(Bloomberg) -- Hyundai Motor Co. reported earnings that missed analyst estimates as a strengthening local currency hurt the automaker’s competitiveness, while incentives to lure American buyers eroded profitability.
Operating profit in the three months through March fell to 681 billion won ($631 million) from 1.25 trillion won a year ago, the Seoul-based company said in a statement Thursday. That compares with the average of 940.6 billion won derived from 14 analysts’ estimates compiled by Bloomberg. Sales fell 4 percent to 22.4 trillion won.
A strengthening Korean won is adding to Hyundai Motor’s challenges in countries like the U.S., where the carmaker is struggling to ramp up enough SUV models as demand for sedans declines. The local currency has gained almost 14 percent against the dollar since the end of 2016, more than the Japanese yen’s 10 percent appreciation. The Hyundai Group is also facing pressure from activist investor Elliott Management Corp. to boost shareholder returns and improve governance.
Hyundai Motor, which sold 12 percent fewer vehicles in the U.S. in the first quarter, has been spending more on incentives to sell its Sonata and Elantra sedans to help bolster flagging sales in the U.S., where SUVs and crossovers account for almost half of new auto purchases.
The company and its affiliate Kia Motors Corp. are working to reverse the slide. By 2020, the two are planning to boost production of new models including large SUVs by 75,000 units in the U.S. Their combined production volume is set to jump 34 percent to 830,000 vehicles in the five years to 2022, another group firm, Hyundai Glovis Co., said in a filing this month.
In China, the firm hasn’t yet fully rebounded from a blow last year when the U.S. deployment of a missile shield on South Korean soil caused tensions with the Asian giant and spurred a boycott of Korean goods on the mainland. Sales in the world’s biggest market dropped 17.1 percent in the period. Hyundai Motor expects recovery next year with the introduction of new SUV models in the market.
©2018 Bloomberg L.P.