Key facts
- Hyundai Motor's operating profit decreased by 21% in the second quarter.
- The company incurred approximately 1.5 trillion won ($1 billion) in combined costs from tariffs, incentives, and production disruptions.
- U.S. tariffs alone amounted to about 900 billion won in the second quarter.
- A fire at a parts supplier led to an estimated 200 billion won reduction in operating profit.
- Hybrid vehicle sales reached a quarterly record, contributing positively to profitability.
Hyundai Motor's operating profit saw a significant decline of over 20% in the second quarter, primarily impacted by substantial U.S. tariffs and production disruptions stemming from a fire at an engine valve supplier. The company reported paying approximately 900 billion won ($608 million) in tariffs during the quarter, adding to a cumulative burden of roughly 1.8 trillion won for the first half of the year.
Intensifying sales competition also led to a net increase in incentives totaling around 400 billion won, as Hyundai Motor sought to counter factors like the repeal of the U.S. Inflation Reduction Act and competition from Chinese electric vehicle makers in Europe. The fire at a parts supplier disrupted the production of higher-margin models, including Genesis and Palisade, estimated to have reduced operating profit by about 200 billion won. Supply was normalized by May.
On a positive note, strong sales of hybrid vehicles contributed an estimated 400 billion won to profitability, reaching a quarterly record of 188,000 units sold and representing 18.9% of total sales. However, rising raw material costs, influenced by the Middle East war and inflation, added further pressure, increasing expenses by approximately 400 billion won.
Hydai Motor acknowledged that parts supply issues and weaker European sales might prevent it from meeting its annual sales target, though it has not formally revised guidance. The company plans to ramp up production in the second half to mitigate volume shortfalls. Despite the sales outlook uncertainty, Hyundai Motor maintained its full-year operating profit margin guidance of 6.3% to 7.3%, aiming to secure profitability through increased sales of high-value models like hybrids and Genesis vehicles.