“Kia Corporation to absorb EV growth pains in Q3 ... HEVs key to defending profitability”: Heungkuk Securities

[Financial News] Kia Corporation is maintaining sales growth while shouldering the profitability burden of expanding EV sales, and is expected to defend profitability from Q4 by increasing sales of high-margin hybrids, according to an analysis.
On the 14th, Heungkuk Securities estimated that Kia Corporation would post Q3 revenue of 31.4 trillion won, up 9.4% from a year earlier, and operating profit of 2.2 trillion won, up 51.7%. The analysis said that although strikes continued across the group, Kia Corporation was affected only by partial strikes and continued to grow sales, with wholesale sales excluding China rising 8.7% year on year to 831,000 units.
However, concerns emerged over profitability. “Despite recognizing valuation gains on provisions following a sharp drop in the year-end exchange rate, we lowered our operating margin estimate by 0.7 percentage points from our previous estimate, taking into account rising raw material prices and the negative mix effect from a higher share of BEV sales, which are relatively less profitable,” said Gunwoo Ma, an analyst at Heungkuk Securities.
The analyst said the profitability burden would be unavoidable for the time being, as Kia has cut the actual selling prices of entry-level BEVs to compete with low-cost EVs in Europe while keeping incentives at a high level.
Hybrids are seen as the key to defending profitability. “We expect the profitability burden to gradually ease from Q4 through next year,” Ma said. “The mass production of the Sportage HEV at HMGMA, increased Telluride production in the U.S., and the expansion of high-margin HEV sales through the introduction of an HEV in the Kia Seltos FMC are positive.” While damage to profitability from intensifying price competition is unavoidable in the short term, market-share gains are expected to bring economies of scale and improve profitability over the medium to long term.
Ma added, “Although concerns about a slowdown in global demand due to rising interest rates and high raw material prices, along with other unfavorable operating conditions, persist, I highly value the competitiveness that enables Kia Corporation to sustain sales growth even in these adverse conditions.”
[email protected] Kim Dong-chan Reporter