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Sub-sector: Automotive
Hyundai Motor
- Sector: Manufacturing
- Sub Sector: Automotive
- Country: Korea
- Bond: HYNMTR 5.4 31
- Indicative Yield-to-Maturity (YTM): 4.53%
- Credit Rating : A3 / A- / A-
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Fundamental View
AS OF 21 Aug 2025While the profit headwind related to tariffs could become a rating event over time, we expect the rating agencies to maintain their patient stance on Hyundai based on its solid market position and healthy pre-tariff profit margins, giving the company time to implement and execute tariff mitigation strategies before contemplating negative rating actions. We note that Hyundai’s biggest mitigation strategy involving the ramp of its US-based Metaplant is already underway and should reduce its reliance on vehicle imports for the US market from 60% to 30% over time.
Business Description
AS OF 21 Aug 2025- Hyundai Motor Co., Ltd. engages in the manufacture and distribution of motor vehicles and parts. It operates through the following business areas: Vehicle, Financial and Other. The Vehicle division offers motor vehicles. The Financial division provides financing, leasing and credit cards. The Other division includes manufacture of railways. The company was founded on December 29, 1967, and is headquartered in Seoul, South Korea.
- Hyundai Capital America benefits from a support agreement with Hyundai Motor (HMC). HCA investor relations confirmed its support (keepwell) agreement contains a fixed charge coverage provision that it views as particularly strong compared to other peers.
Risk & Catalysts
AS OF 21 Aug 2025On a combined basis, HMG’s current FY25 guidance targets FY25 wholesale unit growth of 2% to 7.4 mn units, revenue growth of 5% to 6%, and a consolidated operating profit margin of 8.8% at the midpoint of the range for YoY margin contraction of 40 bp. Kia management expects 2H25 vehicle demand in the US to decline 10% YoY, which will likely lead to a reduction in HMG’s FY25 wholesale unit target. Hyundai management stated it expects a bigger tariff impact in 3Q25 and 4Q25 than 2Q25, which we believe is likely due to a combination of vehicle tariffs being in effect for the entire quarter instead of just two months in 2Q25, along with lower volumes.
HMG targets continued growth of NEVs in 2H25, including a target of 100% growth in HEV sales. Given the end of the US $7,500 NEV consumer tax incentive at the end of 3Q25 and expected reduced emissions standards in the US, the company plans to leverage its flexible production system for ICE and NEVs to adapt to potential demand changes. Management previously noted its Metaplant in Georgia, which was originally designed to manufacture EVs, was being retooled to also produce HEVs and could potentially produce ICE vehicles in the future.
Key Metric
AS OF 21 Aug 2025| KRW bn | FY21 | FY22 | FY23 | FY24 | LTM 2Q25 |
|---|---|---|---|---|---|
| Revenue | 94,143 | 113,718 | 130,150 | 136,725 | 141,518 |
| EBIT | 5,459 | 8,950 | 15,440 | 14,189 | 12,233 |
| EBIT Margin | 5.8% | 7.9% | 11.9% | 10.4% | 8.5% |
| EBITDA | 10,015 | 13,998 | 20,387 | 18,476 | 15,331 |
| EBITDA Margin | 10.6% | 12.3% | 15.7% | 13.5% | 8.5% |
| Total Liquidity | 19,745 | 26,639 | 26,507 | 27,488 | 22,776 |
| Net Debt | (5,202) | (11,035) | (10,916) | (11,799) | (17,730) |
| Total Debt | 12,569 | 12,940 | 12,940 | 12,940 | 5,805 |
| Gross Leverage | 1.3x | 0.9x | 0.6x | 0.7x | 0.4x |
| Net Leverage | -0.5x | -0.8x | -0.5x | -0.6x | -1.0x |
CreditSight View Comment
AS OF 22 Sep 2025We reiterate our Outperform recommendation on HMG notes based on relative value, the company’s solid global market position, and our view its low-A credit rating should be secure in the near term based on its solid global market position, its growing new energy vehicle business, tariff mitigation initiative including vehicle onshoring in the US, and potential near-term tariff rate relief.
Recommendation Reviewed: September 22, 2025
Recommendation Changed: April 28, 2025
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Hyundai Motor
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Fundamental View
AS OF 20 Aug 2025While management has not yet provided consolidated operating profit guidance for FY25, it lowered its FY25 tariff impact estimate by one-third and pointed to “green shoots” in retail vehicle sales trends in North America and China. At the same time, management’s formal retail vehicle sales guidance implies a 1% YoY decline for the balance of the year – not what we would call a bullish outlook. Management is making progress on its manufacturing plant reduction, having announced five of the seven planned plant closures, although it will take time to wind down production and relocate it to other plants. Overall, we remain hopeful but not optimistic regarding management’s Re: Nissan turnaround plan and view the cadence of its monthly retail sales as the best indicator of the plan’s progress.
Business Description
AS OF 20 Aug 2025- Nissan, with headquarters in Yokohama, Japan, is a leading global automotive manufacturer with a market presence in many countries around the globe. The company’s growth investments are focused primarily on Japan, North America, and China, core markets with large profit pools in which Nissan has a meaningful market share. The company’s business in China is conducted through a joint venture with Dongfeng Motor Corporation.
- Nissan’s Sales Financing segment supports the sale of its vehicles by providing financing solutions to its customers and dealers. To enhance their creditworthiness, Nissan maintains keepwell (support) agreements with its wholly owned financial subsidiaries including Nissan Motor Acceptance Corporation (NMAC) in the United States and Nissan Financial Services (NFS) in Japan.
- The Renault-Nissan-Mitsubishi Alliance was established in 1999 to enhance member company scale in product development and raw material purchasing. The alliance includes equity participation, which led to Nissan holding ownership stakes in Renault (15% non-voting) and Mitsubishi (34%) and Renault holding an ownership stake in Nissan (43%). The Alliance’s automobile production volume is the third largest globally behind Toyota and Volkswagen.
Risk & Catalysts
AS OF 20 Aug 2025Management reaffirmed its FY25 guidance for global automotive production, global automotive retail sales, and revenue. However, full-year guidance for operating profit, net income, and automotive free cash flow is still “to be determined” owing to uncertainty related to the potential impact of tariffs and additional restructuring costs that are currently being assessed.
Management expects automotive free cash flow to improve from ¥(390) bn in F1Q25 to ¥(350) bn in F2Q25, including the estimated tariff impact, before turning positive in 2H25. The combined automotive free cash flow of ¥(740) bn in 1H25 – roughly US$4.9 bn – currently represents our worst-case scenario for FY25 automotive free cash flow, assuming the company is automotive free cash flow breakeven in the back half of the year. FY25 automotive free cash flow upside can be achieved if the company generates positive free cash flow in 2H25 as management expects based on its seasonal patterns of working capital usage and cash generation.
Key Metric
AS OF 20 Aug 2025| JPY bn | FY21 | FY22 | FY23 | FY24 | LTM F1Q25 |
|---|---|---|---|---|---|
| Revenue | 7,393 | 9,573 | 11,524 | 11,371 | 11,083 |
| EBIT | (78) | 218 | 394 | (78) | (256) |
| EBIT Margin | (1%) | 2% | 3% | (1%) | (8%) |
| EBITDA | 211 | 535 | 745 | 286 | 77 |
| EBITDA Margin | 2.9% | 5.6% | 6.5% | 2.5% | (5.2%) |
| Total Liquidity | 3,601 | 3,658 | 4,196 | 4,272 | 2,670 |
| Net Debt | (728) | (1,213) | (1,546) | (1,498) | (1,134) |
| Total Debt | 973 | 687 | 468 | 661 | 936 |
| Gross Leverage | n/m | 1.3x | 0.6x | 2.3x | 12.1x |
| Net Leverage | -3.4x | -2.3x | -2.1x | -5.2x | -14.7x |
CreditSight View Comment
AS OF 24 Sep 2025We maintain a Market perform recommendation on Nissan Motor and Nissan Motor Acceptance Co. (NMAC) notes based on the company’s weak near-term outlook for automotive profit and free cash flow that is made harder by tariffs, its turnaround initiatives that target positive profit and free cash flow by FY26, new vehicle launches that target improving retail sales momentum, recent refinancing activity of FY25 debt maturities that also bolstered its liquidity, and relative value.
Recommendation Reviewed: September 24, 2025
Recommendation Changed: July 16, 2025
Featured Issuers
Bank of Philippine Islands
SK Hynix
Hyundai Motor
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Fundamental View
AS OF 20 Aug 2025While we expect its automotive profit margin to fall below the Moody’s EBIT margin downgrade trigger of below 10%, we believe Moody’s is unlikely to make a negative outlook revision in the near term considering it revised its outlook on Toyota from positive to stable in early June after the tariffs had been implemented. Outside the tariff impacts, Toyota’s global sales and market share remain strong, and it maintains a leadership position–if not THE leadership position–in hybrid vehicle sales, which is currently the fastest growing light vehicle segment globally. And while management maintains the long-term strategy of localizing vehicle production in the US, it also announced a new manufacturing facility in Japan that is expected to open by the early 2030s to support its home market.
Business Description
AS OF 20 Aug 2025- Toyota Motor Corp. (TMC) engages in the manufacture and sale of motor vehicles and parts. It operates through the following segments: Automotive, Financial Services, and All Other. The Automotive segment designs, manufactures, assembles and sells passenger cars, minivans, trucks, and related vehicle parts and accessories. Toyota is also involved in the development of intelligent transport systems. The Financial Services segment offers purchase or lease financing to Toyota vehicle dealers and customers. It also provides retail leasing through lease contracts purchased by dealers. The company was founded by Kiichiro Toyoda on August 28, 1937, and is headquartered in Toyota, Japan.
- Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary of TMC, oversees the management of Toyota's finance companies worldwide. Toyota Motor Credit Corporation (TMCC) is the company’s principal financial services subsidiary in the United States. Under terms of the credit support agreement between TFSC and TMCC, TFSC agrees to: (1) maintain 100% ownership of TMCC; (2) cause TMCC and its subsidiaries to have a tangible net worth of at least $100,000; (3) make sufficient funds available to TMCC so that it will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper. The terms of the credit support agreement between TMC and TFSC are very similar to the terms of the TFSC and TMCC credit support agreement.
Risk & Catalysts
AS OF 20 Aug 2025Toyota revised its FY26 financial guidance that maintains projections for vehicle wholesales (+5%) and revenue (+1%). The guidance reflects a full-year tariff impact of ¥1.4 tn, a ¥725 bn headwind from yen appreciation, and a ¥300 bn drag from higher material costs. These pressures are projected to be partially offset by planned improvement efforts totaling ¥900 bn, comprised of volume/mix gains, cost reductions, value chain profit expansion, and other positive drivers. The company’s consolidated operating margin is now expected to decline from 10.0% in FY25 to 6.6% in FY26, representing 340 bp of contraction, 290 bp of which is from tariffs.
The tariff impact assumptions include a 25% tariff on Japanese exports to the U.S. from April through July, shifting to 12.5% for the remainder of the fiscal year, and a 25% tariff on exports from Canada and Mexico for the entire period. Management highlighted that a portion of these costs are expected to be absorbed by suppliers or mitigated by exemptions for USMCA-compliant parts and U.S.-produced vehicles, but acknowledged “the impact of U.S. tariffs and other factors drove the profit guidance cut.”
Key Metric
AS OF 20 Aug 2025| JPY bn | FY22 | FY23 | FY24 | FY25 | LTM F1Q26 |
|---|---|---|---|---|---|
| Automotive Revenue | 28,606 | 33,777 | 41,081 | 42,996 | 43,276 |
| EBIT | 2,519 | 2,486 | 4,890 | 4,047 | 3,849 |
| EBIT Margin | 8.0% | 6.7% | 10.8% | 8.4% | 7.6% |
| EBITDA | 3,526 | 3,671 | 6,159 | 5,408 | 5,185 |
| EBITDA Margin | 11.2% | 9.9% | 13.7% | 11.3% | 10.3% |
| Total Liquidity | 15,864 | 10,090 | 12,401 | 11,595 | 11,595 |
| Net Debt | (1,719) | (2,825) | (4,025) | (3,355) | (3,355) |
| Total Debt | 2,580 | 2,724 | 2,868 | 2,736 | 2,736 |
| Gross Leverage | 0.7x | 0.7x | 0.5x | 0.5x | 0.5x |
| Net Leverage | -0.5x | -0.8x | -0.7x | -0.6x | -0.6x |
CreditSight View Comment
AS OF 15 Sep 2025We reiterate our Underperform recommendation on notes of Toyota Motor Co. and Toyota Motor Credit Corporation based primarily on relative value, although we consider the Toyota bond complex to be a relatively safe haven for long-term investors.
Recommendation Reviewed: September 15, 2025
Recommendation Changed: May 09, 2025
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Bank of Philippine Islands
SK Hynix
Hyundai Motor
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Fundamental View
AS OF 20 Aug 2025F1Q26 Non-Financial Services results reflected robust motorcycle sales and record segment profitability, offset by a sharp downturn in automobile earnings due to tariffs, one-time EV-related expenses, and regional sales declines in Asia and Japan. Management is pursuing active mitigation of tariff impacts through localization, production reallocation, and pricing, while maintaining strong cash generation and shareholder returns. Management lowered its projected FY26 tariff cost estimate by nearly one-third, improving its projected FY26 consolidated operating margin compression from 310 bp previously to 230 bp. While the projected FY26 consolidated operating margin of 3.3% remains low, improvement from its previous forecast and lower tariff impact could alleviate negative rating pressure.
Business Description
AS OF 20 Aug 2025- Honda Motor Co., Ltd. engages in the manufacture and sale of automobiles, motorcycles, and power products. It operates through the following segments: Automobile, Motorcycle, Financial Services, and Power Product and Other Businesses. The Automobile segment manufactures and sells automobiles and related accessories. The Motorcycle segment handles all-terrain vehicles, motorcycle business, and related parts. The Financial Services segment provides financial and insurance services. The Power Products and Other Businesses segment offers power products and relevant parts.
- American Honda Finance Corporation (AHFC) is a wholly-owned subsidiary of American Honda Motor Co., Inc. (AHM or the Parent). Honda Canada Finance Inc. (HCFI) is a majority-owned subsidiary of AHFC. Non-controlling interest in HCFI is held by Honda Canada Inc. (HCI), an affiliate of AHFC. AHM is a wholly-owned subsidiary and HCI is an indirect wholly-owned subsidiary of Honda Motor Co., Ltd. (HMC). Honda Motor Co. (HMC) maintains Keep Well (support) agreements with its North American finance subsidiaries, AHFC and HCFI. Under the Keep Well agreements, HMC agrees to (1) maintain at least 80% ownership in AHFC and HCFI, (2) ensure AHFC and HCFI maintain a positive net worth, and (3) ensure both AHFC and HCFI have sufficient liquidity to meet their debt payment obligations.
Risk & Catalysts
AS OF 20 Aug 2025Management maintained its FY26 wholesale unit volume guidance that includes higher motorcycle wholesales and lower wholesales of Automobiles (-3%) and Power Products (-1%). The changes in Motorcycle segment (higher) and Automobile segment (lower) wholesales are expected to be primarily driven by Asia. Automobile wholesales in North America are projected to increase 2% YoY and account for 46% of the company’s global wholesales.
Management raised its FY26 consolidated operating profit forecast from ¥500 bn to ¥700 bn. The increase is equivalent to reduction in projected tariff impacts from to ¥650 bn to ¥450 bn. The revised forecast also includes higher currency tailwinds that are expected to be offset by unfavorable sales and price/cost impacts. While the revised forecast is a material improvement from last quarter’s forecast, it still represents a 42% decline from FY25 operating profit of ¥1.3 tn, mostly attributable to the company’s projected to ¥450 bn tariff cost. Finally, the updated forecast calls for Honda’s consolidated operating profit margin to decline by 230 bp from 5.6% in FY25 to 3.3%, an improvement from the 310 bp margin compression it previously expected.
Key Metric
AS OF 20 Aug 2025| JPY bn | FY22 | FY23 | FY24 | FY25 | LTM F1Q26 |
|---|---|---|---|---|---|
| Revenue | 11,967 | 14,167 | 17,434 | 18,509 | 18,550 |
| EBIT | 741 | 612 | 1,219 | 899 | 661 |
| EBIT Margin | 6.2% | 4.3% | 7.0% | 4.9% | 3.6% |
| EBITDA | 1,334 | 1,294 | 1,964 | 1,630 | 1,383 |
| EBITDA Margin | 11.1% | 9.1% | 11.3% | 8.8% | 7.4% |
| Total Liquidity | 4,612 | 4,926 | 6,150 | 5,368 | 5,044 |
| Net Debt | (2,481) | (2,751) | (3,762) | (3,216) | (2,908) |
| Total Debt | 837 | 803 | 863 | 646 | 630 |
| Gross Leverage | 0.6x | 0.6x | 0.4x | 0.4x | 0.5x |
| Net Leverage | -1.9x | -2.1x | -1.9x | -2.0x | -2.1x |
CreditSight View Comment
AS OF 15 Sep 2025We reiterate our Underperform recommendation on Honda Motor Co. and American Honda Finance Corporation notes based on relative value and its weak but improving consolidated operating profit outlook.
Recommendation Reviewed: September 15, 2025
Recommendation Changed: May 15, 2025
Featured Issuers
Bank of Philippine Islands
SK Hynix
Hyundai Motor
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Fundamental View
AS OF 29 Feb 2024Toyota’s slower ramp of battery electric vehicle (BEV) production and sales relative to its peers was a common investor concern a year ago. However, with the recent slowdown in consumer adoption of BEVs in North America and Europe and Toyota’s dominance in the hybrid electric vehicle (HEV) market, those concerns have abated, at least for the time being. Importantly, Toyota management has indicated its profitability of its HEV portfolio is on par with its ICE portfolio profitability. We continue to believe that Toyota’s market leading position in HEVs provides consumers with a more eco-friendly option than traditional ICE vehicles that can serve as a bridge to EVs while the charging infrastructure is built out and the cost of producing EVs is reduced.
Business Description
AS OF 29 Feb 2024- Toyota Motor Corp. (TMC) engages in the manufacture and sale of motor vehicles and parts. The Financial Services segment offers purchase or lease financing to Toyota vehicle dealers and customers. It also provides retail leasing through lease contracts purchased by dealers. The company was founded by Kiichiro Toyoda on August 28, 1937, and is headquartered in Toyota, Japan. In July 2000, the company established Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary, to oversee the management of its finance companies worldwide.
- Toyota Financial Services Corporation (TFSC), a wholly owned subsidiary of TMC, oversees the management of Toyota's finance companies worldwide. Toyota Motor Credit Corporation (TMCC) is the company’s principal financial services subsidiary in the United States and is an indirect wholly owned subsidiary. Under terms of the credit support agreement between TFSC and TMCC, TFSC agrees to: (1) maintain 100% ownership of TMCC; (2) cause TMCC and its subsidiaries to have a tangible net worth of at least $100,000; (3) make sufficient funds available to TMCC so that it will be able to service the obligations arising out of its own bonds, debentures, notes and other investment securities and commercial paper. The terms of the credit support agreement between TMC and TFSC are very similar to the terms of the TFSC and TMCC credit support agreement.
Risk & Catalysts
AS OF 29 Feb 2024Toyota Motor Credit Corporation (TMCC) credit metrics stable. TMCC F3Q24 earnings before taxes increased 50% YoY and 3x sequentially. At F3Q24 the delinquency rate expanded 10 bp YoY to 0.9%, nearly double pre-pandemic levels, while the retail charge-off rate expanded 10bp YoY to 0.7%. The company notes that changes in interest rates or unemployment could increase credit losses and additional provisioning. Additionally, elevated prices and high borrowing costs have impacted some consumers’ ability to make scheduled payments resulting in an increase in consumer delinquencies and charge-offs.
Key Metric
AS OF 29 Feb 2024| ¥ bn | FY20 | FY21 | FY22 | FY23 | F3Q24 |
|---|---|---|---|---|---|
| Total Company Earning Assets | 110,621 | 116,546 | 117,659 | 120,018 | 129,320 |
| Cash and Investments | 6,790 | 8,195 | 7,670 | 6,398 | 6,458 |
| Total Liquidity | 31,390 | 35,895 | 36,070 | 33,498 | 35,058 |
| Unsecured Debt | 83,172 | 85,513 | 82,288 | 78,949 | 85,744 |
| Secured Debt | 14,568 | 24,212 | 26,864 | 32,736 | 33,262 |
| Total Debt | 97,740 | 109,725 | 109,152 | 111,685 | 119,006 |
| Allowance % Retail Rece. | 0.86% | 1.64% | 1.66% | 1.83% | 1.81% |
| Allowance / Net Charge-offs | 1.58x | 4.50x | 6.68x | 3.03x | 2.56x |
| Net Charge-offs % Avg. Receivable | 0.56% | 0.39% | 0.26% | 0.63% | 0.72% |
| 30+ Day Delinquency Rate | 1.8% | 1.2% | 1.8% | 2.3% | 3.1% |
CreditSight View Comment
AS OF 13 May 2024We reiterate our Underperform recommendations on notes of Toyota Motor Co. (TOYOTA: A1/A+/A+; S/S/S) and Toyota Motor Credit Corporation (TMCC: A1/A+/A+; S/S/S) based primarily on relative value. Toyota reported record profit in FY24 and announced increased investments in labor, suppliers, and BEVs in FY25 that it expects to reduce operating profit 20%. We applaud the investments that we believe should further its new energy vehicle offerings well beyond its hybrid electric vehicles (HEVs), which account for more than one-third of its sales. We believe the Toyota bond complex is fairly valued at current levels but will continue to underperform the broader market and the A-rated index owing to its high-A credit rating and short duration.
Recommendation Reviewed: May 13, 2024
Recommendation Changed: January 13, 2023
Featured Issuers
Bank of Philippine Islands
SK Hynix
Hyundai Motor