remain in the double digits after 2025 as a fiercer race in the automobile market is likely, starting from the year when major global automakers begin mass production of EVs. Tesla is now busy cutting its EV prices to compete against its rivals, which analysts expected to develop into a broader race among global automakers in two years.