Hyundai Motor Co. raised its earnings forecast on Monday, thanks to sales of high-end vehicles and a boost from the foreign exchange market. However, its shares fell 3% because of poor quarterly results and an uncertain outlook for sales of electric vehicles (EVs) in the U.S.
Hyundai and Kia Motors, which are both based in South Korea and make the popular Ioniq 5 and EV6 electric cars, had reported strong EV performance in the U.S. until July, with sales more than doubling from last year and blowing past Ford Motor (NYSE:F), Volkswagen AG (OTC:VWAGY), and General Motors Co. (NYSE:GM).
But since then, nothing has changed. In the United States, sales of the Ioniq 5 crossover SUV dropped by about 14% in September compared to the previous month. This was because of a new law that ended federal tax credits for buying cars made by some foreign automakers, like Hyundai.
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Hyundai said it was thinking about different ways to lessen the effects of the law, such as starting a joint venture to get key battery parts so it could qualify for the new up to $7,500 U.S. EV tax credits.
Analysts said that Hyundai’s answer to the problem was still not clear.
An analyst at Eugene Investment & Securities named Lee Jae-il said, “It seems inevitable that the Inflation Reduction Act will affect Hyundai’s EV sales in the U.S. market, since EV incentives are the most important factor for U.S. EV shoppers.”
Hyundai raised its estimate for full-year revenue growth by six percentage points, from 19 to 20% in January to 19 to 20% on Monday. The company’s outlook is still mixed. The operating profit margin is now thought to be between 6.7% and 7.5%, up from 5.5–6% before.
But the company cut its sales forecast for 2022 by 7%, to 4.01 million. This is because chips and other parts are causing problems in the auto industry’s supply chain. In 2021, Hyundai sold 3.89 million cars.
Shares of Hyundai fell 3.3% at the end of the day after the company reported a 3% drop in third-quarter net profit and a change in its outlook. This was worse than Seoul’s benchmark index, which rose 1%.
Hyundai Motor expects a gradual recovery from global chip and component shortages in the fourth quarter, the company said in a statement. However, the company expects external uncertainties to continue, such as inflation, disruptions in the supply chain, and changes in raw material prices due to geopolitical issues.
Hyundai said that its operating profit for the third quarter fell by 3% because it had to set aside 1.36 trillion won ($906 million) to cover costs related to engine quality problems.
The provision, which was announced last week, was worth more than half of the estimated net income of 2.4 trillion won for the third quarter, which 17 analysts came up with.
Analysts had predicted that revenue for the quarter would be 36 trillion won, but it came in at 37.7 trillion won, an increase of 31%.
The weaker dollar helped bring in more money because it made it easier to bring sales from abroad back home. So far this year, the won has lost more than 17% of its value against the dollar, making it one of the worst-performing currencies in Asia.
The outlook for car sales is getting worse because inflation and interest rates are going up all over the world. Elon Musk, the CEO of Tesla (NASDAQ:TSLA), said last week that “a sort of recession” in China and Europe was hurting demand for the company’s electric cars.
But the global supply of vehicles is still tight because of the chip shortage and COVID restrictions.
Toyota Motor (NYSE:TM) Corp., which sells more cars than any other company in the world, also said on Friday that its annual vehicle production was likely to fall short of its original goal because of the chip shortage.
“Even though these (supply chain) problems are getting better, people’s feelings about inflation seem to be getting worse,” said Eugene analyst Lee.
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He did say, though, that the weaker mood probably wouldn’t have a big effect on sales for a few months because supplies were still tight because of the COVID-19 pandemic.
Hyundai said that sales of its electric vehicles went up by more than 27% in the third quarter, reaching about 52,000. This was about 5.1% of the company’s total sales volume, and it was due to strong sales of its new IONIQ 6 and GV60 models.
($1 = 1,434.4400 won)
