**Hyundai’s Performance in Q3 Falls Short of Expectations, but Hybrid Sales Remain Strong**
On the 24th, during Hyundai Motor’s third-quarter business performance conference, it was reported that although the company’s Q3 performance fell short of expectations, the growth in hybrid vehicle sales remained robust. Hyundai emphasized that despite setting aside significant provisions due to the extension of warranty periods for their SUVs sold in the U.S., the company maintains its target operating profit margin of 8-9% for this year.
On that date, Hyundai announced that its Q3 revenue increased by 4.7% year-on-year to 42.9283 trillion KRW, marking a record high for the third quarter. However, the operating profit was 3.5809 trillion KRW, falling short of the expected 3.8 trillion KRW and declining by 6.5% compared to the previous year. The operating profit margin also fell by 1.0 percentage point to 8.3%.
**Impact of the U.S. SUV Warranty Extension Provision:**
The decrease in Q3 operating profit was attributed to one-time costs. Hyundai set a one-time provision liability of 320 billion KRW by proactively extending the warranty period for the 2013-2019 Grand Santa Fe (Maxcruz) sold in the U.S. Yoon Tae-sik, head of Hyundai’s IR team, stated that due to the characteristics of U.S. SUV consumers who frequently use towing functions, there was an increased possibility of issues with the installed Lambda II engines. As a preemptive measure, Hyundai agreed with the U.S. National Highway Traffic Safety Administration to extend the warranty period.
The Lambda II engine is installed not only in SUVs but also in large vehicle models like the Grandeur and Genesis. Regarding questions about additional provisions, it was clarified that the problem is specific to U.S. SUV consumers and was accounted for in the total sales volume, meaning no further provisions will be made.
**Excluding Provisions, the Operating Profit is the Third Highest Record for a Quarter:**
Despite the decrease in operating profit due to one-time costs, the underlying performance remained strong. Excluding the impact of this provision, the Q3 operating profit would have been 3.9 trillion KRW, with an operating profit margin of 9.1%, which would be the third-highest quarterly operating profit on record.
Hyundai attributed the successful performance to strong sales of various models and brands like hybrids and Genesis, continuous mix improvements and cost reduction efforts, and favorable exchange rates. Notably, hybrid sales grew by 45% year-on-year, significantly boosting the results for this quarter.
In Q3, Hyundai sold 131,000 hybrid units globally, making up 13% of total sales, up by 4.5 percentage points from the previous year. Hyundai is confident it can maintain this “strong hybrid performance” trend into Q4 and achieve the previously announced annual operating profit margin target of 8-9% without any major issues. Yoon mentioned that for some models, hybrid vehicles are more profitable than traditional internal combustion engine vehicles, contributing significantly to the company-wide results by securing double-digit profitability.
On this day, Hyundai announced a Q3 dividend of 2,000 KRW per share, an increase of 500 KRW from the same period last year. Additionally, Hyundai expressed its intention to use proceeds from the recent successful IPO of its Indian subsidiary on October 22 for shareholder returns. A Hyundai representative stated that cash inflows from the listing will be used to enhance competitiveness in the Indian market and invest in future growth engines, and the company plans to discuss and communicate with the board regarding the Hyundai’s shareholder return plan.