Hyundai Motor Co. (005380) and Kia Motors Corp. (000270), South Korea’s two largest automakers, forecast their weakest sales growth in eight years as competition intensifies and the stronger won hampers exports. The shares fell.
Hyundai and Kia’s combined deliveries will increase 4.1 percent to 7.86 million vehicles in 2014, according to comments made by Chung Mong Koo, chairman of both automakers, to employees during a new year address in Seoul today. That’s the slowest growth since 2006 and falls short of the 8 million units projection based on the average estimate of five analysts surveyed by Bloomberg News.
Chung, 75, said the companies will invest in improving vehicle safety and technology as competition gets fiercer and the global economy reaches a “low growth era.” The forecast comes days after Hyundai announced a leadership change in the U.S., where sales have slumped as the won appreciated more than any major Asian currency in the past six months, gaining about 8 percent against the dollar and 13 percent versus the yen.
“The strong won against the yen that intensifies the competition with Japanese automakers remains a concern for Hyundai and Kia,” Shin Chung Kwan, an analyst at KB Investment & Securities Co. said by phone. “Still, we expect Hyundai and Kia to exceed their sales targets this year and sell about 8 million vehicles combined.”
Seoul-based Hyundai plans to increase sales by 3.8 percent to 4.9 million vehicles this year, while Kia targets to deliver 4.7 percent more at 2.96 million units, the companies said in separate regulatory filings today.
Hyundai slumped 5.1 percent, the most since July 12, to 224,500 won at the close in Seoul trading. Kia dropped 6.1 percent, while parts suppliers Hyundai Wia Corp. (011210) and Hyundai Mobis (012330) Co. fell 7.4 percent and 4.9 percent, respectively. The benchmark Kospi index declined 2.2 percent.
Last week, Hyundai named David Zuchowski, formerly in charge of U.S. sales, to lead its U.S. unit after the automaker lost market share in the country -- the company’s biggest market after China. Separately, Hyundai and Kia agreed last week to spend as much as $395 million to settle lawsuits in the U.S. related to claims that they overstated the fuel-economy ratings of their vehicles.
Hyundai’s U.S. sales rose 2.2 percent for the first 11 months of 2013, while Kia’s sales in the country in the January-to-November period fell to 501,548 units from 518,421 units.
In South Korea, Chief Technology Officer Kwon Moon Sik resigned along with two other executives in November after a record number of vehicles were recalled last year.
In China, Hyundai’s sales rose 24 percent to 931,330 units in the first 11 months of 2013, on course to exceed its annual target of 970,000 units. Kia beat its full-year target of 500,000 with a month to spare, selling 526,525 vehicles in the January-to-November period.
China is Hyundai’s largest market and the second biggest for Kia, accounting for 22 percent and 19 percent, respectively, of total sales in the first nine months of last year, according to the companies.
Hyundai Motor Group, the umbrella group of Hyundai and Kia, based its 2014 business plan on an exchange rate of 1,050 won to the dollar, MoneyToday reported, without saying where it got the information. The group said in an e-mail that it hasn’t released its currency rate assumption.
Hyundai and Kia’s 2014 growth forecast is lower than the revised 6 percent increase posted last year. Korea Automotive Research Institute, an in-house research center in the Hyundai Motor Group, expects the global auto market to increase 4.1 percent this year.
Among new cars expected for this year, Hyundai will introduce the next-generation Sonata sedan and Kia will unveil the new Sorento sport utility vehicle, according to Shin Chung Kwan, a Seoul-based analyst at KB Investment & Securities Co., who has a buy rating on Hyundai’s stock.
To contact the editor responsible for this story: Young-Sam Cho at firstname.lastname@example.org