SEOUL – South Korea's Hyundai Motor Co <005380.KS> and affiliate Kia Motors Corp <000270.KS> are targeting a 4 percent increase in global sales this year to a combined 7.41 million vehicles, their slowest growth since 2003.
The duo, which together ranks fifth in global car sales, is bracing for more modest growth after years of expansion at breakneck speed. Group chairman Chung Mong-koo has put the brakes on capacity building to focus on improving their quality and brands and safeguarding profitability.
But investors are concerned that growth momentum will stall with the firming won and Hyundai and Kia's go-slow strategy.
Hyundai/Kia's industry-leading margins are being threatened by the strengthening South Korean currency, which reduces repatriated earnings and pricing power. By contrast, the yen is softening, which could tip the competitive balance in favor of their Japanese rivals such as Toyota Motor Corp <7203.T> and Honda Motor Co Ltd <7267.T>.
The won rose 7.6 percent against the dollar last year, its biggest percentage gain since 2009.
As a reflection of that sentiment, shares in Hyundai Motor rose 2.6 percent in 2012 while Kia shares slumped 15.3 percent, underperforming the wider market's <.KS11> 9.4 percent gain.
Hyundai and Kia were the worst performing stocks among the world's top five automakers last year, according to Thomson Reuters data.
The South Korean duo sold 7.12 million vehicles in 2012, up 8 percent from the previous year and better than their original target of 7 million.
Hyundai and Kia drove up sales in China when their Japanese competitors were hit by a backlash in a dispute over islands in the East China Sea last year.
In the United States and Canada, Hyundai/Kia's sales have not been greatly affected so far by their November 2 admission that they had overstated the fuel economy of more than 1 million cars.
Hyundai Motor, which started new plants in China and Brazil in 2012, is in a better position to increase sales this year than Kia, which did not add any capacity at all last year.
The companies plan to release their global sales results for December later on Wednesday. Figures for the United States are due on Thursday.
(Reporting by Hyunjoo Jin; Editing by Ryan Woo and John Mair)