Hyundai plans turnaround in China after profits slump
Hyundai Motor Co. will court China's bargain-hunting motorists with more aggressive discounting and sportier cars after weak April-June sales in its biggest market sealed the automaker's sixth straight drop in quarterly profit.
The company, which with affiliate Kia Motors ranks fifth in global auto sales, said its net profit slumped 24 percent in the quarter to $1.5 billion (8.9 billion yuan), matching analysts' estimates.
The downturn was due in part to Hyundai's poor results in China. In the first six months, deliveries slumped 8.5 percent to 513,784 units, as Hyundai became the latest foreign carmaker to report slowing demand in China.
Hampered by a strong currency and portfolio of mostly sedans when consumers are favoring SUVs and crossovers, the South Korean carmaker is cutting costs and production.
"Hyundai didn't have enough SUVs and seems to have been slow in increasing incentives in China," said Lee Sang Hyun, an analyst at IBK Securities Co. "You can say that the company's share performance this year hinges on how well Hyundai recovers sales in China in the coming months."
While discounts in China will hurt profit margins, Hyundai is counting on higher sales to make up the shortfall.
In China, Hyundai will "increase [sales] incentives to minimize the price gap with local carmakers, increase marketing costs and bring forward the launch of the [redesigned Tucson] crossover", CFO Lee Won-hee said during a conference call.
Lee said Hyundai also plans to add dealerships in China.
"In the mid- to long-term, it's inevitable for us to cut production cost as local carmakers are aggressively increasing sales with competitive pricing," Lee said. "We also have plans to aid the business stabilization of dealers in China so that they may keep an appropriate amount of inventory."
The downturn was due in part to Hyundai's poor results in China. In the first six months, deliveries slumped 8.5 percent to 513,784 units, as Hyundai became the latest foreign carmaker to report slowing demand in China.
Hampered by a strong currency and portfolio of mostly sedans when consumers are favoring SUVs and crossovers, the South Korean carmaker is cutting costs and production.
"Hyundai didn't have enough SUVs and seems to have been slow in increasing incentives in China," said Lee Sang Hyun, an analyst at IBK Securities Co. "You can say that the company's share performance this year hinges on how well Hyundai recovers sales in China in the coming months."
While discounts in China will hurt profit margins, Hyundai is counting on higher sales to make up the shortfall.
In China, Hyundai will "increase [sales] incentives to minimize the price gap with local carmakers, increase marketing costs and bring forward the launch of the [redesigned Tucson] crossover", CFO Lee Won-hee said during a conference call.
Lee said Hyundai also plans to add dealerships in China.
"In the mid- to long-term, it's inevitable for us to cut production cost as local carmakers are aggressively increasing sales with competitive pricing," Lee said. "We also have plans to aid the business stabilization of dealers in China so that they may keep an appropriate amount of inventory."
