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Hyundai profit drops again

Hyundai Motor Co. reported Tuesday another quarterly earnings decline, hit by slowing demand in China and emerging markets, and by fierce competition in the U.S. that pushed up marketing costs.

Hyundai, the world’s fifth-biggest auto maker by sales when combined with affiliate Kia Motors Corp., is seeking ways to turn around its business in China–its biggest market–after sales there fell last year for the first time since 2007.

In the U.S., the Korean company shipped a record volume of automobiles in the fourth quarter, but the cost of incentives rose sharply from a year earlier as Hyundai spent more to lure customers.

Hyundai said October-December net profit was 1.53 trillion won ($1.3 billion), down 7.7% from 1.66 trillion won a year earlier. The result was worse than market expectations for net profit of 1.60 trillion won.

The eighth straight quarterly profit decline comes as sedans like the midsize Sonata–which the company has aggressively marketed for years–fall out of favor with consumers who prefer larger sport-utility vehicles and light trucks that have become cheaper to drive as fuel prices fall.

Hyundai plans to bring in more South Korean-made SUVs, such as the Tucson crossover, to the U.S. and increase the production of such vehicles in China.

Hyundai has made some progress recently in catching up with consumer tastes. Sales in China began to show some signs of turning the corner in December with the launch of the revamped Tucson, while government tax cuts buoyed sales of smaller cars. The Tucson, Hyundai’s flagship midsize SUV, and its larger cousin, the Santa Fe, also underpinned better sales in the U.S.

Hyundai’s fourth-quarter operating profit fell 19% to 1.52 trillion won from 1.88 trillion won. Revenue rose 5% to 24.76 trillion won from 23.57 trillion won.

Analysts expect the company’s profit to improve this year, helped by favorable foreign-exchange rates as the won weakens and by increased sales.

Source: MarketWatch

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