SEOUL, Jan. 29 (Korea Bizwire) — Hyundai Motor Co. and its affiliate Kia Motors Corp. fell far behind global rivals in profitability last year due to a strong won and declining sales in China and the United States, industry sources said Sunday.
For the whole of 2017, Hyundai Motor and Kia Motors posted operating profit margins of 4.7 percent and 1.2 percent, respectively, down 0.8 percentage point and 3.5 percent points from a year earlier, earnings data from the companies showed.
The won’s strength against the dollar and sharp sales declines in China due to a diplomatic row over a U.S. anti-missile system had an impact on the carmakers’ bottom lines last year, the companies said in their statements.
Hyundai and Kia’s operating profit margins in the first three quarters were 5.3 percent and 0.9 percent, respectively, placing them seventh and 11th in terms of profitability among the world’s top 11 complete carmakers, according to brokerage reports.
The Korean carmakers, in particular, looked lackluster in comparison to German luxury carmakers Mercedes-Benz and BMW, which boasted operating profit margins of more than 9 percent in the first nine months, the reports indicated.
In the fourth quarter of last year, the corresponding figures stood at 3.2 percent for Hyundai, down from 4.2 percent on-year, and 2.3 percent for Kia, down 4.1 percent on the previous year, the earnings data showed.
If Hyundai and Kia do not achieve their shared goal of recovering profitability this year in global markets, they are widely expected to drop to the lowest level in term of operating profit margins.
Both saw their sales plunge in China, with Hyundai reporting a 31 percent on-year drop to 785,006 vehicles sold last year, while Kia’s sales nosedived 44.61 percent to 360,006 units.
In another blow for Kia, it had to put aside about 1 trillion won (US$938 million) in one-off expenses for overdue wages for its workers following a Seoul court ruling. This inevitably harmed its earnings results.
Hyundai and Kia, which are flagships of Hyundai Motor Group, the world’s fifth-biggest automotive conglomerate by sales, meanwhile, set a conservative sales goal of 7.56 million vehicles globally this year, slightly up from the 7.22 million units sold last year.