Hyundai and Kia Motors, South Korea’s top two automakers, saw their combined sales in China plunge by 65.1 percent on-year in April amid the row over the deployment of a US anti-missile system here, industry data showed Thursday.
The two auto companies sold a combined total of 51,059 units in China last month, down 65.1 percent on-year, the second consecutive sales decline there, Hyundai Motor confirmed.
Hyundai Motor and Kia Motors headquarters in Southern Seoul. (Yonhap)
Sales of Hyundai Motor dropped 63.6 percent on-year to 35,009 units last month, while Kia suffered a decline of 68 percent and sold 16,050 units.
The sales posted by the two companies were the lowest level seen since demand for automobiles saw a sharp decline in February 2009 due to the global financial crisis.
“Anti-Korea sentiment in China due to the THAAD (Terminal High Altitude Area Defense) deployment is the biggest reason for the two auto companies’ weak performance last month. The market had predicted the THAAD issue to slash Hyundai and Kia’s April sales in China, continued from March,” said analyst Kwon Soon-woo of SK Securities.
Hyundai Mobis, South Korea’s biggest auto parts maker, is feeling the impact of Hyundai and Kia’s sales decline, with a dim second-quarter outlook for the auto parts supplier prevailing.
Analysts, including Esther Yim at Samsung Securities, lowered Hyundai Mobis’ expected second-quarter performance.
Yim projected that the auto parts supplier would post sales of 8.9 trillion won ($7.9 billion) from April to June, down 8.8 percent year-on-year. Its operating profit was expected to plummet 20 percent to 626.8 billion won.
Hyundai and Kia’s performance is an essential factor for Hyundai Mobis, as the two automakers account for some 70 percent of the auto parts maker’s sales.
Hyundai Mobis supplies modules for various Hyundai and Kia models, including Hyundai’s LF Sonata sedan and Hyundai’s luxury lineup Grandeur IG sedan.
“Hyundai and Kia Motors’ sluggish sales in China is a result of intensifying competition there and their falling product competitiveness,” Yim said.
“It is difficult to expect sales to bounce back up on eased political risks.”
Despite enhanced profitability of Hyundai Mobis’ after-service business, chances of the company showing improved profit in the coming months remain unlikely due to weak performance in the module business, according to Moon Yong-kwon, an analyst KTB Investment & Securities.
Hyundai Mobis is largely divided into module business and after-service business.
Sales posted by its module sector totaled 7.5 trillion won, down 2.2 on-year in the first quarter, which was the lowest since 2011, company data showed.
The rising inventory of Hyundai and Kia Motors is also accountable for Hyundai Mobis’ sluggish module business, as they will continue downsizing production, Moon said.
That means less modules for Hyundai Mobis to sell.
The new vehicle inventory of Kia Motors in the US reached 4.9 months of supply as of March, which means the automaker holds the inventory for an average 4.9 months before selling it.
According to Moon, conditions in China and the US will continue to affect Hyundai and Kia, and ultimately push down Hyundai Mobis’ performance.
By Kim Bo-gyung(
lisakim425@heraldcorp.com)