The South Korean automaker Hyundai Motor (KRX:005380) and their affiliate Kia have set a target of selling 8.25 million vehicles all over the world for 2017, in spite of growing concerns about rising competition. Hyundai revealed this on Monday.
This 8.25 million target of 2017, is a bit higher than the goal of selling 8.13 million vehicles in 2016. It is higher by 1.5 percent than last year. Hyundai wants to sell 5.08 million vehicles globally, while Kia’s target is to sell 3.17 million vehicles in 2017.
Whether the business was able to meet this target is not known yet, but the results are expected to come out soon. However, analysts feel that they are likely to miss the sales target because of low demand of cars in emerging markets. The slowdown of the US market is also a cause for concern. The margins of Hyundai are coming down due to low demand and growing competition.
Hyundai missed the sales growth projections for 2015 as well.
Motor Group Chairman Shares the Same Concerns
Interestingly, the Chairman of Hyundai’s Motor Group also seems to agree with this view. Issuing a message to the employees on the occasion of the New Year, Mong-koo said, “With the global economy continuing its low growth, trade protectionism spreading and competition intensifying in the automobile industry, uncertainty is growing more than ever”.
He his however still hopeful that the business will be able to achieve the 2017 target because of additional production capacity in Mexico and China, which will be opening this year. Mong-koo says that Russia is stabilizing, and this too might help them meet the sales target after all.
Hank Lee, the Vice Chairman of Kia (KRX:000270) told his employees on Monday the business has hopes of reviving sales growth this year.
Profits May Fall For the Fifth Straight Year
Observers are saying that the Seoul-based business is likely to report their fifth straight annual profit decline once the financial report is published, which is disturbing news for their investors. Apart from growing competition, and low demand, another issue that has hurt the business is its product line-up. The Hyundai (KRX:005380) and Kia line-up include more sedans than SUVs (Sport Utility Vehicles). But in large parts of the market, SUV’s are now more popular than sedans.
In contrast, only a few years back, their sales were peaking. Thanks to clever marketing, and sleek designs, the business had achieved double-digit growth, with 2010 being the best year in recent times.