SEOUL: Hyundai Motor Co, South Korea’s largest carmaker, reported lower first-quarter profits yesterday because of higher research and development (R&D) spending on popular new models like the EF Sonata sedans.
The company, which is 10% owned by US-German automaker DaimlerChrysler AG, has invested heavily to improve the quality of its cars, replacing cheap compacts such as the Excel with sleeker models. It is hoping for a profit rebound later this year on brisk sales of the new models, particularly in the United States, where it is increasing sales faster than its Japanese rivals.
“The first quarter was the worst for Hyundai. But the situation seems to be getting better from April,” said Choi Yong-kyu, a fund manager at KEB Commerz Investment Trust Management. “But the domestic spending is still quite weak and the won’s strength is also not positive for Hyundai’s exports.”
The maker of Santa Fe sport utility vehicles and Elantra compacts earned 417.6 billion won (US$350.6mil) for the three months ended March 31, compared with 586.6 billion won a year ago.
R&D spending in the latest quarter jumped to 58.5 billion won from 9.7 billion won a year ago.
In comparison, Kia Motors Corp, Hyundai’s affiliate, posted a profit rise of more than 40%, thanks to brisk sales of more expensive recreation vehicles and forecast a bright outlook for the year.
Their Japanese rival Toyota Motor Corp had reported a record recurring profit last week, but faces fierce competition from Detroit’s “Big Three”.
Hyundai is betting on exports, mainly to the United States, to drive growth this year in the wake of weak demand at home. – Reuters