Hyundai Motor loses 1.1 trillion won in operating profit due to tariffs and war... Hybrids are the cash cow

Hyundai Motor loses 1.1 trillion won in operating profit due to tariffs and war... Hybrids are the cash cow

Despite record Q1 sales, operating profit drops 30.8%... Contingency plan strengthened

Hyundai Motor, the largest finished car manufacturer in Korea, saw its operating profit decrease by more than 1 trillion won in the first quarter alone due to the impact of US auto tariffs and geopolitical risks from the Middle East war.

However, a significant increase in sales of high-profit vehicle types such as hybrid electric vehicles (HEVs) and electric vehicles signals a strong rebound after the crisis.

Hyundai Motor announced on the 23rd that its consolidated operating profit for the first quarter was tentatively tallied at 2.5147 trillion won, a 30.8% decrease compared to the same period last year.

Operating profit decreased by 1.1189 trillion won from 3.6336 trillion won in the first quarter of last year. The operating profit margin was 5.5%, down 2.7 percentage points from the same period last year. Net profit decreased by 23.6% to 2.5849 trillion won.

Sales increased by 3.4% year-on-year to 45.9389 trillion won, marking a record high for the first quarter. However, profitability significantly declined due to US tariffs imposed since the second quarter of last year, reduced global market demand caused by the Middle East war, and rising raw material prices.

Tariff costs accounted for most of the decrease in first-quarter operating profit, at approximately 860 billion won. Losses due to mix and incentive effects were 337 billion won, and losses due to volume were 247 billion won, which had less impact compared to tariffs.

The increase in operating profit due to the high exchange rate was 25 billion won. Generally, a high exchange rate is analyzed as a favorable factor for Hyundai Motor Group's profitability, but in the first quarter, it did not act as a significant profit factor as sales warranty provisions increased due to the rising exchange rate. Sales warranty provisions, which are costs for free repairs, etc., are set in US dollars and reflected in accounting.

However, Hyundai Motor boosted sales by expanding sales of high-profit vehicle types, such as hybrid and electric vehicles, which generate significant profits.

First-quarter eco-friendly vehicle sales increased by 14.2% year-on-year to 242,612 units, with eco-friendly vehicles accounting for 24.9% of total sales, marking a quarterly record high.

Hybrid vehicle sales increased by 27% to 173,977 units (17.8% share), setting a new quarterly record. Particularly in the US, hybrid vehicle sales increased due to high oil prices, achieving a record high hybrid vehicle share of 24.8% (up 8.5 percentage points) in the US market, and the share of hybrid vehicle sales in the European market also rose from 20.3% last year to 27%.

Globally, sales showed strength, particularly in emerging markets such as India. By region (wholesale basis), sales in the Indian market increased by 8.5% to 167,000 units. Sales in the Central and South American market increased by 7.7% to 74,000 units, and in the US market by 0.3% to 244,000 units.

However, sales in the Africa and Middle East markets, directly affected by the war, decreased by 29.8% to 52,000 units, and in the European market, where competition intensified due to the strong performance of Chinese brands, sales decreased by 7.8% to 140,000 units.

Hyundai Motor plans to strengthen its contingency plan, which has been in place since last year, to maximize recovery from factors deteriorating profitability. This is based on the forecast that a difficult-to-predict business environment will continue, as US tariffs are ongoing and the Middle East war, though under a ceasefire, has not yet concluded.

Hyundai Motor plans to expand sales through the launch of new models and models with improved core product competitiveness, such as the Santa Fe and Tucson hybrids, while also striving to enhance profitability. It will flexibly respond to market changes by implementing customized strategies according to the varying speeds of electrification transition in each region.