Kia held a conference call on the 25th at its headquarters in Yangjae-dong, Seoul, to announce its corporate earnings for Q3 2022.
Kia reported sales of 752,104 units in Q3 2022 (up 9.9% year-on-year). The financial performance figures included revenue of 23.1616 trillion won (up 30.5%), operating profit of 768.2 billion won (down 42.1%), ordinary profit of 730 billion won (down 54.6%), and net profit of 458.9 billion won (down 59.6%). (Based on IFRS consolidated standards)
A Kia representative stated regarding the Q3 performance, “Improvement in parts supply led to increased sales, and while the high profitability vehicle sales based on premium product competitiveness continued to enhance the profit structure, the strong influence of favorable exchange rates was significant. However, the substantial reflection of engine quality costs could not prevent a decrease in operating profit.”
They further mentioned, “However, strong demand across all vehicle types and regions is ongoing, so we expect continued recovery in sales and improved profitability in Q4 through supply expansion linked to improved parts supply for semiconductors.”
Kia’s global sales for Q3 2022 included ▲132,768 units sold domestically (up 6.2% year-on-year) and ▲619,336 units sold overseas (up 10.7%), reaching a total of ▲752,104 units globally (up 9.9% year-on-year). (Based on wholesale figures)
Domestic sales saw a slight increase compared to the previous year due to the new car effects of the EV6 and the new Niro, coupled with improvements in semiconductor and other parts supplies, alleviating a portion of the backlog demand for major SUV models.
Overseas sales faced the impacts of sales suspension in the Russian region, but increased in most regions thanks to ▲transitioning volumes to regions with higher profitability ▲switching to three-shift operations at the Indian plant ▲the effects of new models like the Carens (India) and the new Sportage.
Q3 revenue achieved 23.1616 trillion won, a 30.5% gain from the previous year, attributed to ▲better supply situations for semiconductors and other parts ▲a significant ramp-up in sales of the EV6 and new Sportage ▲general increases in sales prices resulting from enhanced specifications across all vehicle types, along with favorable exchange rate effects.
The cost of goods sold ratio improved by 2.3 percentage points from the previous year to record 79.7% despite increases in product cost due to rising raw materials.
The selling and administrative expense ratio increased by 6.5 percentage points from the previous year to reach 17.0%, driven by increased warranty costs following the recent reassessment of engine quality costs and rising end-period exchange rates.
Despite achieving a significant sales increase in Q3, operating profit recorded 768.2 billion won, a drop of 42.1% from the previous year, resulting in an operating profit margin decline of 4.2 percentage points to 3.3%.
Nevertheless, Kia continued to minimize profit loss through ▲sales expansions via production normalization ▲strengthening mix and trims due to product appeal and brand enhancement ▲setting industry-low incentive levels in major markets like the U.S. for a ‘fair pricing’ policy ▲and rising average selling prices.
Additionally, the average won-dollar exchange rate in Q3 was 1,338 won, an increase of 15.6% year-on-year, significantly contributing to revenue growth and profit improvement.
Meanwhile, Kia’s cumulative operating results for the year until Q3 included ▲sales of 2,171,590 units (up 2.0% year-on-year) ▲revenue of 63.3949 trillion won (up 20.4%) ▲operating profit of 4.6088 trillion won (up 18.5%) ▲and net profit of 3.3724 trillion won (down 4.0%).
Kia’s eco-friendly vehicle sales in Q3 were bolstered by rapid sales growth of the EV6 and the effects of new hybrid/plug-in hybrid variants of the Sportage, achieving 123,000 units— a 46.8% increase over the same period last year, with eco-friendly vehicle sales accounting for 16.8% of total sales, up 5.6 percentage points from a year earlier. (Retail sales basis, rounded to the nearest hundred)
By type, ▲electric vehicles reached 40,000 units (up 34.3% year-on-year) ▲hybrids totaled 62,000 units (up 67.0%) ▲and plug-in hybrids recorded 21,000 units (up 24.1%).
The share of electric vehicle sales in major markets also expanded significantly, with ▲domestic at 12.3% (up from 7.5% a year earlier) ▲Western Europe at 11.7% (up from 11.5%) ▲and the U.S. at 3.2% (up from 1.7%).
Additionally, Kia is diversifying its electric vehicle sales markets, moving away from concentrating on specific regions. In the previous third quarter, Western Europe accounted for over 52.9% of total electric vehicle sales, but this year, the domestic share was the highest at 40.8%, followed by Western Europe at 38.9% and the U.S. at 14.6%, indicating balanced sales across major markets.
Kia is closely monitoring the unstable external environment characterized by increased raw material price volatility due to geopolitical unrest, high interest rates, and inflation affecting consumer sentiment, while still expecting noticeable performance improvements in Q4.
Kia plans to expand supply as much as possible in connection with improved parts supply for semiconductors to quickly address the high backlog demand, focusing on expanding sales of eco-friendly vehicles and high-profit RV models to continue enhancing profitability.
While continuing to ramp up production and sales of the highly sought-after EV6 globally, Kia intends to focus on launching the improved model of the Telluride in the U.S. along with the new Sportage, and in Europe with the new Niro, as well as the Karens in India, targeting key models for each market.
Furthermore, Kia aims to continuously enhance product and trim mixes, while pursuing pricing strategies that respond to improved brand and product appeal, thereby maximizing profitability.
In the meantime, Jeong In-seok wrote this article (daedusj@autodiary.kr).