Hyundai to expand hybrid lineup after posting record profit

SEOUL -- Hyundai reported record quarterly profit and revenue on strong sales of high-margin cars and said it would expand hybrid line ups to brace for possible changes in U.S. electric vehicle policies following the election.

Hyundai, which together with its affiliate Kia is the world's No. 3 automaker by sales, reported a net profit of 4 trillion won ($2.89 billion) for the April-June period, up from 3.2 trillion won in profit a year earlier.

The net profit was its highest quarterly since the previous record high set in the second quarter of 2022.

Favorable exchange rates and strong sales of high-margin SUVs boosted earnings.

Hyundai warned of an uncertain outlook due to intensifying price competition as inflation and high interest rates squeeze consumers.

"As consumer demand for autos is weakening, we expect there will be more competition and the amount of incentives is also likely to increase ... creating a tougher business outlook," the automaker said in a July 25 earnings release.

Hyundai outperformed some of its rivals including EV leader Tesla and other legacy auto makers such as Ford, by boosting sales of premium SUV models and hybrid vehicles in the U.S., a move that also helped it offset a prolonged sales weakness in the domestic market.

Domestic vehicle sales in South Korea, Hyundai's second-biggest market, slumped 10 percent the second quarter, extending from a 16 percent drop in the previous quarter, as consumers continue to grapple with surging inflation and a weak economy.

Its vehicle sales in the U.S. edged up 2.2 percent in the quarter. High-margin SUV sales accounted for about 80 percent of the total while hybrid vehicle sales jumped 42 percent from the same period a year ago, Hyundai said.

Analysts also said the favorable exchange rate in the quarter had helped Hyundai's profit growth. The won slumped 4.3 percent against the dollar in the quarter from a year earlier, boosting Hyundai's repatriated overseas sales and profit.

U.S. uncertainty

Hyundai said it would expand hybrid lineups as demand for EVs eases globally and uncertainty mounts over U.S. EV policies.

Former President Donald Trump, the Republican candidate, is critical of the EV policies of Democrat President Joe Biden and has said he will "end the electric vehicle mandate" if he wins.

"Even if Trump wins the election, we don't expect the Inflation Reduction Act (IRA) to be scrapped," Hyundai Chief Financial Officer Lee Seung Jo told analysts on an earnings call, referring to Biden's signature clean energy policy.

Lee said the company continues to monitor possibilities and plans to increase hybrid lineups "to prepare for possible shrinking of the IRA package."

Hyundai said profitability of its hybrid models was similar to that of gasoline cars, highlighting the segment's growing contribution to the bottom line, as sales of pure EVs dropped almost by a quarter.