South Korea’s biggest carmaker Hyundai Motor announced Thursday a 375.8 billion won (US$321 million) operating profit, a 31% rise from a year earlier.

However, its third-quarter operating profit slowed from a stellar 1.2377 trillion won in the second quarter – the first time since the third quarter of 2017 that any of Hyundai’s quarterly operating profits had exceeded 1 trillion won.

Consumer costs

Hyundai had been expected to post about 1 trillion won of operating profit in the third quarter. However, the actual result was far lower as Hyundai earmarked 6,000 billion won for repairs of troubled Theta 2 engines.

Hyundai took that step to resolve a four-year dispute with customers over the engine defects. Earlier this month, Hyundai and its sister company Kia Motors announced they would offer lifetime warranties and compensation to the owners of 4.17 million cars equipped with the Theta 2 gasoline engine, which was produced between 2011 and 2019.

The decision was made after Hyundai reached an agreement to resolve class litigation with US owners of the troubled vehicles. US customers filed a lawsuit against Hyundai Motor Group, calling for compensation.

Hyundai will start the compensation program when preliminary court approval of the class-action suit is completed.

Revenues up

Hyundai’s revenues in the third quarter rose despite a marginal fall of car sales.

It increased by 10.4% to 26.9689 trillion won thanks to an improved product mix, rising sales of new cars and a weak won, which empowered exports.

Hyundai sold 1,103,362 million units globally in the third quarter, a 1.6% drop from the same quarter of last year. Overseas sales fell 1.0% to 940,040 units, and domestic sales dropped 4.7% to 163,322 units.

Better days ahead

Hyundai plans to launch a series of lucrative SUV models for a better product mix, including its first luxury SUV, the Genesis GV80, which will be rolled out later this year. It also plans to launch the Genesis brand in the near future in the Chinese market where luxury car sales are rising while volume models are falling.

Industry experts said Hyundai’s earnings are improving despite the jittery market conditions caused by trade disputes and a global economic slowdown.

“Hyundai’s performance is improving as new cars, including SUV models, sell well,” an industry insider told Asia Times. “In the fourth quarter, with no large one-off costs, Hyundai’s operating profit to sales ratio may improve to 4%.”

Hyundai’s operating income to sales ratio was rated at 1.4% in the third quarter.