Hyundai domestic sales slump in May, shares slide
South Korea's largest carmaker, Hyundai Motor Co Ltd, posted a steeper-than-expected 23 percent decline in domestic sales in May as competition stepped up, pulling its shares to a three-week closing low.autos Updated: Jun 01, 2010 16:02 IST
South Korea's largest carmaker, Hyundai Motor Co Ltd, posted a steeper-than-expected 23 percent decline in domestic sales in May as competition stepped up, pulling its shares to a three-week closing low.
Hyundai, one of the top global performers during the financial crisis and the sales slump that followed, continued to post a rise in overseas sales in May. But it was the sole Korean automaker with falling local sales for two months in a row in the face of new model launches by affiliate Kia Motors Corp and aggressive marketing of imports by rivals such as Toyota Motor Co.
"A second consecutive fall in domestic sales is quite worrying, although year-ago comparison numbers were relatively high," said Lee Sang-hyun, an analyst at NH Investment & Securities.
"It was hit by aggressive marketing by rivals and new model launches by Kia and Renault-Samsung and those factors may continue to depress domestic sales, although Hyundai plans to introduce new models later this year."
Hyundai lowered the price of its Genesis sedan from today by dropping some of its more expensive options as foreign cars, including Daimler's Mercedes-Benz, gain ground at more affordable prices.
It could face a further battle after Ssangyong Motor, the country's smallest carmaker, drew seven preliminary bidders, including France's Renault SA and India's top utility vehicle maker Mahindra & Mahindra last week in a deal worth up to $500 million.
The participation of high-profile international firms in the auction was seen as a potential threat to the dominance enjoyed by Hyundai and Kia, which control 80 percent of South Korea's auto market.
Hyundai shares extended losses after the monthly results before closing down 5.4 percent, its lowest close since May 11. It was the sixth-worst performer on the KOSPI for the day.
The stock spiked to a record high in mid-May, up as much as 21 percent in 2009 and outperforming a 1 percent rise in the wider market on expectations of strong sales. The stock is now almost 10 percent off its peak.
Overall May sales climbed 19 percent to 298,036 vehicles from a year earlier, but sales at home fell 22.7 percent to 49,228 units, missing Nomura's forecast of a 15 percent drop. Sales of its YF Sonata sedan, which was launched late last year, almost halved in South Korea.
"May of last year saw a sharp increase in sales with the introduction of the clunker subsidies and ahead of the end of consumption tax cuts," Hyundai said in a statement.
"That made the pace of sales fall bigger, and deepening competition for major models weighed on May sales."
In contrast, overseas sales jumped by a third to 248,808 cars last month, above market expectations, helped by a series of upgraded models. However that still represented a month-on-month decline of 7.1 percent.
Hyundai's average incentive levels are much lower than the industry average in the U.S. market and concerns about a slowdown in world economic recovery on European debt woes may cloud Hyundai's second-half outlook.
But analysts say the weaker won following tensions with North Korea should prop up Hyundai's overseas sales.
The full launch of Kia's U.S. plant in Georgia, which produces Sorento R SUVs, bumped up its overseas sales by 46.1 percent. Ssangyong Motor more than doubled May sales from a year earlier, selling a total of 7,028 vehicles at home and abroad.