Hyundai Motor Co. raised its target for revenue and profit for this year as favorable foreign-exchange rates and rising popularity of premium models helped growth.
(Bloomberg) — Hyundai Motor Co. raised its target for revenue and profit for this year as favorable foreign-exchange rates and rising popularity of premium models helped growth.
The South Korean automaker is aiming for revenue growth of as much as 15% this year, up from the 11.5% target announced in January. Hyundai also increased its target for operating profit growth to 8%-9%, from an earlier goal of 6.5%-7.5%. The upgrade came after record second-quarter earnings, which beat analyst estimates.
Operating profit rose 42% to 4.2 trillion won ($3.3 billion) in the three months ended June 30, compared to the 3.8 trillion won expected by analysts, according to data compiled by Bloomberg. Sales jumped 17% to 42 trillion won, the Seoul-based company said in a statement Wednesday.
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The shortage of automotive semiconductors has eased, leading to improvement in production, while Hyundai’s inventories in major car markets are still low, the company said. Hyundai expects solid sales growth due to the waiting orders, but geopolitical risks and higher interest rates remain as risks, it added.
“We’ve sold more than 200,000 Genesis cars annually and cemented our leadership in sport utility vehicles,” Executive Vice President Seo Gang-Hyun said on an earnings call. “Even if the global economy slows, we don’t think we will shift to selling cheaper models.”
Hyundai sold a total of 1.06 million cars globally during the quarter, up 8.1% from a a year ago. Sales in North America climbed 11.3%, while European deliveries rose 4.5%. China gained 45%, and India advanced 7.7%. Sales in Latin America dropped 14%.
Retail sales in Russia, where Hyundai used to get about 5% of revenue, declined 32%. Hyundai suspended its plant in St. Petersburg last year.
Sales of luxury models, including Genesis, Palisade and the Ioniq 5 electric car accounted for almost 70% of total sales in the quarter. Sales of battery-powered vehicles accounted for 7.4%.
EV Incentives
The combined market share of Hyundai and affiliate Kia Corp. in the US jumped to around 11% this year, compared to 7.3% in 2018, according to Kim Jin-Woo, an analyst at Korea Investment & Securities. Still, for EV sales, Hyundai is paying large incentives of around $5,000 per car to US dealers because it doesn’t qualify for tax credits.
“We are now spending most of our incentives for EV sales,” Seo said. “Tesla is aggressively leading a price war.”
To receive credits from the Biden administration, Hyundai is planning to start operating its own EV plant in Georgia as early as the end of 2024.
Hyundai also unveiled details of its dividend policy that offers cash payouts of 1,500 won per share. The automaker’s one-year forward dividend yield is projected to be 3.6%, higher than the average 2.3% of Kospi 200 members, according to Bloomberg Dividend Forecasts.
Investors are concerned about global growth for 2024, which may hurt demand for autos, according to Hyun-Soo Lee, an analyst at Yuanta Securities Korea. There’s a risk that Hyundai’s union may strike this year, Kim at Korea Investment & Securities said.
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