Hyundai Motor and Kia recorded sales of $196.2 billion (262.5 trillion won) and an operating profit of $20 billion (26.8 trillion won) last year, marking their best performance since the companies were founded. Notably, the firms achieved a significant milestone with their operating margin, a critical measure of profitability, reaching double digits for the first time at 10.2%. This figure surpasses Tesla’s operating profit margin of 9.2% from last year and matches the margins of luxury automakers like BMW and Mercedes-Benz. In the broader context, this success fills a gap left by another Korean giant, Samsung Electronics, which experienced its worst performance since 2008.
In the automotive industry, it is uncommon for a company to achieve an operating profit exceeding $20 billion (26.8 trillion won). To put this in perspective, in the years 2021-2022, Toyota, the world’s leading automaker, reported annual profits of 2.7 trillion yen (24.4 trillion won), while Volkswagen Group, ranked second, recorded annual profits exceeding 20 billion euros (29 trillion won) for two consecutive years.
Achieving double-digit profit margins while selling 7.3 million vehicles is rare. During 2021-2022, Toyota and Volkswagen reported 8-9% operating margins. In contrast, Tesla, BMW, and Mercedes-Benz, known for maintaining double-digit margins for years, have global sales figures of around 2 million units. A Korean automotive industry insider noted, “Last year, Toyota’s performance was likely similar or slightly better than Hyundai and Kia’s, owing to the weak yen. Furthermore, Kia’s operating margin of 11.6% could be the highest globally.”
The company’s diversified vehicle range beyond electric vehicles (EVs) is the primary driver behind this record-breaking performance. While the EV market, often heralded as the future of transportation, has experienced a slowdown, there are ample ‘alternatives’ like hybrids and SUVs. The efficient production and high pricing of these alternatives, coupled with cost competitiveness, are also critical factors in this success.
