Kia said Friday that its operating profit declined 24.1 percent on-year to 2.8 trillion won ($2 billion) in the second quarter, largely due to the 25 percent automobile tariffs imposed by the US.
According to Kia’s conference call on earnings from April to June, its operating profit margin declined to 9.4 percent, marking a single-digit figure for the first time in 10 quarters. Its sales revenue reached a record high of 29.3 trillion won, with a 6.5 percent increase from the previous year.
“The US tariffs, which have taken effect since April, have (negatively) affected the company’s profits by 786 billion won,” said Yoon Byung-yeol, head of the investor relations division at Kia. “Despite our efforts to mitigate this impact through incentive cuts in the US, overall incentives increased due to fierce competition in the European market, resulting in a further drop in profit reduction of 341 billion won.”
In the second quarter, Kia’s global sales volume soared by 2.5 percent year-on-year to 814,888 units. This includes a 3.2 percent increase in the domestic market with 142,535 units and a 4.1 percent jump for the North American market, totaling 289,000 units. Sales in Europe declined 4.5 percent to 140,000 units, while India saw a surge in sales by 9.5 percent to 67,000 units.
Kia’s eco-friendly vehicle sales, ranging from all-electric vehicles to hybrids, rose by 14.0 percent to 185,000 units in the same period, with a strong demand for hybrids in the US and EVs in Western Europe. The share of eco-friendly cars in total sales also increased by 2.0 percentage points from the previous year, reaching 23.4 percent.
Addressing the hostile business environment, Kim Seung-jun, chief financial officer of Kia, noted that the second half of this year would be more challenging than the January–June period as the full impact of the US tariffs hits.
To mitigate this, Kia plans to redirect approximately 25,000 vehicles produced at its Georgia plant — originally intended for export to Canada, the Middle East and Africa — toward the US market. By combining this strategy with receiving car parts tax credits from the US government and maintaining low consumer incentives, Kia aims to reduce the tariff impact by 30 percent for the remaining year.
In addition to this multi-pronged strategy, Kia looks to drive sales of its hybrids, including the Carnival MPV and Sorento, Sportage and Telluride SUVs, along with its gasoline-powered cars, increasing its US market share from 5.1 percent in the first half of the year to 6 percent in the latter half. This goal comes despite industry projections of a 10 percent decline in demand for EVs in the US during the same period.
In its push to bolster sluggish European sales, which have been hit by intensified competition from Chinese automakers, Kia will launch the EV4 and EV5, as well as the new Sportage PE model.
Due to the global market uncertainties, Kia has not updated its annual guidance for this year, which aims for a 4.1 percent on-year increase in sales to 3.2 million units and revenue surpassing 112 trillion won with an 11 percent operating profit margin.
hyejin2@heraldcorp.com
