Hyundai Motor Group rises to world’s No. 3 in operating profit and margin in Q2

Hyundai Motor Group headquarters in Seoul. [Courtesy of Hyundai Motor Group]

South Korean auto giant Hyundai Motor Group, the world’s third-largest automaker by sales last year, has been ranked among the world’s top three in terms of both operating profit and operating margin.

As of the second quarter this year, Hyundai Motor Co. and Kia Corp. under Hyundai Motor Group ranked third in operating profit behind Toyota Motor Corp. and Volkswagen AG, which are mass brands with large sales volumes. Their operating margin, meanwhile, also ranked third after luxury brands Mercedes-Benz Group AG and BMW Group Inc.

According to Hyundai Motor Group on Thursday, Hyundai Motor and Kia posted combined sales of 68.49 trillion won ($53.5 billion) in the second quarter, up 18.3 percent from a year earlier and an operating profit of 7.64 trillion won, up 46.6 percent. The combined operating margin of the two companies reached double digits at 11.2 percent.

According to an analysis of second-quarter results of major automakers released by Maeil Business Newspaper and Samsung Securities Co., the combined operating profit of Hyundai Motor and Kia ranked third globally behind Toyota Motor with 8.44 trillion won and Volkswagen with 8.33 trillion won.

The combined operating margin of the two companies also ranked third after Mercedes-Benz with 13 percent and BMW with 11.3 percent. It turns out that Hyundai Motor Group has performed well, standing shoulder to shoulder with global mass and luxury brands.

Hyundai Motor Group’s double-digit operating margin alongside Mercedes-Benz and BMW is attributed to its upscale strategy.

“Compared with Volkswagen and Toyota Motor, Hyundai Motor Group has a higher proportion of sales from recreational vehicles (RVs) and more standard comfort and safety features for each model,” said Lim Eun-young, a senior analyst at Samsung Securities. “While Volkswagen and Toyota Motor mainly sell standard cars with the least amount of features in the U.S., Hyundai Motor and Kia offer advanced driver assistance systems (ADAS) for the base model.”

In fact, increased sales of RVs such as more expensive sport utility vehicles (SUVs) and eco-friendly vehicles helped Kia post its best-ever quarterly results.

Kia announced that its consolidated sales for the second quarter was 26.24 trillion, up 20 percent from a year ago and its operating profit 3.40 trillion won, up 52.3 percent. The operating margin was 13 percent. Sales have set new highs for a sixth consecutive quarter and operating profit a third straight quarter.

Global sales reached 807,772 units, up 10.1 percent from last year. The profit increase was led by an expanded share of high-end, high-value vehicles such as RVs and eco-friendly vehicles.

RVs such as Sorento and Sportage accounted for 68 percent of Kia’s second-quarter sales based on wholesale excluding that in China, up 2.6 percentage points from a year ago.

Eco-friendly vehicles accounted for more than 10 percent with hybrid and electric vehicle (HEV) sales reaching 82,000 units and plug-in hybrid (PHEV) sales continuing to be strong. Sales of battery electric vehicles (BEVs) remained high at 44,000 units, similar to last year, despite the absence of any additional lineup released beyond the EV6.

RVs rather than EVs are expected to lead the sales of Kia in the second half as well. The EV9, a seven-seat electric SUV, has begun selling in Korea but will be released in the U.S. and Europe only after the fourth quarter. However, Kia aims to seek a strong sales rebound in China by introducing the EV6 and the EV5, a locally customized electric vehicle, one after another. In India, the company will introduce an upgraded model of the locally popular Seltos.