Hyundai to focus on EVs and luxury cars amid industry turmoil

Hyundai said it will focus on luxury models, SUVs and electric vehicles to achieve what it expects to be record high earnings this year even as challenges such as inflation and fluctuating raw material prices persist.

While supply chain disruptions continue to stoke uncertainty, and currency volatility and higher marketing costs in the face of tougher competition will be a burden, the global chip shortage should ease in the fourth quarter, Hyundai said Monday as it announced quarterly results.

The company said it will “focus on the recovery of sales” through a plan that will “enhance its product mix with SUVs and luxury models.”

Its Grandeur flagship sedan, named Azera in markets outside Korea, is in high demand following its launch this month and will help spur domestic sales momentum, Hyundai said. The Ioniq 6 full-electric car, which was introduced in Korea in the third quarter, is also selling well, it said.

“By adding the provisions to the operating profit, you would find that Hyundai is doing pretty well,” said Koh Tae-bong, head of research at HI Investment & Securities in Seoul.

Operating profit for the three months through September was 1.55 trillion won ($1.07 billion). Sales rose 31 percent from a year earlier to 37.7 trillion won. Operating profit was down 3.4 percent from a year earlier, while net income dropped 5.1 percent. Excluding provisions, operating profit topped 2.9 trillion won, the company said.

Hyundai cut its 2022 sales target to 4.01 million vehicles from 4.32 million, and also trimmed its planned investment for the year to 8.9 trillion won from 9.2 trillion won.

Hyundai and its affiliate Kia said last week they would book a combined 2.9 trillion won as provisions in third-quarter earnings due to costs related to Theta engines.

More owners than expected demanded replacement engines during the pandemic rather than buying new cars, pushing up warranty costs, the automakers said.

The issue could hurt the companies’ share prices in the near term, Nomura analyst Angela Hong wrote in an Oct. 20 note.

EV sales

Hyundai said its EV sales rose more than 27 percent from a year earlier to about 52,000 units, accounting for 5.1 percent of overall sales volume. Despite the provisions and challenges such as inflation and geopolitical uncertainty, Hyundai expects record-high results this year, it said.

The automaker raised its EV sales target for 2023 by 40 percent to about 300,000 units, with the Ioniq 6 accounting for about 20 percent of those sales next year.

Hyundai also said it is considering investing a joint venture to make batteries in the U.S.