Hyundai Motor's Q3 Operating Profit Drops 7%, Misses Analysts' Estimates
Hyundai Motor Co. reported a 7% decline in its third-quarter operating profit, citing warranty costs related to its Santa Fe SUVs and a global slowdown in car demand.
Hyundai Motor Co. reported a 7% decline in its third-quarter operating profit, citing warranty costs related to its Santa Fe SUVs and a global slowdown in car demand. The South Korean automaker's profit for July-September stood at 3.6 trillion won ($2.6 billion), down from 3.8 trillion won in the same period last year. The figure also fell short of the 3.9 trillion won estimate forecasted by analysts, according to LSEG SmartEstimate.
Key Factors Behind the Decline
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Warranty Costs: Hyundai incurred provision costs of 320 billion won to extend warranties for the engines of Santa Fe SUVs in the United States. This contributed significantly to the drop in profit.
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Global Car Demand Slowdown: A broader slowdown in global car demand also weighed on Hyundai's performance, with the automaker warning of continued uncertainty in major markets.
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Falling Global Sales: Hyundai's global retail sales fell by 5% in the third quarter compared to last year. Sales declines in Europe, in particular, offset increases in both the United States and South Korea.
Impact on Electric Vehicles (EVs) and Hybrid Models
While Hyundai saw a fall in sales of electric vehicles, the company reported a sharp 40% increase in hybrid EV sales from a year earlier. This surge reflects Hyundai's strategic shift to expand its hybrid vehicle lineup in response to declining global demand for electric vehicles. In August, Hyundai announced plans to double its hybrid vehicle offerings while cutting targets for EV sales and delaying the development of some new EV models.
Broader Industry Challenges
Hyundai’s struggles come amid challenges faced by major European carmakers like Volkswagen, Mercedes-Benz, and BMW, who have flagged a worsening outlook for auto demand and rising costs. This has led to a sharp drop in the market value of the sector.
Looking Forward
Despite these challenges, Hyundai continues to adapt by focusing on hybrid models and preparing for a tougher global automotive market. However, it remains cautious about future market conditions, as stated in its earnings report.
Following the earnings announcement, Hyundai’s shares dropped 3.7%, reflecting investor concerns about the automaker's ability to navigate these ongoing challenges.
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