Hyundai Motor's profit skids for a 12th quarter, sedan discounts drag

[SEOUL] Hyundai Motor's profits fell for a twelfth straight quarter over the three months ended December, as steep discounts on its smaller sedans that are losing ground in South Korea and the United States chipped away at the automaker's earnings.

At its peak in 2011, more than one car in every 20 sold in the US was a Hyundai, driven by sales of Elantra and Sonata sedans. But the South Korean firm's mainstay sedans have lost their appeal to rival offerings such as Honda's Civic in the United States and Renault's SM6 in South Korea.

Exacerbating the situation is the fact that gas-guzzling sport utility vehicles (SUVs) seem to be all the rage now in a world of low oil prices. The landscape has been muddied further by worries protectionism under US President Donald Trump could lead to higher tariffs on vehicles shipped in to what is Hyundai's No 2 market.

Hyundai Motor, the world's No 5 automaker combined with affiliate Kia Motors Corp, said its net profit for the fourth quarter was one trillion won (S$1.219 billion), down 39 per cent from a year ago. Analysts polled by Thomson Reuters I/B/E/S had on an average expected a 1.5 trillion won profit.

Quarterly profits for the company have been on the wane on a year-on-year basis since the first quarter of 2014. Its profit for the full year, 2016, fell 16 per cent to 6.4 trillion won, a fourth consecutive annual drop.

Hyundai Motor said uncertainty is expected to persist over the auto industry this year, citing growing trade protectionism and rising competition.

Hyundai Motor's fourth-quarter sales fell 0.9 per cent to 24.5 trillion won, while operating profit dropped 33 per cent from year-ago levels to 1 trillion won.

Higher US incentive spending - which Autodata Corp said jumped 30 per cent to US$2,582 per vehicle in December from a year ago for Hyundai, above the industry's average gain of 23 per cent - dragged on the company's results for the quarter.

In South Korea, its lucrative home market, Hyundai Motor saw sales fall 18 per cent in the fourth quarter on slowing demand after a cut in excise tax expired in June.

Hyundai Motor shares, which dropped for a third straight year in 2016, were down 1.4 per cent after the results, versus a flat wider market.

REUTERS