South Korea’s Hyundai Motor stated on Thursday it expects only a modest recovery in Chinese auto demand and weak sales elsewhere this year after the coronavirus pandemic resulted in first-quarter vehicle sales to drop 18%.
Hyundai, which with Kia Motors forms the world’s No.5 automotive group, joins an increasing number of automakers forecasting a bleak year.
“Demand is expected to worsen in the second quarter because of the prolonged suspension of dealer operations and factory operations in overseas markets,” said Kim Sang-hyun, Hyundai’s Chief Financial Officer.
“Global automakers are expected to see their profitability drop in earnest.”
Hyundai stated worldwide auto demand dropped 24% in the first quarter and over 40% in March.
Tracking the spread of the outbreak, drops for Hyundai’s first-quarter retail vehicle sales were sharpest in China where they declined 43%. In South Korea, they declined 14% while in the United States, they declined 11%.
With the outlook for many nations’ recoveries from the pandemic is not clear, Hyundai has suspended operations at its plants located in the United States, India and Brazil. However its plants in China, South Korea, Russia, Czech Republic and Turkey have restarted production after suspensions.
“Although we forecast a sales recovery in the second half, annual demand is expected to decline sharply,” said Koo Za-yong, head of Hyundai’s investor relations.
He said that China would likely see only a modest revival as the economy reels from the fallout of the coronavirus.
But while vehicle sales dropped in the first quarter, a cheaper South Korean won and improved sales of luxury models helped Hyundai’s revenue increase 6% to 25 trillion won ($20.4 billion).
Net profit dropped 44% to 463 billion won ($376 million), below an average Refinitiv estimate of 607 billion won, hit by the decline in China sales, a smaller profit from its affiliates and financial losses.
By comparison, Daimler AG cautioned on Thursday of almost 70% decline in core earnings for the quarter just ended.
Coronavirus has so far infected more than 2,897,645 people and killed more than 202,880 people worldwide.