(Seoul = Yonhap News) Reporter Hong Gyu-bin = Kia improved its third quarter performance by leveraging electric and hybrid vehicles despite the shrinking global automobile market.
However, the policy of reducing prices and expanding incentives in response to Chinese electric vehicle companies targeting overseas markets with low prices is putting a burden on profitability.
Kia announced on the 30th that its consolidated sales in the third quarter amounted to KRW 31.5974 trillion, up 10.1% from the same period last year. Operating profit increased 24.3% to 1.8183 trillion won.
Despite the decline in global industrial demand as consumer sentiment froze due to high prices and rising interest rates, the fact that automobile sales (wholesale basis) increased by 7.9% to 847,355 units was effective.
What led to the increase in sales were eco-friendly cars. Kia's retail sales of electric vehicles increased by 47% to 300,000 units, and its share of total sales also increased by 9.8 percentage points to 36.2%.
Considering that the increase in sales of electric vehicles (96,000 units) is greater than the increase in total retail sales (54,000 units), the decrease in sales of internal combustion engine vehicles is made up for by electric vehicles.
This is about 50,000 units more than Hyundai Motor Company’s sales of electric vehicles during the same period (245,540 units, 2.7%↓).
By vehicle type, sales of electric vehicles surged 75.4% to 123,000 units, and about half, or 63,000 units, were sold in Western Europe, including the UK, Germany, and France.
Hybrid car sales increased 46% to 172,000 units. In particular, U.S. sales increased by 118% to 69,000 units, recording a double-digit market share (10.6%) of Kia in the local HEV market for the first time.
However, behind the increase in sales lies the burden of profitability.
Kia increased incentives (sales incentives) and lowered prices to increase sales of electric vehicles in Western Europe and Korea, and the resulting decrease in operating profit was calculated to be 727 billion won.
This is twice the increase in operating profit (356 billion won) in the third quarter.
In a situation where profits were cut by 577 billion won due to external variables such as rising raw material prices (368 billion won) and the prolongation of the Middle East conflict (209 billion won), the cost of price competition was added. Kia's cost-of-sales ratio was 84.1%, up 3.0 percentage points from a year ago.
It is observed that the fact that operating profit in the third quarter fell below market expectations is not unrelated to this. The market forecast compiled by Yonhap Infomax was 2.3313 trillion won.
Kia's pricing strategy is interpreted as a response to the offensive of Chinese competitors. The strategy is to increase market share even if it means compromising some of the profitability.
According to SNE Research, the market share excluding China of the three Chinese groups, including BYD, Geely, and Cherry, was 22.8% as of January to August this year, up 7.5 percentage points from the same period last year.
In the domestic market, BYD and Zikker have begun sales, and Xiaopeng and Cherry Tea are also preparing to enter the Korean market.
Kia's stance is that it will continue its electrification strategy despite short-term profitability burden.
A Kia official said in a conference call that day, "We believe that the European market in particular cannot survive without selling electric vehicles," and added, "Giving up electric vehicles because of low profitability in the short term is not the right direction. We plan to continue with this strategy until next year."
At the same time, hybrid vehicles did not make a profit in the beginning, but are now making a profit as much as internal combustion engine vehicles, and predicted, "With incentives normalized and cost reductions, electric vehicles will also be profitable within two to three years."
In relation to responding to the European Union's (EU) Industrial Acceleration Act (IAA), he said he was considering increasing the localization rate and said, "We are also considering producing all electric vehicles at our Slovakian factory and exporting internal combustion engine vehicles from Korea."
