Hyundai puts faith in 4x4s for US sales push

With expanded offering including upgraded Palisade 4x4, starting from the second half, South Korean car maker targets US market share of 5.2 per cent by 2023

A customer looks at a Hyundai Motor Co. Palisade sport utility vehicle (SUV) on display at the company's Motorstudio showroom in Goyang, South Korea, on Friday, July 19, 2019. Hyundai is scheduled to release second-quarter earnings result on July 22. Photographer: SeongJoon Cho/Bloomberg
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South Korea's Hyundai Motor laid out its US sales turnaround plan on Monday with an expanded line-up of 4x4s, after posting its biggest quarterly profit jump in seven years.

The car maker forecast its US market share to begin rising again from this year, targeting a year-end share of 4.2 per cent versus 3.9 per cent last year, with sales of its upgraded Palisade 4x4 starting from the second half. It aims for a US share of 5.2 per cent by 2023.

Solid performance at home and in the United States in the three months through June helped offset a sales slump in China, where a slowing economy, trade war with the United States and a lack of competitive models prompted the auto maker to suspend production at its oldest factory earlier this year.

To maintain momentum in the United States - its biggest overseas market - Hyundai said it plans to boost the proportion of SUVs in its U.S. line-up to 67 per cent in 2023 from 51 per cent in 2019, as it works to catch up with a shift in consumer preference.

"It was a surprise when Hyundai revealed an aggressive US turnaround plan, but I don't see any problem in it meeting its annual sales target there," said analyst Kim Joon-sung at Meritz Securities.

Hyundai's revival is being led by heir-apparent Euisun Chung following six years of profit decline. The executive vice chairman is widely considered to be seeking investor support to revisit an ownership restructuring plan as he prepares to take over from his 81-year-old father and chairman.

A previous proposal was scrapped last year following shareholder opposition, notably from US hedge fund Elliott Management.

Since last year, Mr Chung has brought in a flurry of foreign executives in a sweeping reshuffle at a firm dominated by Koreans. Most recently, in April, it appointed an ex-ally of Nissan's ousted chairman Carlos Ghosn as global chief operating officer and Americas chief.

In the April-June period, US sales gained 3 per cent while a weak Korean won against the US dollar raised the value repatriated income. At home, new models such as the Palisade 4x4 and Sonata saloon helped sales jump 8.1 per cent.

Overall, net profit for the quarter rose 31.2 per cent to 919.3 billion won (Dh2.86bn), just short of market estimates but still Hyundai's biggest quarterly percentage gain since the first quarter of 2012.

Operating profit rose 30.2 per cent on a 9.1 per cent increase in revenue, the automaker said in a stock exchange filing.

Even so, the earnings recovery could weaken as Hyundai braces for a potential strike by its domestic labour union that could disrupt supplies of models such as the Palisade both at home and overseas, analysts said.

The union will vote next Monday whether to approve strike action after walking out of annual wage talks on Friday.

A prolonged dispute could have a greater impact on sales and earnings this year because, unlike in the past three or four years of slow growth, sales of its new models have been brisk, Samsung Securities analyst Esther Yim said in a recent report.