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Kia Motors reports super second quarter

But weak won was the primary driver, while sales have been slow
July 24,2019
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Kia Motors reported a 52-percent rise in second quarter net profit as currency gains boosted its bottom line.

Significant challenges remain for the automaker, as sales were weak across the board despite the popularity of the Telluride SUV in North America.

According to Korea’s second-largest automaker by sales on Tuesday, its net profit between April and June this year reached 505.4 billion won ($429 million), up from 331.8 billion won posted the same period a year before.

“The won’s weakness against the U.S. dollar was the main contributor to the increased net profit,” a Kia Motors spokesperson said. “Decreased U.S. incentives and lower global inventories also buoyed the bottom line, offsetting weak sales at home and in China.”

Operating profit jumped 51 percent from 353 billion won to 534 billion won.

According to the Bank of Korea, the won traded at 1,165.91 to the dollar in the second quarter, significantly weaker than the 1,078.57 in the same period a year earlier.

If the won’s value depreciates, Korean exports become more price competitive overseas and profits can increase.

Thanks to changes in the currency value, the company’s operating profit jumped 51 percent from 352.6 billion won in the second quarter last year to 533.6 billion won in the same period this year. Sales rose 3.2 percent, from 14.06 trillion won to 14.51 trillion won.

Significant challenges remain for Kia Motors, as the automaker has been selling fewer cars this year compared to the first half of last year.

The company, which is 33.9 percent owned by Hyundai Motor, sold a total of 1.35 million cars worldwide in the first half this year, 2.4 percent lower than 1.39 million units sold in the same period a year earlier.

The automaker’s sales volume fell in most markets, but the steepest decline was seen in the Chinese market. Kia Motors sold 144,000 vehicles in China during the first half this year, which is 16.4 percent lower than the 173,000 units it sold a year earlier.

Kia Motors blames its weak performance in China on lower demand for its products as a result of the trade war between Washington and Beijing.

The automaker somewhat offset its poor performance in China by posting robust sales in the North American market. With strong demand for the Telluride SUV and the Soul boxcar, Kia Motors sold 383,000 units in North America during the first half of the year, up 2.3 percent from 375,000 units a year earlier.

During the first half of the year, the automaker achieved 46 percent of its annual sales target of 2.92 million units.

Moving forward, Kia Motors seeks to report better sales and earnings results in the coming quarters by introducing more of its cars to respective markets. Its recently launched Seltos will be key for the automaker to reach the goal.

The company seeks to recover its sales volume in China by introducing the Seltos SUV and K3 sedan to the market while realigning its brand and pricing strategies. Kia Motors is also betting the two vehicles will help it in the Korean market.

While presenting its earnings report for the second quarter, Kia Motors also announced plans to become one of the top five carmakers in India over the next three years.

As the Indian economy is expected to improve in the second half of this year, and later become one of the core markets for global auto industry, Kia Motors said it will set up 265 sales and service offices in 160 cities in India by end of December.

It specifically seeks to target the mid-SUV market by selling 110,000 Seltos to Indian consumers by the end of the year. The automaker said it is conducting research to develop India-specialized trims and localized digital packages.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]