In another proof of its alarmingly underwhelming performance in the world’s two largest automobile markets, South Korea’s largest automaker Hyundai Motor Co.’s inventories of unsold vehicles in the United States topped 30,000 units in the first half, which means the carmaker could be sitting on a backlog of 60,000 units by year-end, a level last seen during the height of the 2008 financial crisis.

The company’s bottom line will obviously be affected as it would have to offer big discounts and sales incentives to clear out the backlog.

According to a joint study by the Maeil Business Newspaper and Korea Investment & Securities Co. on Monday, as many as 30,940 vehicles rolled out from Hyundai Motor’s U.S. factories and shipped from Korea have been sitting idle on lots as of the end of June. The last time its U.S. stock reached that many was in 2008, when it posted a record-high inventory of 60,024 unsold cars.

Inventory is measured by adding the company’s shipment in the U.S. and exports to the country and subtracting local sales. Increased inventory tends to bring down profits because the company is pressured to sell cars at a discount.

The U.S. market accounts for about 20 percent of Hyundai Motor’s total operating profit, according to industry analysts. Inventories worsened because the carmaker propped up shipment to the U.S. despite sluggish sales there. Car sales in the U.S. fell by 7.4 percent on year in January-June period. The carmaker’s shipment to the U.S. increased to 38,400 units in June from 23,030 in January.

Hyundai Motor reports the worst inventory period in the U.S. Its inventory period in the U.S. was 4.2 months in July, up 0.3 months from June and nearly doubling the global average of 2.2 months.

“The market competition has become heavier amid recovery in the U.S. economy. Hyundai Motor also lost much of its marketing in car sales in fleets to rental companies,” a company official said.

The automaker has been deliberately scaling back sales to rental car companies, which may boost the top line but helps little to the bottom line.

Hyundai Motor’s operating profit this year is expected to slump 39 percent to 5.17 trillion won ($4.55 billion) from 8.44 trillion won in 2012, according to Korea Investment & Securities. Its first-half operating margin has been deteriorating for the sixth straight year, slipping from 10.3 percent in 2011 to 5.4 percent in 2017.

Shares of Hyundai Motor closed Tuesday down 0.68 percent at 147,000 won.

By Moon Il-ho and Yoon Jin-ho

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]