SEOUL, Oct. 26 (Korea Bizwire) — South Korea’s Hyundai Motor Co. on Tuesday achieved a turnaround in the third quarter from a year earlier on a base effect but revised down its annual sales target due to chip shortages.
For the three months ended on Sept. 30, Hyundai Motor swung to a net profit of 1.487 trillion won (US$1.27 billion) from a net loss of 188.8 billion won in the year-ago period, the company said in a statement.
Last year, the company put aside more than 2 trillion won in provisions for after-sales product quality maintenance and other services. Some of the provisions were factored in the third-quarter bottom line in 2020. But this year there were no such one-off expenses.
Looking ahead, continued chip supply shortages remain a major woe for carmakers in coming quarters, Hyundai executives and analysts said.
“Disruptions in the global chip supply chain deteriorated in the third quarter due to the spread of the more transmissible delta variant in Southeast Asia, affecting semiconductor production in the regions,” Seo Gang-hyun, executive vice president in charge of Hyundai’s finance and accounting division, said in the company’s earnings conference call.
He expected supply chain problems to continue to weigh on carmaker’s earnings in the fourth quarter and early next year.
To reflect the supply-side issues, Hyundai has revised down its sales target to 4 million vehicles for the year from 4.16 million units announced early this year. Last year, it sold 3.74 million autos.
Hyundai’s sales from January to September rose 12 percent to 2.93 million autos from 2.60 million units in the year-ago period.
The maker of the Sonata sedan and the Palisade SUV also shifted to an operating profit of 1.607 trillion won in the third quarter from an operating loss of 313.82 billion won a year ago, the statement said.
An improved product mix helped prop up the quarterly results, as demand for high-end Genesis brand models and Hyundai’s electrified models improved despite the extended COVID-19 pandemic.
Sales rose 4.7 percent to 28.867 trillion won from 27.576 trillion won during the same period.
“To boost sales in the fourth quarter, the company will reduce incentives for new car purchases in the United States until the chip issues are resolved and focus on selling electrified, SUV and Genesis models,” Yun Tae-sik, head of Hyundai’s investor relations team, said.
Genesis vehicles have entered the U.S. automobile market, the world’s most important, and they will be launched in Europe and the world’s biggest auto market, China, next year, he said.
Hyundai sells G70, G80, G90 sedans, and GV70 and GV80 SUV models under the independent Genesis brand.
“On top of Genesis models, Hyundai needs to increase the production of electric models built on a dedicated EV platform, called E-GMP, and raise the ratio of its models in the global EV market,” Song Sun-jae, an anayst at Hana Financial Group, said.
In September, Hyundai unveiled the GV60 SUV, the Genesis brand’s first model equipped with the E-GMP platform, ahead of its local launch later this year.
Genesis plans to launch only hydrogen fuel cell or battery-powered vehicles in 2025 to compete with rival carmakers in the electrification push.
The Genesis brand will complete its lineup with eight hydrogen and battery models by 2030 and aims to sell 400,000 units a year in global markets,
From January to September, net profit soared to 4.992 trillion won from 741.15 billion won a year earlier.
Operating profit also jumped to 5.149 trillion won in the first nine months from 1.14 trillion won a year ago. Sales climbed 16 percent to 86.584 trillion won from 74.754 trillion won.
Meanwhile, Hyundai has reduced its planned investments, including R&D and capital expenditure, to 8 trillion won this year from 8.9 trillion won to secure liquidity amid growing external uncertainties.
On Tuesday, Hyundai shares rose 1.2 percent to 213,500 won, outperforming the broader KOSPI’s 0.9 percent gain.