Despite a decrease in sales due to a prolonged shortage of semiconductors, sales and operating profit increased
Impact of reduced incentives centered on North America and increased sales of high-margi
In the third quarter of this year, KIA's sales and operating profit both increased despite a decrease in sales due to a prolonged shortage of semiconductors. This is the result of increased profitability by reducing incentives in the North American market and increasing sales of high-margin recreational vehicles (RV). Despite the difficult business environment such as supply and demand for semiconductors and the exchange rate, the company plans to focus on protecting profitability by efficiently managing inventory and increasing sales of new vehicles such as EV6.
Kia held a conference call at their headquarters in Yangjae-dong, Seoul on the 27th and presented their business results for the third quarter of 2021. Global sales in the third quarter recorded 684,413 units, down 2.1% from the same period last year. Domestic sales decreased by 8.6% compared to the same period last year, and overseas sales decreased by 0.6%.
In Korea, the effect of new cars such as flagship RV models and Sportage continued, but demand did not lead to shipments due to production disruptions due to a shortage of semiconductors. Overseas, sales also declined slightly due to lack of available inventory.
Sales in the third quarter reached 17,752.8 billion KRW, an increase of 8.8% compared to the same period last year. Sales of RV models and new cars increased despite unfavorable circumstances such as worsening sales conditions due to supply disruptions and a decline in the KRW-USD exchange rate.
Operating profit increased by 579.7% from the same period last year to 1.327 trillion KRW, and the operating profit margin was 7.5%. In the third quarter of last year, operating profit was only 195.2 billion KRW due to large-scale quality cost. This year, profitability increased significantly from increased sales of high-margin new cars such as the SORENTO, Carnival, and SELTOS, and significant reduction in incentives, and efficient execution of SG&A expenses. Excluding the Chinese market, the proportion of global RV sales recorded 58.7%, up 1.1 percentage points (P) from last year.
Regarding the future business, KIA predicted that global vehicle demand would recover due to the base effect of COVID-19, but also concerned such as production setbacks and inventory shortages would persist. To overcome this, they would focus on strengthening sales, profitability, and risk management.
An official from KIA said, "As a short-term countermeasure, we will promote the securing of parts by mobilizing our company-wide capabilities. We will do our best to manage external risks such as prolonged COVID-19 and inflation concerns by minimizing production disruption and optimizing sales through efficient inventory management."
An official continued, “In the mid to long-term, we will secure profitability by expanding production and sales of electric vehicles. We plan to materialize new businesses such as software and services.”
By Staff Reporter Chiyeon Jung (email@example.com)