As people purchased Hyundai’s luxury cars, the company’s first-quarter profit nearly tripled to its highest level in four years, but it warned that due to a chip shortage, production will have to be adjusted again in May. Due to a healthy chip inventory, the South Korean automaker avoided production halts in the first quarter, unlike its rivals. However, the shortage is now catching up with Hyundai, thanks to factors such as a fire at a chip factory in Japan and storms in Texas.
Hyundai has briefly halted production three times since the beginning of this month, saving chips for its most successful models. Hyundai, along with its partner Kia Corp, is among the world’s top 10 automakers by sales. Hyundai executive vice president Seo Gang-Hyun said, “The state of semiconductor parts is a little longer than we thought.” “It’s difficult to forecast production status after May because the semiconductor procurement situation is rapidly evolving. In May, we anticipate a close, if not greater, output change than in April.”
According to analysts, the production halts have costed Hyundai around 12,000 vehicles so far, and potential performance will be harmed if the chip crisis continues. “While Hyundai may have to cut some production (in the second quarter), the company is unlikely to suffer significant consequences,” said Lee Jae-il, an analyst at Eugene Investment & Securities. This was due to favourable market conditions backed by strong demand, as well as higher average selling prices driven by sales of higher-margin vehicles, he explained.
The coronavirus pandemic dragged on, fuelling car ownership, but Hyundai was unaffected in the quarter ended March 31, as people at home and in the United States picked up its high-margin SUVs and luxury Genesis cars. The company’s net profit increased by 187 % to 1.3 trillion won ($1.16 billion) from 463 billion a year ago, when business was down due to countries shutting down to reduce the spread. This corresponded to a Refinitiv SmartEstimate’s average. To 27.4 trillion won, revenue increased by 8.2%.
According to Refinitiv SmartEstimate, Hyundai is expected to post a net profit of 1.4 trillion won for the April-June quarter, up 536 % year on year. Hyundai Motor, Asia’s fifth-largest automaker by market capitalization, saw its shares rise 2% after its results on Thursday, but then dropped back to trade unchanged. The stock market as a whole increased by 0.2 %. Hyundai’s stock has gained nearly 18% this year, making it the third-best performer among large Asian automakers. Hyundai, which has lagged behind its competitors in the electric vehicle (EV) race, also announced on Thursday, that it is working on solid-state batteries and plans to mass-produce EVs with solid-state batteries by 2030.
Hyundai debuted its Ioniq 5 midsize crossover in February, the first of a planned family of electric vehicles, that the company hopes will catapult it to third place among global EV manufacturers by 2025. In 2025, Hyundai Motor and Kia are expected to sell 1 million electric vehicles. Kia Corp, a Hyundai subsidiary, posted an operating profit of 1.1 trillion won in January-March, up 142 % year on year.
