Sanguine outlook for Hyundai, Kia sales on track despite setback in China, Russia

2022.05.04 14:14:12 | 2022.05.04 15:38:25

[Graphics by Song Ji-yoon]이미지 확대

[Graphics by Song Ji-yoon]

Despite setback in sales of China and Russia, Hyundai Motor Co. and Kia Corp. will likely keep up robust earnings streak in the second quarter on eased chip crisis and popularity of green fleet in western markets.

Kia during the conference call after releasing its first-quarter statement said chip situation started showing signs of improvement in mid-April, projecting supplies of car controller chips would be normalized in May and powertrain controller chips in the second half.

Hyundai Motor also had been sanguine about normalization of automotive chips within the year.

“At current rate, Kia’s monthly output will recover to the level of 270,000 units by the third quarter,” said Kim Gwi-yeon, an analyst at Daishin Securities.

Once finished car production gets back to normal, automobile sales can surge, given the delayed orders. The automotive industry estimates currently there are 15 million units of potential demand across the globe. Considering Hyundai Motor and Kia’s market share of 8 percent last year, they have potential demand for 1.2 million units.

Hyundai and Kia’s auto sales are estimated to rebound from May. Their combined sales in the United States fell 16.7 percent on year to 125,770 units last month, but the utilization rate in Korea and the U.S. went up in March.

“Hyundai and Kia’s combined sales are forecast to reach 730,000 units in the second quarter, gaining 6 percent from a quarter ago, as their quarterly sales have continued growth from 640,000 units in the further quarter of 2021 to 684,000 units in the first quarter of this year,” said Lim Eun-yeong, an analyst at Samsung Securities.

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Average selling price (ASP) also is rising with new car price hike and decreased sales incentives. Hyundai Motor and Kia have recently joined their global peers in raising price tags to reflect the chain price surge in raw materials. The ratio of expensive SUVs and luxury vehicles to total sales also has increased.

The average sales incentive offered on Kia vehicles in the U.S. was lowered by 53 percent on year in the first quarter, pushing up the carmakers ASP by 12 percent to 29 million won ($23,014). Kia’s annual ASP for this year is expected to increase by more than 9 percent from the previous year.

Securities firms now are releasing positive earnings outlook for Korean finished carmakers. Morgan Stanley recently revised up its stock price target for Hyundai Motor to 270,000 won from 260,000 won, and Kia’s to 85,000 won from 80,000 won. Meritz Securities also adjusted its stock price target for Hyundai Motor to 260,000 won from earlier 220,000 won, and Mirae Asset Securities target for Kia’s to 120,000 won from 110,000 won.

Last month, offshore investors net purchased 106.2 billion won worth Hyundai Motor shares and 259.7 billion won worth Kia shares.

Hyundai Motor shares closed 0.27 percent higher at 184,000 won in Seoul trading on Wednesday, while Kia finished unchanged at 83,500 won.

By Kim Je-gwan and Lee Ha-yeon

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