Tariffs and rising costs bite Hyundai despite record quarterly revenue

SEOUL, April 23 (AJP) - Despite posting record revenue, Hyundai Motor saw its profitability come under intense pressure as tariffs and rising costs eroded margins.

Revenue rose 3.4 percent year on year to 45.9 trillion won, marking the highest first-quarter figure on record. The increase was supported by strong sales of high-margin SUVs and hybrid vehicles, even as global industry demand contracted 7.2 percent.
  Hybrid vehicles accounted for 17.8 percent of total sales, with the U.S. market reaching a record 24.8 percent. This helped the company expand global market share despite weakening demand.

Operating profit, however, fell 30.8 percent to 2.51 trillion won, with the operating margin narrowing to 5.5 percent from 8.2 percent a year earlier.

The result came in at the lower end of market expectations, with estimates compiled by FnGuide pointing to operating profit in the range of 2.4 trillion to 2.6 trillion won.

A breakdown of earnings drivers showed that tariff-related costs were the single largest drag on profitability, reducing operating profit by 860 billion won. Lower volumes cut earnings by 247 billion won, while a weaker product mix — driven by higher incentive spending — reduced profit by a further 337 billion won.
  The earnings pressure came despite relatively resilient sales. Wholesale volumes declined to 976,000 units from 1.0 million a year earlier, reflecting weaker industry demand and temporary disruptions, including supply chain issues and geopolitical uncertainty.

Cost pressures were also evident in the company's structure, with the cost of sales rising to 82.5 percent of revenue, up 2.7 percentage points from a year earlier, driven largely by higher raw material prices.
  The automaker said raw material costs - including nickel, lithium and precious metals — added more than 200 billion won in additional expenses in the first quarter and are expected to remain elevated into the second quarter, even as some prices begin to stabilize.

It also acknowledged production disruptions following a fire at a key engine valve supplier, though it expects to normalize output from April and recover lost production in the second half through global production adjustments.

Regional dynamics also weighed on profitability. Incentive spending remained elevated in Europe amid tightening emissions regulations, while India emerged as a rare bright spot, with record sales and minimal incentive burden.

Despite pressure in its core automotive business, Hyundai's financial arm delivered stable earnings growth supported by asset expansion, partially offsetting the decline in vehicle operations.

Looking ahead, the company said it is accelerating autonomous driving development through collaboration with Nvidia to secure data and enhance competitiveness. It is also shifting its China strategy toward export-driven growth, with exports already accounting for around 40 percent of local sales.

Shares of Hyundai Motor closed at 532,000 won, down 1.7 percent on the day.
 

Copyright ⓒ Aju Press All rights reserved.