November 25, 2024

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Kia CEO Song Ho-sung unveils the EV9, the company's first electric SUV, at the Seoul Mobility Show 2023 in Goyang city on March 30. (Hyundai Motor Group)

Hyundai Motor Group has retained its position as the world's third-largest automaker for a second year, trailing only Toyota Motor and Volkswagen Group, based on its 2023 fourth-quarter and yearly financial results disclosed Thursday.

The Korean automotive giant, comprising the Hyundai, Kia and Genesis brands, sold approximately 7.32 million vehicles last year, marking a 6.7 percent on-year increase from 2022. Kia, in particular, hit a record operating margin of 11.6 percent, surpassing traditionally high-profit automakers like Tesla, which reported a 9.2 percent margin for 2023 on Wednesday.

"Hyundai-Kia's edge over Tesla in profit margins comes, in part, from its diverse EV lineup, offering double the vehicle choices to meet broader consumer preferences. They are ready with relatively cheaper EVs for the price-sensitive crowd and more beefed up options for the upscale market, unlike other EV makers who've been slashing prices to boost their numbers," said Kim Joon-sung, an automotive analyst at Meritz Securities.

Toyota remained the top carmaker, with sales already reaching 10.22 million units from January to November. Volkswagen secured the second position with 9.23 million vehicles sold.

Hyundai Motor Group's immediate competitors for the third position -- Stellantis and the Renault-Nissan-Mitsubishi Alliance -- have not yet published their complete 2023 results. However, Hyundai Motor Group's sales for the first three quarters of 2023 already amounted to 5.48 million vehicles, exceeding Stellantis's 4.8 million. Stellantis also reported a 1 percent decrease in 2023 US sales while Hyundai Motor Group saw a 12.1 percent increase.

The Renault-Nissan-Mitsubishi Alliance followed closely with 4.73 million vehicle sales in the first three quarters, with GM at 4.58 million, practically affirming Hyundai Motor Group's third-place position for 2023.

In profitability, operating margins were 9.3 percent for Hyundai Motor, which includes the Genesis brand, and 11.6 percent for Kia, up 2.4 and 3.2 percentage points, respectively, from the previous year. Kia's operating margin of 11.6 percent was the first time it hit double digits. The company generated a total operating profit of over 11 trillion won ($8.24 billion) in 2023, the highest since its founding in 1944.

Hyundai Motor Group attributed the higher operating margins to increased sales in the US and Europe, a focus on high-margin vehicles -- SUVs, electric vehicles and hybrids -- and the integration of advanced driving systems across entry-level models that drove up the average selling price.

Tesla's operating margins demonstrated a downward trend throughout 2023, with a significant drop from the first quarter's 11.4 percent to the fourth quarter's 8.2 percent. The decline was likely due to aggressive price cuts to stimulate sales and increased investments in capital expenditures as well as research and development.

Volkswagen experienced a similar trend, with its operating margin decreasing from 7.5 percent in the first quarter to 6.2 percent in the third quarter, likely impacted by diminished sales of its lucrative Porsche line in the Chinese market.

Among its peers, only Toyota achieved a higher operating margin than Hyundai Motor Group in the third quarter of 2023, at 12.4 percent, bolstered by a stronger yen and a surge in hybrid electric vehicle sales.

"Hyundai-Kia is striking a good balance between bolstering immediate sales, for example, with robust SUVs, and preparing for the future with EVs and software-defined vehicles. The next steps are ramping up EV sales and monetizing SDVs," said analyst Kim.

By Moon Joon-hyun (mjh@heraldcorp.com)