Hyundai Motor reported a drop in profit on high-margin domestic sales but less than what was expected. The automaker said that while demand should pick up soon, the pace of recovery will be slow because of the impact of the coronavirus pandemic.
The automaker which together with sister company Kia Motors is the world’s fifth-largest automaker stated that weakness in both mature and developing economies means auto sales may only make recovery to 2019 levels around 2023.
“Auto demand is expected to pick up from the third quarter, but economic recession impact from COVID-19 and uncertainties around re-proliferation remain,” CFO Kim Sang-hyun stated.
Hyundai said it will not pay interim dividends in 2020 because of the uncertainty and need to secure capital as it revealed its results for the second quarter on Thursday.
For April-June, Hyundai turned in an operating profit of 590 billion won ($493 million), against an average analyst estimate of 377 billion won provided by Refinitiv, driving its shares up 5.1% in a slightly weaker wider market.
The results were buoyed by sales in South Korea, which increased 13% from a year ago to 200,000 vehicles, led by demand for large vehicles and sport-utility vehicles (SUVs) such as the G80 sedan and GV80 SUV from premium brand Genesis.
Hyundai’s global retail sales dropped 33% for the period, which included double-digit percentage sales declines in major markets such as the United States, China, Europe, and India.
South Korea has surpassed China and the United States as the leading market for Hyundai, as the country managed to control the spread of COVID-19 outbreak much better than many others and extended auto tax cuts.
Other than Tesla, Hyundai, and Kia, other automakers are expected to report losses this quarter.
Hyundai’s net profit for April-June dropped to 227 billion won, from 919 billion won a year ago, most probably due to foreign currency debt and lackluster China business.