Hyundai Motor Co. and Kia Motors Corp. achieved record sales in 2019. Hyundai Motor surpassed 100 trillion won (about US$86.2 billion) in annual sales for the first time thanks to increased sales of high-priced models, strong popularity of newly launched models, and favorable foreign exchange rates. Kia Motors renewed its annual sales record for the fifth consecutive year.
Hyundai Motor announced in a conference call held at its head office in Yangjae-dong, Seoul, on Jan. 22 that its 2019 sales increased by 9.3 percent on year to 105.79 trillion won (about US$91.2 billion). The amount was Hyundai Motor’s highest sales since 2010 when it introduced the International Financial Reporting Standards (IFRS).
Its overseas sales decreased by 3.6 percent to 4,425,528 units from 4,589,199 units in the previous year. But strong demand for its sports utility vehicles (SUVs), such as the Palisade, and new models including the New Grandeur led sales growth. A full-option export model of the Palisade was priced at nearly 60 million won. In addition, as the won-dollar exchange rate rose by more than 100 won to 1,223 won from 1,113 won per dollar last year, its sales expanded further.
On the same day, Kia Motors also released better-than-expected sales results. Last year, Kia Motors’ sales grew by 7.3 percent on year to 58.15 trillion won (about US$50.1 billion) due to an increase in sales of new models such as the Seltos and the Telluride, an SUV that targeted the North American market, and an increase in the proportion of recreational vehicles (RVs). Since 2015, its sales have hit new record highs. Last year, the Telluride sold 58,604 units in the United States alone, leading Kia's sales growth.
However, the two companies’ profitability still remains at a low level. Hyundai Motor recorded 3.68 trillion won (about US$3.18 billion) in operating profit, a 52 percent jump on year, and 3.26 trillion won (about US$2.81 billion) in net profit, a 98.5 percent surge from a year ago. The high growth rates are impressive, but they reflect poor earnings a year ago.
The company’s operating margin rose by 1.0 percentage point from 2.5 percent in 2018, which was the lowest level ever, to 3.5 percent, but it was still half of the domestic manufacturing average. Hyundai Motor's operating margin peaked at 10.3 percent in 2011 and has been staying under 5 percent for three consecutive years.
Kia Motors posted 2.01 trillion (about US$1.73 billion) in operating profit and 1.83 trillion won (about US$1.57 billion) in net profit. Its operating profit and net profit swelled 73.6 percent and 58.0 percent, respectively.
Kia’s operating margin was 3.5 percent, the same as that of Hyundai Motor. Its operating margin dropped to 1.2 percent in 2017 but rose to 3 percent last year after recovering to the 2 percent range in 2018. The expansion of R&D investment slowed down a rise in its profitability compared to sales growth.
In 2019, Hyundai Motor and Kia Motors put up a good fight considering the fact that the two carmakers had to reflect a cost increase of 900 billion won (Hyundai Motor 600 billion won and Kia Motors 300 billion won) stemming from their provision of life-long warranty for the Theta 2 Engine to their customers.