SEOUL: Hyundai Motor’s revenue jumped more than 30% in the third quarter on strong electric vehicle sales, but profit fell as the company had to set aside nearly US$1 billion to deal with the repair of faulty gasoline engines on some older cars.
Hyundai announced today that operating profit fell 3.4% to 1.6 trillion won (US$1.1 billion) in the July-September quarter from the same period last year. Net profit declined 5.1% to 1.4 trillion won.
The hit was largely due to 1.4 trillion won in provisions to recall 2.4 million Sonata, Tucson, and Santa Fe models with defective Theta engines. Affiliate Kia was also affected by the recall.
“The results reflect engine-related provisions to place the utmost priority on protecting customer safety and ensuring vehicle quality,” Hyundai said in a media release. Minus those, the company said it had a nearly 7.7% operating profit margin in Q3.
The profit results overshadowed what was stellar sales performance in the period. Revenue soared 30.6% to 37.7 trillion won in Q3 on year.
Hyundai said EV sales rose more than 27% from the year before to about 52,000 vehicles, accounting for 5.1% of total sales.
“The increase mainly stemmed from the strong sales of the newly launched Ioniq 6 and GV60 while award-winning Ioniq 5 sales stayed robust,” the company said.
A consensus of analysts published by FnGuide expected operating profit of 2.8 trillion won while net profit was pegged at 2.4 trillion won. The forecasts, however, did not account for the recall provisions. Revenue was seen at 36.1 trillion won.
Like many automakers, Hyundai – which with Kia forms the world’s fifth-biggest automaker – is increasingly investing in electric vehicles while continuing to produce traditional gas-powered models.
Hyundai is manufacturing EVs in Indonesia, a country that is attempting to leverage its huge supply of nickel to establish itself as a key player in the global EV supply chain.
The US has traditionally been a key market for Hyundai, which has produced conventional cars there for years.
However, Washington excluded it from its list of automakers benefiting from tax credits for EV buyers as they do not apply to automakers that do not produce EVs in the country. The South Korean government is asking the administration of President Joe Biden to include Hyundai on the list.
Hyundai shares fell 3.3% to close at 161,500 won.