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Hyundai Motor’s Q1 Profitability Dips 2.4% as Domestic Sales Remain Weak

In the first quarter, South Korean automaker Hyundai Motor Co (005380.KS) experienced a 2.4% decline in profit, primarily attributed to a sharp drop in domestic sales. The company also expressed concerns about a challenging business environment ahead, citing increased competition and uncertain global economic conditions.

Hyundai’s cautious outlook and subdued performance, announced on Thursday, stand in contrast to the more optimistic forecasts from its U.S. counterparts, including General Motors (GM.N) and Ford Motor Co (F.N). Both American companies recently reported robust profit growth, fueled by steady pricing and strong demand for gasoline-engine vehicles.

“We expect competition among automakers to intensify, raising related cost burden… while global macroeconomic uncertainty is also growing. We expect challenging business conditions to continue going forward,” Hyundai said in a statement.

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The world’s No.3 automaker by sales along with affiliate Kia Corp (000270.KS), opens new tab sold 1.5% fewer vehicles, delivering 1.007 million units in the first quarter.

Sales in South Korea, its second-biggest market after the United States, slumped 16%, as consumers grappled with surging inflation and a weak economy.

Hyundai said domestic sales were also impacted by temporary suspension of production at its Asan plant, which is being revamped for production of electric vehicles (EVs).

Vehicle sales in the U.S. market jumped nearly 10%, tracking other legacy automakers that are enjoying strong profit growth.

Sales of hybrid vehicles jumped 17% globally, underscoring consumers’ growing interest in more affordable vehicles over more expensive pure electric cars.

Hyundai said it would continue to expand its electrified model lineups globally by introducing more hybrids and new IONIQ EV models.

Its parent Hyundai Motor Group said Executive Chair Euisun Chung visited India, where it is the second biggest automaker and is considering an initial public offering of its local unit, this week to discuss mid- and long-term strategies.

In February, Reuters reported that Hyundai had appointed investment banks to advise on its at least $3 billion India IPO.

The IPO is aimed at accelerating its expansion in a country where it has operated for over 25 years and where its affordable cars are popular with price-conscious Indians, according to analysts and four people familiar with the car maker’s plans.

Earlier this month, Hyundai and Kia signed a memorandum of understanding with India’s Exide Energy Solutions Ltd to supply batteries for their electric vehicles in a bid to boost competitiveness in India.

Hyundai reported a net profit of 3.2 trillion won ($2.32 billion) for January-March, down from 3.3 trillion won a year earlier, but ahead of an average forecast of 3.0 trillion won by LSEG SmartEstimate.

Revenue rose 7.6% to 41 trillion won, helped by solid overseas sales and as a weaker local currency also boosted repatriated earnings.

Shares in Hyundai Motor closed down 1.0%, versus a fall of 1.8% in the benchmark KOSPI (.KS11), opens new tab.

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