Hyundai Motor Company Q3 FY2026 earnings call

• Production and Volume Impact: Global wholesale volume decreased 11.3% Y-o-Y to 921,000 units. This decline was caused by reduced working days from holidays (Chuseok), labor strikes affecting domestic plants, and supply chain disruptions from a supplier fire.
• Regional Sales Dynamics: In the U.S., retail sales grew 3.5% Y-o-Y despite wholesale declines, with hybrid sales mix reaching 26.8%. Market share remained stable at 6.6%. In Europe, sales dropped 18% due to lineup transitions, but SUV share expanded significantly. Domestic sales fell 27.2% due to strike-related production halts.
• Profitability Drivers: Operating profit rose 5.5% to KRW 2.7 trillion (margin 5.9%). Key positive factors included favorable FX effects (~KRW 500 billion benefit), contingency-driven cost optimizations (~KRW 500 billion offset), and tariff advantages. These offset negative volume/mix effects and rising raw material costs.
• Raw Material Costs: Steel, aluminum, and plastic prices peaked in Q2 and are now trending down, but elevated spot prices continue to create a ~KRW 500 billion burden for Q3/Q4 due to lead times. AI investment demand is also keeping some prices high.
• Product Mix: Hybrid vehicles accounted for 18.2% of global sales. Strong demand for hybrids and Genesis models helped maintain U.S. market share. New model launches (Avante, Tucson GV90, GV80 Hybrid) are being accelerated in Q4.

• Automotive Division: Revenue decreased 10% year-over-year (Y-o-Y) due to production disruptions and lower sales. Operating profit increased 24.8% Y-o-Y, supported by favorable foreign exchange rates and cost optimization measures.
• Finance Division: Revenue increased 27.8% driven by growth in managed assets. Operating profit declined 18.2% Y-o-Y due to higher operating expenses, including increased interest costs.

• Global Wholesale Volume: Revised downward to 4 million units for 2026 (from previous 4.1 million), reflecting strike impacts and weaker Middle East/EMEA sales.
• Consolidated Revenue Growth: Maintained at 1% to 2% YoY growth. Lower volumes and FX headwinds are partially offset by strong North American demand and hybrid growth.
• Operating Margin: Revised downward to 5.5% to 6.5% for 2026 (previously implied higher). The revision accounts for geopolitical risks, raw material costs, FX depreciation impact on profitability, and delayed new model contributions.
• Investment Plan: Revised downward to KRW 15 trillion for the Automotive division (from KRW 17.8 trillion) to improve capital efficiency while maintaining critical R&D.
• Free Cash Flow: Guidance maintained within the range of negative KRW 1 trillion to positive KRW 0.5 trillion.
• Dividend: Quarterly dividend set at KRW 2,500 per share for common and preferred shares.

• Geopolitical Instability: Ongoing conflicts in the Middle East and U.S.-Iran tensions are driving up raw material costs and creating uncertainty in key markets like the Middle East and EMEA.
• Labor Strikes and Supply Chain: Prolonged domestic plant strikes and supplier fires have disrupted production, limited inventory, and delayed new model launches, impacting volume and increasing fixed costs per unit.
• Rising Input Costs: Raw material prices remain elevated despite recent peaks passing, with continued pressure from AI-driven demand and supply-demand issues.
• Foreign Exchange Volatility: Fluctuations in the Korean Won affect both revenue translation and warranty provisions, though recent trends have been mixed.
• Competitive Pressure: Increasing presence of Chinese OEMs in Europe and Korea poses competitive threats, requiring strategic responses in pricing and service networks.

Q: Yongmin Kim asked why Hyundai Capital’s profitability deteriorated in Q3 and how FX rates would impact Q4 results. / A: Executives clarified that the primary driver for Q3 profit decline was rising long-term interest rates increasing borrowing costs, not car price changes. Additionally, losses on returned used cars and higher delinquency rates contributed to the drop. For Q4, FX impacts on finance sales are expected to align closely with Hyundai Motor Company’s overall trajectory.