KB News Desk
South Korean carmaker Kia said Friday its operating profit fell 4.9 percent in the second quarter, as US auto tariffs and higher sales incentives offset record revenue and vehicle sales fueled by surging demand for hybrid and electric models.
Operating profit declined to 2.63 trillion won ($1.79 billion) in the April-June period from a year earlier, according to Kia.
Revenue rose 12.6 percent to 33.04 trillion won, marking the highest quarterly figure, while net profit increased 2.6 percent to 2.33 trillion won.
Kia sold 851,639 vehicles globally on a wholesale basis during the quarter, up 4.5 percent from a year earlier and also the highest quarterly total in the company’s history.
Domestic sales totaled 154,816 vehicles, up 8.6 percent on-year, while overseas sales reached 696,823, up 3.6 percent on-year.
Kia said the record sales come despite weaker industry demand cause by geopolitical instability in the Middle East and deteriorating consumer sentiment in China.
The company attributed the growth to an expanded electrified vehicle lineup and the introduction of models tailored to specific markets.
In Korea, the sales increase was attributed to high demand for models including the EV3, EV5 and PV5.
US sales rose 2.8 percent to 224,000 units, as the redesigned Telluride and sport utility vehicles such as the Sportage and Sorento performed strongly.
In Western Europe, Kia sold 151,000 units, up 12.9 percent, outpacing the region’s overall market growth of 4.8 percent, following the launch of the EV2, EV4, EV5 and PV5.
Record sales were driven by strong demand for electrified vehicles, with Kia selling 296,000 hybrid and battery-electric models during the quarter, a 60 percent jump from a year earlier.
Electrified vehicles accounted for 35.3 percent of Kia’s total sales, an increase of 11.9 percentage points from the same period last year.
Battery-powered vehicle sales rose 88.4 percent to 110,000 units, driven by the EV2, EV4 and EV5, as well as the PV5, Kia’s first purpose-built commercial vehicle.
Electric vehicle sales in South Korea more than doubled to 38,000 units. EVs accounted for 24.5 percent of Kia’s domestic sales, compared with 11.9 percent a year earlier.
EV sales in Western Europe increased 101.5 percent to 52,000 vehicles.
Profitability, however, came under pressure from higher sales incentives in South Korea and Western Europe, as Kia responded to intensifying competition from Chinese EV makers.
“Incentive spending (per vehicle sold) increased by $400 in the US and by more than 1,000 euros ($1,140) in Europe compared to last year,” said Kia Chief Financial Officer Kim Seung-jun during a conference call, adding it was inevitable to compete with Chinese EV makers in Europe. “We believe that, for the time being, it will be necessary to prioritize expanding market share even at the expense of some EV profitability.”
A weaker won also increased warranty provisions, while US tariffs on imported automobiles added to costs.
As a result, Kia’s cost of sales climbed to 81.7 percent of revenue, up 1.7 percentage points from a year earlier. Excluding the tariff impact, the ratio would have been 79.2 percent, the company said.
Kia’s operating profit margin stood at 8 percent, rising for a third consecutive quarter after falling to 5.1 percent in the third quarter of last year.
Going forward, Kia said it will focus on expanding sales in the US and Europe in the second half of the year.
In the US, the company plans to boost production of the Telluride to help improve profitability, while also beginning deliveries of the Sportage hybrid being built at Hyundai Motor Group’s Metaplant America in Georgia. The company will additionally bring the Mexico-made EV3 to the US market.
In Europe, Kia plans to strengthen its price competitiveness through local production of the EV2 and EV4. It will also target the light commercial vehicle market with the PV5, its first purpose-built vehicle, and launch hybrid versions of the Seltos and K4.
