Hyundai reports lowest earnings in more than five years
Published 22/10/2015 | 06:41
Hyundai has reported its lowest quarterly earnings in more than five years after losing ground to local brands in China and underestimating strong demand for SUVs.
South Korea's largest car maker said its third quarter net income was 1.2 trillion won (£714m) for July-September quarter, slumping more than 25% over a year earlier.
The result, its worst since the first quarter of 2010, was below even the lowest estimate by analysts. The maker of Sonata and Tucson vehicles was expected to post 1.5 trillion won in quarterly profit, according to a survey of analysts by FactSet, a financial data provider.
Hyundai has suffered from weakening sales in China like some other foreign brands while its lack of new SUV models until recently led to lower share in key markets.
The company has focused on sedans rather than SUVs, misreading consumer demand at a time of sluggish global demand for saloons such as the Elantra.
Hyundai, part of the world's fifth-largest car maker along with affiliate Kia, faced a raft of challenges in China, the US and South Korea.
Its China sales plunged 30% in July over a year earlier and then sank 16% in August as Chinese car brands introduced new models. The decline was narrowed to 5% in September.
Lee Won-hee, Hyundai's chief financial officer, said its sales in China would turn higher this month compared with a year earlier, helped by a cut in tax on car purchases.
In the US, the company recalled nearly half a million Sonata saloons for a possible engine flaw l ast month . It also gave more generous incentives to car buyers to compete with Japanese car makers, Mr Lee said.
In South Korea, Hyundai's union staged a strike for three days last month during the annual wage negotiations, affecting operations at all domestic plants.
During the third quarter, sales rose 10% to 23.4 trillion won while operating profit dropped 9% to 1.5 trillion won.
The latest result marks a seventh straight quarter of earnings decline for Hyundai.
The fall in its earnings is at odds with an improvement in Hyundai's brand value. Interbrand, a global brand consultancy, ranked Hyundai Motor as 39th most valuable brand in the world, up one notch from a year earlier.