South Korea’s top automaker Hyundai Motor Co. has logged a loss in the third quarter despite double-digit growth in sales as it booked near $2 billion in reserves for voluntary recalls for engine defects to raise after-sales quality control and commitment.

The company in its regulatory filing on Monday reported an operating loss of 313.8 billion won ($278.1 million) on a consolidated basis in the July-September period, reversing from a profit of 590.3 billion won a quarter ago and 378.5 billion won a year earlier.

It registered a net loss of 188.8 billion won, swinging from a profit of 377.3 billion won three months ago and 460.5 billion won against the previous year. Sales added 26.2 percent on quarter and 2.3 percent on year to total 27.58 trillion won in the quarter.

The figures were sharply below the earlier market consensus of 1.14 trillion won in operating profit compiled by Seoul-based financial data provider FnGuide as of Oct. 19, but did not come as a surprise as Hyundai Motor Group last week alerted investors that Hyundai Motor was entering 2.1 trillion won and Kia Motors 1.26 trillion won in the third-quarter books to cover for recalls for defective Theta 2 GDi engines. The recall coverage budget was upped to promptly address to consumer complaints from engine issues.

Hyundai Motor shares gained 2.69 percent to finish at 171,500 won in Seoul on Monday.

Operating margin was down 2.5 percentage points to negative 1.1 percent in the third quarter.

From July to September, Hyundai Motor sold total 997,842 vehicles, down 9.6 percent from a year-ago period. Domestic sales jumped 21.9 percent to 199,051 units on robust demand for new releases like luxury brand Genesis’ first SUV model GV80 and sedan G80 and Hyundai all-new Avante. Overseas shipments were off 15 percent to 798,791 units due to prolongation in pandemic crisis.

Although global auto demand shows signs of improvement, uncertainties still exist concerning possible resurgence in virus infections, unfavorable foreign exchange rates and poor sales in emerging markets, Hyundai Motor said.

The company plans to add higher value-added vehicle lineups and tailor sales strategies for each market to enhance its profitability. To avoid repetitive quality issues, company-wide measures also will be set up for fast detection and improvement in the development stage.

By Lee Ha-yeon

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