SEOUL, South Korea (AP) — Hyundai Motor Co. reported Thursday its lowest quarterly earnings in more than five years after underestimating strong demand for SUVs and losing ground to local brands in China.
South Korea's largest automaker said its third quarter net income was 1.2 trillion won ($1.1 billion) for July-September quarter, slumping more than 25 percent over a year earlier.
The result, its worst since the first quarter of 2010, was below even the lowest estimate by analysts. The maker of Sonata and Tucson vehicles was expected to post 1.5 trillion won in quarterly profit, according to a survey of analysts by FactSet, a financial data provider.
Hyundai has suffered from weakening sales in China like some other foreign brands while its lack of new SUV models until recently led to lower share in key markets. The company has focused on sedans rather than SUVs, misreading consumer demand at a time of sluggish global demand for sedans such as the Elantra.
Hyundai, part of the world's fifth-largest automaker along with affiliate Kia Motors Corp., faced a slew of challenges in China, the U.S. and South Korea.
Its China sales plunged 30 percent in July over a year earlier and then sank 16 percent in August as Chinese auto brands introduced new models. The decline was narrowed to 5 percent in September.
Lee Won-hee, Hyundai's chief financial officer, said its sales in China will turn higher this month compared with a year earlier, helped by a cut in tax on auto purchases.
In the U.S., the company last month recalled nearly half a million Sonata sedans for a possible engine flaw. It also gave more generous incentives to car buyers to compete with Japanese automakers, Lee said.
In South Korea, Hyundai's labor union staged a strike for three days last month during the annual wage negotiations, affecting operations at all domestic plants.
During the third quarter, sales rose 10 percent to 23.4 trillion won while operating profit dropped 9 percent to 1.5 trillion won.
The latest result marks a seventh straight quarter of earnings decline for Hyundai.
The fall in its earnings is at odds with an improvement in Hyundai's brand value. Interbrand, a global brand consultancy, ranked Hyundai Motor as 39th most valuable brand in the world, up one notch from a year earlier.