Hyundai's U.S. Market Share Hits New Monthly High in May
The author is an analyst of Shinhan Investment Corp. He can be reached at yjjung86@shinhan.com. -- Ed.
Domestic: Sales fared much better
Domestic auto sales (excluding imported cars) came in at 124,000 units (-15.0% YoY, -8.4% MoM) in May, weighed down by disruptions in the supply chain. The results were much better than feared by the market. Decent output levels achieved even with chip shortages in full swing should help ease concerns over supply disruptions. Gaining a competitive advantage in new models, flexible production plans, and chip restocking, Hyundai Motor and Kia were able to further strengthen their oligopolistic standing. Their combined domestic market share rose 5.1%p YoY to 88.6%.
Overseas: Demand-driven growth
Overseas subsidiaries reported solid results in both shipments and sales. Strong growth continued, driven by pent-up demand, despite various negatives like the shutdown of US plants amid automotive chip shortages, worsening COVID-19 crisis in India possibly weakening demand, and sluggish sales in China. Overseas plant shipments at Hyundai Motor amounted to 170,000 units (+56.9% YoY, -16.6% MoM) and Kia 94,000 units (+75.7% YoY, -8.5% MoM).
In the US market, which is key to short-term earnings, Hyundai saw its market share hit a new monthly high in May with retail sales of 80,000 units (+35.7% YoY, -0.9% MoM). Auto inventories were down to the lowest 2.1 months of inventory (-1.9 months YoY, -0.6 month MoM) due to supply disruptions. Kia’s US retail sales stood at 67,000 units (+45.1% YoY,-5.2% MoM). The average incentive is estimated to have dropped by 35.9% YoY to USD2,425, the lowest level since 2013.
Retain OVERWEIGHT; top picks are Kia and Hyundai Motor
Despite the chip shortage issue, the auto sector performed well on almost all fronts. Even the decline in output was less than feared. Cost hikes from a KRW50,000/ton rise in steel contract prices have raised concerns recently, but appear to be manageable given the decline in promotion expenses and rising share of high-margin vehicles. Our auto sector top picks are Kia and Hyundai Motor that are capable of maximizing profitability through flexible production management.