Hyundai Motor Co and Kia Motors Corp, South Korea’s largest automakers, forecast their weakest sales increase in a decade as a slump in demand in China and a stronger won cut their profit.
The companies’ combined deliveries are to rise 1.4 percent to 8.13 million vehicles this year from a year earlier, Chung Mong-koo, chairman of both automakers, said during a New Year address to employees in Seoul yesterday.
That would be the slowest growth since 2006 and compares with the average estimate of 8.12 million units in a Bloomberg News survey of five analysts.
Photo: Bloomberg
Shares of the automakers fell in Seoul trading. The companies missed their sales target last year for the first time since 2008 after sales slumped in China and unfavorable exchange rates cut earnings in Russia and Brazil.
Hyundai spun off its luxury Genesis sedan into a standalone premium brand to burnish its reputation amid flagging sales, while Kia plans to begin production at its Mexico plant this year to help boost sales in the region.
“The slowdown in the Chinese economy, low fuel prices and uncertainties in emerging markets due to a hike in US interest rates suggest that growth will continue to be slow,” Chung said in his speech.
Hyundai Motor fell 3.4 percent to 144,000 won at the close in Seoul trading to a four-month low. Kia lost 3.4 percent to 50,800 won.
Sales in China, the largest market by volume for the two automakers, fell in the first 11 months of last year after demand slowed with a moderation in economic growth.
Demand began to rebound after the Chinese government cut a sales target by half starting in October last year through the end of this year.
The automakers have not released their delivery figures in China for last month.
A recovery in the world’s largest car market is important for Hyundai and Kia, as both companies are adding factory capacity this year. Hyundai is to begin manufacturing at a new plant in the fourth quarter of this year and is building another in Chongqing, China.
Together, the two factories are to boost Hyundai’s production in China by 57 percent by 2018.
Kia is expanding manufacturing capacity at its third plant in China and plans to start producing its Forte compacts in Mexico in May, for export to the US and nations in South America.
“Sales in China should recover for both carmakers in 2016, helped by the tax cut,” said Kim Jin-woo, an analyst at Korea Investment and Securities Co. “Other issues to keep an eye out for in the year would be how well the Genesis brand is accepted in key markets, like the US, and how quickly Kia can bring up production at its new plant in Mexico.”
Hyundai plans to increase sales by 0.9 percent to 5.01 million vehicles this year, while Kia’s aim is for a 2.3 percent increase to 3.12 million units, the companies said in separate filings.
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