Hyundai, Kia 2017 Net Plunge on Strong Won, China Woes | Be Korea-savvy

Hyundai, Kia 2017 Net Plunge on Strong Won, China Woes

(image: Hyundai-Kia Motor Group)

(image: Hyundai-Kia Motor Group)

SEOUL, Jan. 26 (Korea Bizwire)Hyundai Motor Co. and its affiliate Kia Motors Corp. on Thursday posted sharp declines in 2017 net profit as a strong won and lower demand in China cut into their bottom lines.

The won rose 2.6 percent to an average of 1,130.84 against the dollar last year from 1,160.50 a year earlier. Sales in major markets such as China posted steep declines due to a diplomatic row and a lack of new models.

For this year, the carmakers expect global vehicle demand to “stay at the lowest levels since the 2008 financial crisis” due to a prolonged low growth trend and rising protectionism in the U.S. and other major economies.

Last year, Hyundai Motor’s net profit plunged 21 percent to 4.546 trillion won (US$4.28 billion) from 5.719 trillion won a year earlier, the company said in a statement.

“A combination of the won’s strength against the dollar, tougher competition with rivals in major markets, such as China and the United States, and increased marketing costs had an impact on the annual bottom line,” it said.

In China, Hyundai saw its sales fall 31 percent on-year to 785,006 vehicles last year, while Kia’s sales declined 44.61 percent to 360,006 units.

Korean companies suffered sales declines in China due to political tensions between Seoul and Beijing over the installation of an advanced U.S. missile defense system, called THAAD, in South Korea last year. Beijing opposed the system, arguing it could be used against the country, though Seoul said it is purely aimed at deterring missile threats from North Korea.

As it will take time to revive lackluster sales in China and the U.S., Hyundai and Kia have announced conservative sales targets for this year. They plan to launch new sport utility vehicle models globally and increase investment in environmentally friendly cars to meet market demand.

Hyundai set a sales goal of 4.68 million vehicles for this year, slightly higher than the 4.51 million units sold last year. Kia’s target of 2.88 million autos is up from 2.71 million units.

Hyundai’s full-year operating profit declined 12 percent on-year to 4.575 trillion won last year. Sales rose 2.9 percent to 96.376 trillion won, the statement said.

Kia posted a 65 percent on-year decline in net profit last year at 968 billion won, with operating profit also plunging 73 percent to 662.2 billion won. Sales rose 1.6 percent to 53.536 trillion won compared to a year earlier.

Last year, Hyundai also suffered strikes and Kia had to put aside a huge amount of money due to a court ruling. The two together form the world’s fifth-biggest carmaker by sales.

Industrial actions by Hyundai’s union cost the company a total of 1.62 trillion won, or 76,900 vehicles, in production losses.

Kia’s figures reflect an approximate 1 trillion won in one-off expenses in its third-quarter results, as a Seoul court ruled in August that fixed bonuses and meal costs are part of ordinary wages. Kia was ordered to pay an overdue amount of 422 billion won, or 39 percent of what the union had requested.

As the court ruling applied to the three years from August 2008 to October 2011, the union may file two additional suits to receive overdue payments for the period from 2012 to 2017, the company said, adding that a retroactive payment is allowed for the previous three years only.


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