Hyundai and Kia continued to post solid growth in global wholesales and retail sales, but its 4Q24 automotive operating profit declined YoY for a second consecutive quarter owing to higher sales incentives, rising labor and R&D costs, and a warranty provision revaluation impacted by currency. While its FY25 guidance calls for modest volume and revenue growth, its profit margins are expected to compress another 70 bp on the heels of 100 bp margin compression in FY24. Guidance does not include the potential impact of US import tariffs, which we believe would affect roughly 60% of its US vehicle sales and could further compress margin by another 60 bp to 230 bp, depending on which tariffs are implemented.

Hyundai Motor Group targets FY25 wholesale volumes of 7.4 mn units, up 2% YoY, comprised of 1% volume growth at Hyundai and 4% volume growth at Kia. Both automakers are projecting modest growth in most of their major markets, except for a 1% decline by Hyundai in Europe. Kia projects outsized growth in India (+22%), starting from a base that is less than half that of Hyundai. Revenue growth is also projected to be modest at 3%-4% for Hyundai and 4% for Kia.

The company projects FY25 revenue growth of 3%-4%, above its ~1% wholesale volume growth, based on higher average selling prices (ASPs) that are driven by increased volumes in North America, including higher sales of Genesis and eco-friendly cars. Automotive operating profit margins are projected to contract 60 bp at the midpoint of the range, based in part on higher sales incentives and enhanced European fuel regulations. Management noted its relatively strong FY25 profit outlook in a weak global demand market environment reflects its expectation for strong performance in North America, fueled in part by increased sales of hybrid and luxury vehicles. The company’s FY25 outlook does not include the potential impact of US tariffs.