South Korean automakers, including Hyundai and its affiliate Kia Motors, are hoping to deliver robust combined operating profits in Q4 2020 after launching new models.
Hyundai and Kia have projected profits of over KRW1.8 trillion and KRW1 trillion, respectively. In Q3, these companies had to make several provisions for the recall of faulty engines and other quality-related expenses, which impacted its profits.
In Q3 2020, Hyundai had posted an operating loss of KRW313.8bn from an operating profit of KRW378.5bn in the prior-year quarter, while Kia’s operating profit dropped by 33pc to KRW195.23bn from KRW291.47bn. These companies had to deal with the impact of COVID-19 and resulting trade chain disruptions, which hit operations.
In Q4, these carmakers hope to benefit from new models, such as Hyundai’s Tucson SUV and the upcoming Genesis GV70 SUV. Kia expects models like Sorento SUV and the Carnival minivan to drive sales despite the COVID-19 pandemic.
In Jan-Sept, Hyundai’s operating profit declined by 53pc from the prior year to KRW1.14 trillion from KRW2.44 trillion. Kia’s operating income fell 44pc to KRW784.85bn from KRW1.42 trillion.
Auto production recovers in September
In September, South Korean car production was 342,490 units, up by 23.2pc from the prior year. Domestic sales increased by 23.1pc from to 138,828 units, while export sales went up by 13.8pc to 191,374 units, according to Korea Automobile Manufacturers Association (KAMA). Strong government stimulus and recovering economy drove sales up in September. In Jan-Sept 2020, vehicles produced decreased by 12.6pc from the prior-year period to 2.55mn units.
The South Korean currency appreciated to KRW1,188.54 against $1 in the third quarter from KRW1,193.24 a year ago. Stronger currency, however, reduces exporters’ earnings due to conversion loss.