Hyundai: Global sales fall 100,000 units for 2015 1H

Construction of Mexican and Chinese two plants targeting volume growth

2015/10/16

Summary

 The Hyundai Group is facing a rough situation in terms of its revenue and profit. Hyundai Group's global wholesales decreased 99,000 units during the first half of 2015, a 2.4% same-period drop compared to 2014. The Group's wholesales increased by about 1 million units year-on-year (y/y) between 2010 and 2011, and by about 500,000 units y/y between 2012 and 2014.

 However, during the first half of 2015, Hyundai Motor Company and KIA Motors Corporation, a subsidiary of Hyundai, registered declines in both revenue and profit. Hyundai's operating profit margin shrank to 7.6%, compared to the 10% the company achieved between 2011 and 2012. Kia's operating profit margin also decreased, from between 7 to 8% it achieved in 2011 and 2012, to 4.9%.

 At one time, the Hyundai Group had more than 70% of the market share in Korea. However, its share dropped below 65% due to a surge in imported vehicles after the country formed FTAs with the EU and the U.S. Up to now, the Hyundai Group was able to invest the profits it achieved because of its high market share, to expand its business outside Korea. Unfortunately, this way of doing business hasn't been working as of late.

 As for key markets outside Korea, the Group's vehicle sales in China sharply fell sharply y/y amid a slowdown in the market. In the U.S., the Hyundai Group maintained a market share in the area of 8% by substantially increasing its sales incentives.

 The Group's slow sales growth is partly due to supply constraints. Ever since the problem Hyundai had with inflated fuel-efficiency figures in the U.S. in 2012, the Hyundai Group has placed a high priority on enhancing internal controls at the expense of expanding its production capacity. The Group's 2015 production capacity is 7.95 million units, the same as it was in 2014.

 Even faced with these circumstances, the Hyundai Group has resumed constructing new plants. Hyundai is currently constructing two new plants in China and Kia is constructing a new plant in Mexico. In 2016, Hyundai's new Cangzhou Plant in Hebei Province, China (initial annual capacity of 200,000 units) and Kia's new plant in Mexico (initial annual capacity of 300,000 units) will begin operating. In addition, in 2017 Hyundai's new Chongqing Plant is scheduled to begin operations. Hyundai intends to thoroughly strengthen its internal controls in 2015 to prepare for quantitative growth from 2016 onward. As China's economic slowdown is apparent, there is also concern that the two new plants may result in overcapacity. In spite of this situation, Hyundai is still considering building a new plant in the U.S. too.

Hyundai Vision G Concept
Hyundai Vision G Concept exhibited at IAA Frankfurt Auto Show 2015. It offers an outlook on future designs of Hyundai luxury models.
Rear view of the Concept
Rear view of the Concept

Related Reports: Hyundai-Kia Group: Declining profitability since 2013 (Sep. 2014)

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