Kia (000270.KS) posted record revenue in the second quarter on the back of all-time high sales volume, but its operating profit declined from a year earlier. While profitability fell as the company aggressively cut vehicle prices to compete with Chinese firms in the global electric vehicle market, analysts assessed the results as resilient.
Kia announced on the 24th that it recorded revenue of 33.037 trillion won and operating profit of 2.6285 trillion won in the second quarter of this year. Revenue rose 12.6% from a year earlier, marking an all-time quarterly high. Operating profit, however, fell 4.9% over the same period.
Revenue increased sharply as global sales volume reached 851,645 units in the second quarter, a quarterly record. Sales of eco-friendly vehicles, including electric and hybrid cars, surged 60% year-on-year to 296,000 units, driving the sales increase. The proportion of electrified vehicles in total sales rose to 35.3%.
Operating profit fell despite strong sales because the company widened discounts to near-zero-margin levels as competition with Chinese brands intensified in major electric vehicle markets such as Europe. "Electric vehicle sales are growing, but their current impact on profitability is neutral," said Kim Seung-jun, executive vice president and head of Kia's finance division. "For the time being, we need to expand market share even if it means giving up some electric vehicle profitability."
Sales warranty provisions also rose sharply as electric vehicle sales expanded. This liability is accounted for as an expense at the time of sale, reflecting costs such as parts replacement within the vehicle warranty period. Electric vehicles, which carry expensive components such as batteries, have higher provisions than internal combustion engine vehicles. As the won-dollar exchange rate averaged 1,502 won in the second quarter of this year, up 7% from a year earlier, the won-converted value of dollar-denominated liabilities increased further.
In the second half, Kia plans to improve profitability by expanding local production of the EV2 and EV4 in Europe and boosting sales of the EV3, EV5, and PV5 in the domestic market. However, mounting domestic strike risk remains a variable. On the 23rd, Kia's union approved a strike proposal with an 82% approval rate in a vote on industrial action held among all members.
Hyundai Mobis said in its earnings announcement the same day that its second-quarter revenue totaled 16.3247 trillion won and operating profit reached 975.2 billion won. This represents increases of 2.4% and 12.1%, respectively, from a year earlier. Hyundai Mobis said its earnings improved as demand for high-value-added electronic components grew.
