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Why Hyundai, Kia Motors See Rapid Rise of Losses in US?
Poor Performance in US
Why Hyundai, Kia Motors See Rapid Rise of Losses in US?
  • By Jung Min-hee
  • September 12, 2017, 04:30
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Hyundai Motor and its smaller affiliate Kia Motors are seeing their performance in the United States get worse for many reasons. (photo courtesy: Hyundai Motor)
Hyundai Motor and its smaller affiliate Kia Motors are seeing their performance in the United States get worse for many reasons. (photo courtesy: Hyundai Motor)

 

Hyundai Motor and its smaller affiliate Kia Motors are seeing their performance in the United States get worse. The Chinese market is the worst in terms of sales due to the Chinese government’s retaliation over the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) system, but the U.S. market is far worse than China in terms of profitability.

The sales growth of eco-friendly vehicles, including hybrid electric vehicle (HEV) which emerged as an alternative that can boost the sluggish market with growing sales in the first half of the year, also started to flatten out last month.

According to industry sources on September 11, Hyundai Motor America made a loss of 245.3 billion won (US$217.04 million) in the U.S. market in the first half of this year. Hyundai Motor’s operating loss in the first half reached the 70 percent level of 341.8 billion won (US$302.42 million) of the total operating losses last year. The figure also far surpassed the loss of 162.8 billion won (US$144.05 million) in 2015. The U.S. market situation is more serious than the Chinese market in terms of profitability. The loss of Beijing Hyundai Motor Co. (BHMC), a 50-50 joint venture between Hyundai Motor and Beijing Automotive Industry Holding Co., stood at 210 billion won (US$185.76 million) in the first half of the year, relatively lower than Hyundai Motor America.

As the market cannot pick up in the short term, the total losses in the U.S. market are expected to surge this year.

Kia Motors is seeing its losses increase more rapidly. The company had a gain of 18.5 billion won (US$16.37 million) in 2015 but it showed a loss of 134 million won (US$118,532) last year. However, it posted 135.7 billion won (US$120.04 million) in loss in the first half of this year alone.

The sharp drop of Hyundai-Kai Motors’ profitability in the U.S. market is largely due to the decrease of fleet sales, including rental cars and mass sales which have lower profitability, and rapid increase of dealer incentives. Fleet sales, which sells a large quantity of products to government offices and companies at one go, has lower profitability than retail sales. This is why Hyundai and Kia Motors are slashing fleet sales after May. In addition, industry watchers say the two companies’ sluggish sales are also due to the steep fall in sedan sales, lack of sports utility vehicle (SUV) lines and lower price competitiveness of Hyundai Motor after it decided to sell its products at the fair price in recent years.

The sales of environmentally friendly cars are also decreasing. According to U.S.-based eco-friendly car website HybridCars.com, the share of Hyundai and Kia Motors in the U.S. HEV market dropped 4 percent points from 17.13 percent in July to 13.85 percent in August.

An official from Hyundai Motor said, “The sales to individual consumers in the U.S. market is ok but profitability dropped as we reduced the sales to corporations. The decrease of the Ioniq HEV was due to the strike and vacation in South Korea in July and August.”