Hyundai Motor's operating profit has dropped by more than 20% compared to the same period last year, primarily due to the ongoing impact of U.S. tariffs over the past four quarters. Lee Seung-jo, Hyundai's Chief Financial Officer, stated during a second-quarter earnings conference call on July 23, "In the first quarter, we paid 900 billion won in U.S. tariffs, and we expect a similar amount in the second quarter. However, we anticipate that the tariff impact will decrease in the second half compared to last year."
Supply chain disruptions from parts suppliers have also contributed to declining profitability. Lee noted, "A fire at a safety equipment manufacturer caused production delays for some models, including Genesis. We shifted production to other models and completed the development of alternative engine valves in May, but the production shortfall mainly affected high-value models like Genesis, negatively impacting profitability."
A fire at Hyundai Mobis' plant in India has further exacerbated the situation. The large fire in May at the facility in Tamil Nadu destroyed one production line for electronic components and chassis, resulting in an estimated production loss of about 14,000 vehicles. Lee explained, "To minimize the impact of production disruptions, we maximized the use of existing inventory in the second quarter, and we expect to recover a significant portion of the lost volume through increased production starting in the second half."
The global business environment is also deteriorating Hyundai's profitability. The prolonged conflict in the Middle East has increased oil price volatility, while the costs of non-ferrous metals and other raw materials have surged, raising cost pressures. Lee added, "The war in the Middle East and inflation have led to a significant rise in the prices of key raw materials, resulting in an increase of about 400 billion won in costs during the second quarter. The potential repeal of the U.S. Inflation Reduction Act and the aggressive market entry of Chinese electric vehicles in Europe are also burdensome factors."
Hyundai plans to regain growth momentum in the second half through new car launches. The company aims to accelerate the release of key models, including the New Grandeur HEV and the volume model Avante. In Europe, the Ioniq 3 and Tucson will also be launched.
Lee stated, "The second half will see the launch of the Grandeur facelift HEV, a full change of the Avante, and new Genesis models. We expect profitability to improve significantly with the sales expansion from these new launches." He also mentioned that in the European market, "We are prioritizing price competitiveness for the Ioniq 3, aiming to sell over 20,000 units annually, and the new Tucson model will be launched in the fourth quarter, with growth expected from next year."
The biggest variable for second-half performance is the strikes. The Hyundai union's third strike resolution over wage and collective bargaining issues has already led to production losses exceeding 1 trillion won.
On the same day, the union decided during its fourth meeting of the Central Struggle Countermeasure Committee to conduct a third partial strike from July 29 to 31. Previously, the union held a first partial strike from July 13 to 15 and a second from July 20 to 22. The two previous partial strikes resulted in approximately 36 hours of halted production, leading to an estimated loss of about 16,000 vehicles and 700 billion won. If the upcoming third partial strike proceeds as planned, industry estimates suggest the damage could reach 1.12 trillion won.
* This article has been translated by AI.
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