By Heekyong Yang and Heejin Kim
SEOUL, July 23 (Reuters) – Hyundai Motor reported a 21% fall in second-quarter operating profit on Thursday, missing analysts’ estimates, as weaker vehicle sales, production disruptions, and higher costs offset support from a weaker won.
The weaker results highlight mounting challenges facing the auto industry, as carmakers contend with rising energy and raw material costs as well as supply chain disruptions linked to U.S. tariffs and conflict in the Middle East.
However, the South Korean firm kept its annual guidance unchanged, as it plans to boost production and launch new models in the second half after it faced additional production disruptions last quarter due to a fire at a supplier.
“By maintaining our full-year guidance, we are indicating that we expect growth to continue in the third and fourth quarters,” the company said in an earnings release.
Some analysts cautioned that it would be challenging for Hyundai to achieve its full-year operating margin target of 6.3%-7.3% due to challenging market conditions.
Shin Yoon-chul, an analyst at Kiwoom Securities, said its earnings recovery would hinge on strong launches of the redesigned Tucson and Avante, Hyundai’s two biggest global volume models.
Hyundai, which together with affiliate Kia Corp is the world’s third-biggest automaking group by sales, posted operating profit of 2.9 trillion won ($1.98 billion) for the April-June period.
That compared with a 3.2 trillion won forecast by LSEG SmartEstimate, which is weighted toward analysts who are more consistently accurate.
GROWING COMPETITION
The company also faces intensifying competition in South Korea, one of its most profitable and biggest markets, as global automakers expand their electric vehicle and software offerings.
Tesla, the largest imported auto brand, plans to roll out a new version of its Full Self Driving software in South Korea, making it the second market after the United States to receive the upgrade.
Shin said the newest software will significantly expand access to Tesla’s advanced driver-assistance technology beyond its premium Model S, Model X and Cybertruck models, which could increase competitive pressure on Hyundai Motor Group.
The country’s imported vehicle market has become increasingly competitive, with China’s BYD overtaking Lexus and Volvo as the fourth-largest imported foreign brand.
Imported passenger cars accounted for nearly one-fourth of newly registered passenger vehicles in the first half of 2026, the highest in five years, according to market researcher Carisyou.
The company reported a 16% plunge in second-quarter vehicle sales in South Korea.
It expanded incentives in the U.S. to counter the abolition of electric vehicle subsidies and raised spending in Europe as well due to increasingly aggressive competition from Chinese carmakers.
Hyundai Motor said revenue rose 2% from a year earlier to 49.2 trillion won.
On its earnings call, Hyundai said higher prices for key raw materials, including plastics, driven by the conflict in the Middle East and inflation, increased second-quarter costs by about 400 billion won.
PIVOT TO AI
Hyundai has stepped up investments in robotics, “software-defined vehicles” and autonomous driving, as it seeks new growth engines beyond traditional car manufacturing.
Last week, Hyundai Motor Group said it would take full control of robotics company Boston Dynamics, giving it greater flexibility, as it prepares to deploy Atlas humanoid robots at its Georgia manufacturing plant from 2028.
Investor enthusiasm for the group’s push into so-called “physical AI” helped drive Hyundai shares to record highs earlier this month, although some analysts have questioned whether the rally has outpaced near-term earnings prospects. Hyundai Motor plans to host its CEO Investor Day on Aug 26.
Shares of Hyundai Motor closed up 3.4%, compared with benchmark KOSPI’s 4.4% rise.
($1 = 1,467.2000 won)
(Reporting by Heekyong Yang and Heejin Kim; Editing by Miyoung Kim and Kim Coghill)
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