Hyundai Motors profits exceed analyst estimates, carmaker focuses on hybrid vehicle demand

(Bloomberg) -- Hyundai Motor Co. reported record quarterly profit that topped analysts’ projections as strong sales of hybrids made up for losses from electric vehicles.

Operating profit for the three months ended June was 4.3 trillion won ($3 billion), compared with the 4.2 trillion won median estimate compiled by Bloomberg. The profit was a record, at least since 2010, according to data compiled by Bloomberg. Revenue rose 6.6% from a year ago to 45 trillion won, the Seoul-based company said.

Shares fell 2.7% in Seoul amid a broad market slump.

The world’s third-largest carmaker is focusing on hybrids as demand for battery-powered cars wanes. Tesla Inc.’s second-quarter deliveries fell for second straight quarter, while General Motors Co. walked back expectations for its goal of building 1 million EVs by the end of next year. In Europe, Porsche AG abandoned its electrification targets due to lower-than-anticipated sales in Europe and China.

Hyundai also said it plans to go forward with a listing of its India unit by the end of 2024. The initial public offering could raise as much as $3.5 billion, people familiar with the matter have said, and will start gauging investor interest this month, with a listing likely in September or October, they said.

“India is the world’s fourth-biggest stock market, it is doing very well,” Lee Seung Jo, Hyundai’s chief financial officer, said in a call with analysts. “We are preparing for new growth in the country.”

Hyundai’s shift to hybrids and SUVs, such as a new Santa Fe released last year, helped the company offset the losses in EVs, Hanwha Investment & Securities wrote in a note before the earnings announcement. Hyundai plans to release the new hybrid Tucson in Europe and the Casper Electric in South Korea in the second half, the note said.

Hyundai sold about 122,000 hybrid vehicles in the second quarter, accounting for 11.6% of total deliveries. Battery-powered vehicles accounted for 5.6% of total shipments, compared with 7.4% a year earlier.

“Hybrids are making almost similar profit margins with gas-powered vehicles, which is in double-digit,” Lee said. EVs are generating at least low-single-digit margins, due to higher incentives given to dealers, he added.

Hyundai’s market share for hybrids in the US rose to 15% from 11% a year ago, Lee added. Hyundai expects its new Santa Fe hybrid to drive up the growth in the second half. Excluding the US, the global automobile market is unlikely to improve in the second half due to higher interest rates and rising competition, according to Lee.

Total retail sales in the second quarter were 1.03 million, dropping 3% from a year earlier, according to its earnings presentation. Value-added products, such as sports-utility vehicles and luxury brand Genesis, accounted 61% of the total. Retail sales in North America climbed 5.2%, while those in Europe fell 1%. China saw a steep decline of 32%, while India posted a 1% gain.

Hyundai plans to hold its annual investor day in August with analysts to discuss its long-term business plan. It will address details on shareholder returns as well as the operation of its new plant in the US state of Georgia, Lee said.

--With assistance from Heesu Lee.

(Updates with comments from company executives.)

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