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Hyundai Motor Co
12, Heolleung-ro, Seocho-gu
Phone: +82 234641114p:+82 234641114 SEOUL, 06797  South Korea Ticker: 005380005380

Hyundai Motor hit by $3bn round of recalls


Shares in Hyundai Motor dropped as much as 7 per cent yesterday after the carmaker announced $3bn in provisions because of a round of recalls, in a blow to plans for a sweeping transition to environmentally friendly vehicle tech.

Hyundai and its affiliate group Kia Motors said they planned to allocate Won3.4tn ($3bn) for product recalls and quality control problems in the third quarter.

The provisions came after Hyundai said it would recall 77,000 of its Kona electric vehicles due to problems with battery cells. They followed the company's decision last year to earmark $760m for a settlement and compensation linked to faults with millions of cars with Theta II engines.

The problems have cast a pall over the carmaker as it lines up investments of more than $35bn to shift from traditional manufacturing to sectors including EVs, hydrogen fuel cells and driverless cars over the next five years.

For investors, Hyundai's third consecutive year of vehicle recalls over enginerelated issues raised questions including whether the "next-generation engines are free from quality issues", said Nomura analysts Angela Hong and Akash Gupta. "We expect the Korean auto sector to face near-term headwinds until these unanswered questions are addressed by Hyundai Motor."

Hyundai remained "fully committed" to its plans to introduce 23 all-electric models and sell 1m EVs by 2025, it said.

Kang Seong-jin, an analyst at KB Securities, said that while the provisions would dent Hyundai shares and hit third-quarter earnings, sales had been showing signs of improvement.

Korea car shipments snapped five months of declines in September, according to data from Ministry of Trade, Industry and Energy, the latest green shoots in export markets including the US.

Vehicle shipments were up 15 per cent from the same period a year earlier, against declines in April and May of 45 per cent and 58 per cent respectively.

Still, Hyundai's latest problem is frustrating for chairman Euisun Chung, coming just days after he took the helm at the conglomerate.

Mr Chung last week described a "great sense of responsibility" as he followed in the footsteps of his father, former chairman Mong-Koo Chung, and his grandfather, who founded Hyundai.

Some 77,000 Kona electric vehicles are affected due to problems with battery cells

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Thursday, April 25, 2024