Hyundai sees rising competition after Q3 profit rise

Reuters

By Hyunjoo Jin

Hyundai

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Hyundai, the world's fifth-biggest carmaker by sales, along with affiliate Kia Motors <000270.KS>, also said it will beat its already-upgraded sales target of 4 million units this year, after its global sales rose 9.6 percent in the third quarter from a year earlier.

Once viewed as manufacturers of bland but economical cars, Hyundai and Kia have addressed design and reliability problems in recent years to outperform during the global financial crisis and have become formidable competitors to more established rivals.

Their sales are expected to remain solid in the fourth quarter with new models winning over consumers with attractive prices, features and styling, analysts said.

The South Korean duo will also continue to benefit from the cheaper won and the woes of Japanese rivals suffering from a strong yen and floods in Thailand, where some maintain production units, they said.

Still, maintaining sales momentum next year in the face of a slowing global economy, resurgent Japanese automakers, and stretched manufacturing capacity is seen a challenge.

Hyundai's president, Chung Jin-haeng, told Reuters on Tuesday that Hyundai and Kia expected to beat their already upgraded combined 2011 sales targets of 6.5 million vehicles, but the growth rate is forecast to slow next year because of capacity constraints.

"Hyundai will probably benefit from some operational issues that its Japanese counterparts are facing due to flooding in Thailand, where some production units are located," said Jung Sang-jin, a fund manger at Dongbu Asset Management.

"Looking at next year however, earnings growth momentum may slow. This is quite natural given that Hyundai has seen very sharp earnings growth in recent years. Hyundai has a stronger presence in the United States than Europe, so the health of the U.S. auto market is one uncertainty."

Hyundai on Thursday reported a 1.92 trillion won ($1.7 billion) net profit for the July-to-September quarter, in line with a consensus forecast of 1.89 trillion won from Thomson Reuters I/B/E/S.

That was up from a 1.59 trillion won net profit a year ago and down from 2.31 trillion won in the preceding quarter.

Shares in Hyundai Motor rose 0.7 percent versus the wider market's <.KS11> 1.1 percent gain as of 0507 GMT (1:07 a.m. EDT). Its shares have jumped 29 percent this year, outperforming the broader market's <.KS11> 8 percent fall.

(Additional reporting by Jungyoun Park; Editing by Matt Driskill and Jonathan Hopfner)

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