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Hyundai defies downturn to post record profits

Hyundai Motor posted record earnings for last year on Thursday as it increased market share in China and the US, the word’s two biggest auto markets, on the back of the weaker won and its strong compact car line-up.

The South Korean group was one of few carmakers to have a good 2009 as the global economic crisis increased demand for smaller, fuel-efficient vehicles, while its rivals such as General Motors and Toyota Motor suffered losses amid the industry’s worst downturn in decades. Hyundai, together with affiliate Kia Motors, overtook Ford Motor to become the world’s fourth-largest carmaker by sales last year.

Hyundai increased its global market share to 5.2 per cent last year from 4.3 per cent in 2008 as sales increased 11.7 per cent. The company’s profit margin shot up from 5.8 per cent to 7 per cent as the weaker won reduced the impact of having to provide aggressive incentives.

“Although the global auto industry faced extreme difficulties last year, we have managed to turn the crisis into an opportunity by increasing our market share,” the carmaker said in a statement.

Net profit at Hyundai more than doubled to Won2,962bn ($2.6bn) in 2009 with fourth-quarter profit almost quadrupling to Won945.5bn from a year ago. Operating profit rose 19 per cent to Won2,235bn.

The strong results contrast sharply with the troubles faced by Toyota, Hyundai’s bigger rival, which is facing growing concerns about the quality of its vehicles.

This week, Toyota suspended sales of eight models and announced plans to close five assembly lines. It has also recalled millions of vehicles in the US and Europe to fix a fault in the accelerator.

But Hyundai predicted that competition would intensify this year as US rivals are expected to fight back after restructuring and the weaker yen would make it harder to compete with Japanese companies.

“Competition in the global auto market will steepen as US makers start anew with only competitive brands and reorganised Japanese companies gear up for a counterattack,” Hyundai said.

Despite the global economic slowdown, which sapped demand for new cars, Hyundai increased its market share in mature markets such as the US and Europe while its sales in China shot up 94 per cent to make Hyundai the fourth-largest carmaker in the country. Its Elantra compact car is the best-selling foreign car there.

Hyundai aims to increase sales by 11 per cent this year to 3.46m vehicles by launching new models such as the revamped Accent and Elantra.

However, the recent rise in the won is raising questions about whether Hyundai can sustain the momentum this year. The currency has strengthened more than 35 per cent against the US dollar from its low in March last year, which could hurt Hyundai’s price competitiveness abroad.

Source: Financial Times


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