Hyundai and Kia once again posted solid results in 3Q24, although they were somewhat tainted by an unexpected proactive warranty provision. The warranty provision lowered the combined automotive operating margin of the Hyundai Motor Group (HMG) by 160 bp, although the unadjusted operating margin of 8.5% was still solid. HMG’s LTM operating margin of 10.3% is the highest in our automaker coverage universe.

HMG continues to grow its new energy vehicle business with vehicle sales accounting for ~20% of sales at both Hyundai and Kia. Management has indicated its hybrid vehicle profitability is about the same as ICE vehicle profitability. This is an important point of differentiation between HMG and its peers that we attribute largely to the scale of its new energy vehicle business.

Hyundai Motor Co. did not update its FY24 financial guidance, which is customary for the automaker, unless it envisions a material change from its previous expectations. Kia, however, raised its FY24 guidance for consolidated revenue and operating profit by 6% and 8%, respectively. Kia now expects its FY24 consolidated operating margin of 12% at the midpoint of the guidance range compared to its previous expectation of 11.9%. Hyundai Motor Co. expects its consolidated operating margin to be in the range of 8% to 9%.

Kia also provided 4Q24 retail sales guidance, which it expects to increase on both a sequential (+9%) and YoY (+5%) basis. The retail sales growth is based on increased production from the expansion of its Hwaseong plant and EV plant expansions, which it expects to increase production of Sorrento (+11k units) and EVs (+11k units). These plants were temporarily shut down in 3Q24 for expansion and conversion activities.