Hyundai Motor Group thrives on solid auto sales, new growth strategy

Hyundai Motor Group Executive Chairman Euisun Chung [Courtesy of Hyundai Motor Group]

South Korea’s Hyundai Motor Group is flying high this year on the back of record quarterly sales posted by its flagship automakers Hyundai Motor Co. and Kia Corp. and large-scale overseas orders won by key affiliates.

According to data from the Financial Supervisory Service on Wednesday, the combined sales of 11 listed companies under Hyundai Motor Group reached 104.5 trillion won ($77.6 billion) in the third quarter. It marked the second consecutive quarter of surpassing the 100 trillion won threshold.

The 11 companies include Hyundai Motor, Kia, Hyundai Mobis Co., Hyundai Steel Co., Hyundai Glovis Co., and excludes Innocean Worldwide Inc., which has not yet announced its third-quarter results.

The 11 companies also posted a combined operating profit of 8.4 trillion won in the third quarter, more than doubling from 4 trillion won reported for the same period last year.

Both the combined sales and operating profit are record highs for the third quarter. Operating margin came to 8 percent.

In the first 9 months of this year, the companies’ operating profit reached 25.9 trillion won, already surpassing last year’s record high figure of 23.7 trillion won.

Hyundai Motor Group’s strong performance has been largely led by Hyundai Motor and Kia.

The combined sales of the two automakers reached 66.5 trillion won in the third quarter, accounting for 63 percent of the entire sales.

The combined operating profit came to 6.7 trillion won, making up 80 percent of the entire number.

Over the past five years, Hyundai Motor and Kia saw their sales rise to 229 trillion won in 2022 from 150 trillion won in 2017.

Operating profit jumped to 17.1 trillion won from 5.2 trillion won during the same period.

The solid growth is attributed to the shift in their sales strategy, focusing more on the sale of premium cars and providing fewer sales incentives, particularly in the United States.

Favorable exchange rates also played a role.

Key affiliated companies in construction and parts are also achieving notable results in the global market and are starting to see tangible outcomes following a reshuffle of business portfolios and value chains.

They strengthened new business initiatives and diversified sales channels.

Hyundai E&C signed a 6.5 trillion won deal in Saudi Arabia in June. Its cumulative overseas order amount reached 12.6 trillion won for the first three quarters of this year, up 106 percent from the same period a year ago.

Hyundai Rotem won a 1.2 trillion won deal to supply electric trains to Australia in June, the largest ever among all the railway projects that Hyundai Rotem has received overseas.

Hyundai Mobis signed a core electrification battery system supply contract with Volkswagen AG in August. Hyundai Mobis’ exports of vehicle parts for completed cars worldwide reached $4.65 billion last year, up from $1.21 billion in 2017.

Global credit ratings for Hyundai Motor Group also reflect strong growth.

Moody’s Corp. upgraded the outlook for the credit ratings of Hyundai Motor and Kia to “positive” from “stable” earlier this year, indicating a potential upgrade to A3 from the current Baa1.

Industry insiders note that the upgrade is feasible, considering the profitability and financial structure of major listed companies within the group and its active engagement in new businesses, mostly focused on sustainable future technologies, such as electrification, autonomous driving, robotics, future aviation mobility, and software-centric vehicles.

Hyundai Motor Group plans to expand investments in future new businesses with increased cash liquidity.

“Hyundai Motor Group has successfully secured a foundation to take the lead in various new businesses by not only achieving external growth but also securing profitability, which is positive from the perspective of securing future competitiveness,” said Kim Jin-woo, an analyst at Korea Investment & Securities Co.