Hyundai Motors reports 20% drop in Q1 profits over deployment of Thaad missiles
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Seoul: Hyundai Motor Co. reported on Wednesday more than a 20% drop in its first quarter profit as anti-Korean sentiment in China, sparked by the deployment of the US missile defence system, battered the Korean carmakers’ sales in its biggest auto market.
The company said its January-March net profit was 1.3 trillion won ($1.2 billion), down 21% from 1.7 trillion won a year earlier.
Its profit slide was smaller than what analysts expected. FactSet, a financial data provider, said the market consensus was 1.22 trillion won.
Sales rose 5% to 23.4 trillion won ($20.8 billion). Operating profit fell 7% to 1.3 trillion won.
The biggest drag in earnings was the US missile system that triggered China’s anger and hurt Korean businesses in the world’s most populous country.
Hyundai Motor, the maker of Tucson sports utility vehicles and Sonata sedans, said it sold 206,000 cars in China during the first three months, down 14% from a year earlier.
In January and February, Hyundai appeared to have been on track for sales recovery in China. That changed when South Korea’s defence ministry signed an agreement with Lotte Group in late February to use its golf course in the south-west to deploy the missile defence system, known as Thaad. In March, Hyundai saw a sharp fall in its China car sales.
“Such sales fall is not due to the internal factor as you know. It is the result of the anti-Korean sentiment that flared up within China since late February and some rivals that launched marketing to exploit the anti-Korean sentiment,” said Koo Zayong, a vice-president at Hyundai Motor.
South Korea and the US say that Thaad is a deterrent against North Korean aggression, but China opposed it because it worries that its powerful radars could peer through its territory.
China has shown its displeasure in other areas too. The once-steady inflows of Chinese tourists to South Korea withered, and Lotte was ordered to stop operations of its big discount chains in China, which cited safety violations. Instances of anti-Korean sentiments also emerged on Chinese social media and some South Korean schools cancelled their trips to China.
Hyundai’s performance in the US, its second-biggest market, also dropped 3%, outweighing growth in western Europe and India.
Hyundai Motor was also hit by massive recalls it estimated to cost around 200 billion won ($178 million) during the first quarter. Earlier this month, Hyundai and Kia recalled 1.4 million cars in US, Canada and South Korea due to possible engine failures.