SEOUL (Reuters) – South Korea’s Hyundai Motor Co (005380.KS) said on Thursday it expects only a modest recovery in Chinese auto demand and weak sales elsewhere this year after the coronavirus pandemic caused first-quarter vehicle sales to tumble 18%.
Hyundai, which with Kia Motors (000270.KS) forms the world’s No.5 automotive group, joins a growing number of carmakers forecasting a bleak year.
“Demand is expected to worsen in the second quarter due to the prolonged suspension of dealer operations and factory operations in overseas markets,” Hyundai’s Chief Financial Officer Kim Sang-hyun said in an earnings call.
“Global automakers are expected to see their profitability decline in earnest.”
Hyundai said global auto demand fell 24% in the first quarter and more than 40% in March.
Tracking the spread of the outbreak, declines for Hyundai’s first-quarter retail vehicle sales were sharpest in China where they slumped 43%. In South Korea, they dropped 14% while in the United States, they fell 11%.
With the outlook for many countries’ recoveries from the pandemic unclear, Hyundai has suspended operations at its plants in the United States, India and Brazil. But its China, South Korea, Russia, Czech Republic and Turkey plants have resumed production after suspensions.
“Although we forecast a sales recovery in the second half, annual demand is expected to drop sharply,” said Koo Za-yong, head of Hyundai’s investor relations.
He added that China – where the coronavirus has been largely contained – would likely see only a modest recovery as the economy reels from the fallout of the pandemic.
But while vehicle sales tumbled in the first quarter, a cheaper South Korean won and improved sales of higher-end models helped Hyundai’s revenue climb 6% to 25 trillion won ($20.4 billion).
Net profit slid 44% to 463 billion won ($376 million), below an average Refinitiv estimate of 607 billion won, hit by the slump in China sales, a smaller profit from its affiliates and financial losses.
By comparison, Daimler AG (DAIGn.DE) warned on Thursday of a near 70% plunge in core earnings for the quarter just ended.
Shares in Hyundai closed down 0.2% after the results, underperforming an 1% climb for the wider market .KS11.
Reporting by Joyce Lee; Editing by Miyoung Kim and Edwina Gibbs