Hyundai Motor, South Korea‘s largest automotive company by sales, showed a decline in earnings in the second quarter of this year due to weakened profitability, the company said Wednesday.
The company’s profits totaled 24.3 trillion won ($21.6 billion), down 1.5 percent on-year between April and June this year, while its operating profits plummeted 23.7 percent on-year to 1.3 trillion won.
The net profit for the second quarter this year was drastically slashed 48.2 percent compared to the same period last year to 913.6 billion won, the company said.
In terms of the company‘s profits for the first half of this year, it showed a slight increase of 1.4 percent on stable sales of the Creta crossover utility vehicle in emerging markets, including Russia and Brazil, the company said during a conference call held at its headquarters in southern Seoul.
But the heightened sales were not enough to cover the overall costs.
“Increased research and development spending, an expansion in incentives in the US and recall costs have all led to a decline in operating profit,” said Lee Sang-hyun, an analyst at IBK Investment & Securities.
Lee added that as the auto industry shifts from conventional cars to eco-friendly and self-driving cars, the company is making large investments in the growing segment and has launched a series of hybrid models.
Hyundai Motor has recalled some 240,000 units here due to manufacturing defects after a former employee and whistleblower reported 32 possible defects to the government last year.
Profitability in emerging markets also slid in sales in Middle Eastern countries, where cars are sold at the highest average price, showed a 21 percent drop between April and May, said Kim Pyung-mo, an analyst at Dongbu Securities.
As the country‘s leading automaker looks set to miss its annual target sales for the second consecutive year, Hyundai continued to suffer sluggish sales in China.
Its sales there dipped 28.8 percent on-year and sold 361,000 units between January and June this year, the company said.
“All efforts will be put forth to improve profitability and brand image through the launch of G70, the third model of the Genesis brand,” said Hyundai Motor.
Eyeing for a piece of the quickly growing and lucrative SUV market, Hyundai Motor will also diversify its SUV lineup, first by introducing its first compact SUV Kona in Europe and the US in the second half of this year.
Preorders for the Kona SUV reached 5,000 units before its official release in Korea in June, the company said.
Strategic SUV models for Chinese drivers are also to be launched in the second half of this year.
To overhaul its lineup in the US market, Hyundai Motor America said earlier this month that it will discontinue sales of the premium lineup Azera, sold as Grandeur here, starting next year.
By Kim Bo-gyung (email@example.com)