Hyundai, Kia post 3.4% y/y gain in November global sales, return to positive territory in YTD

Hyundai and Kia recorded combined global vehicle sales of 711,841 units in November, according to separate data releases issued by the two companies and compiled by IHS Automotive. This total was up 3.4% year on year (y/y) from 688,279 units in November 2014. Hyundai's global sales rose by 4.9% y/y to 451,838 units last month, with domestic sales up 16.9% y/y to 65,166 units. Passenger car sales posted growth of 15.1% y/y to 34,410 units, while sport utility vehicles (SUV) sales surged 59% y/y to 15,913 units, although commercial vehicle sales continue to decline by 6.2% y/y to 14,843 units. Hyundai has been registering a consistent rise in domestic sales since the start of the second half of this year. In overseas sales, Hyundai recorded an increase of 3.1% y/y to 386,672 units in the month. Although exports fell by 15% y/y to 93,777 units, sales from overseas plants helped with a 10.7% y/y gain to 292,895 units, of which Hyundai's Chinese plants sold 110,094 (up 11.2% y/y) and facilities in India 57,500 (up 5.9% y/y). US plant sales totalled 32,200 units (up 4.5% y/y), followed by the Czech Republic with 31,200 units (up 19% y/y), Russia with 20,800 units (up 9.7% y/y), Turkey with 20,500 units (up 7% y/y), and Brazil with 15,900 units (up 6.2% y/y). Hyundai's Chinese commercial vehicle subsidiary accounted for 4,111 units in November, up 234% y/y, while consignments of vehicles produced by Turkish commercial vehicle manufacturer Karsan totalled 590 units, up 23.4% y/y.

Meanwhile, Kia posted a slight sales gain of 1% y/y in its global volumes to 260,003 units, against 257,487 units in November 2014. Kia saw a turnaround in its Chinese volumes during the month, thanks to the recent 50% cut announced by the government in the new vehicle purchase tax on small-engine models. The automaker registered a 10.3% y/y gain in Chinese sales to 71,625 units, followed by North America with 50,154 units, up a modest 1.5% y/y, and South Korea with 50,031 units, up 12.4% y/y. But sales fell in all other markets. European sales slipped by 9.8% y/y to 46,975 units, while sales in "other general markets" – including Central and South America, the Caribbean, Asia (excluding China and South Korea), the Pacific, and the Middle East and Africa – totalled 41,218 units (down 11.5% y/y). The brand's top-selling cars last month were the Rio/K2 (44,484 units), the Sportage (38,138 units), the Creta/Forte/K3 (32,485 units), the Optima (26,324 units), and the Sorento (15,799 units). It should be noted that IHS Automotive figures for Kia differ due to the inclusion of the Saipa brand for the Iranian market.

Combining the monthly sales data for the two automakers, Hyundai-Kia's domestic sales increased a healthy 14.9% y/y to 115,197 units, while their combined overseas sales also grew 1.5% y/y to 596,644 units, mainly due to Hyundai.

For the year to date (YTD) period in November, Hyundai's overall global sales are down 0.9% y/y to 4,448,969 units. Although domestic sales have returned to positive territory with a growth rate of 2.6% y/y to 632,061 units, thanks to improvements in recent months, overseas sales remain under pressure, down 1.4% y/y to 3,816,908 units. Yet Kia's YTD sales remain in positive territory at 2,707,352 units (up 2% y/y), split between a 13.7% y/y surge in domestic sales to 474,170 units and a 0.2% y/y decline in overseas sales to 2,233,182 units.

Combined YTD domestic sales of Hyundai and Kia total 1,106,231 units, up 7.1% y/y, while their combined overseas sales are down 1% y/y to 6,050,090 units.

Outlook and implications

Hyundai-Kia continue to receive a boost in the domestic Korean market from a temporary cut in the special consumption tax announced by the government in September (see South Korea: 4 December 2015: New vehicle sales in South Korea gain 14.5% y/y during November as imported volumes soar). Although the South Korean won is becoming more stable against other foreign currencies including the US dollar, Hyundai and Kia are under pressure from rising competition in both domestic as well as export markets. Hyundai launched its latest-generation Tucson model in March, resulting in a sales spike in South Korea for the automaker from June. It also introduced an updated Sonata model with new engine options, along with a plug-in hybrid electric vehicle (PHEV) version, while an all-new Avante (known as the Elantra) was unveiled recently (see South Korea: 9 September 2015: Hyundai union holds strike vote as rising labour costs raise concerns, new Elantra is unveiled). In addition, Hyundai is planning to begin sales of the refreshed Genesis and the Equus before the end of this year (see South Korea: 10 November 2015: Hyundai unveils premium-brand 'Genesis' G90 sedan to replace Equus). Meanwhile, Kia has refreshed some of its key models, including the Sportage R, K3, the latest K5 (known as the Optima globally, including a recent hybrid version), and the Morning (known as the Picanto globally), which were unveiled earlier this year. As well as these, Kia is receiving some support from new models such as the Sorento R, and the New Carnival, which were launched in 2014.

Looking ahead, growth in overseas sales is crucial as these make up nearly 80% of Hyundai-Kia's global sales volumes. According to IHS Automotive light-vehicle sales forecast data, Hyundai is expected to struggle in 2015 in most of its key markets, including Brazil, China, Russia, and South Korea. Some gains are predicted for Hyundai in a few markets such as the United States, India, and European markets such as Germany and United Kingdom, although they will be offset by overall sluggish demand in other global markets. By country, Hyundai is expected to enjoy a strong performance in the United States, thanks to the new Elantra, Santa Fe Sport, and Tucson, while sales in European markets such as Germany, United Kingdom, Turkey, and Italy will be helped by models such as the i20, the i10, and the new Tucson. Hyundai's Indian sales alone are predicted at 448,825 units, up 9.2% y/y, thanks to the Grand i10 and the Elite i20 models, while the newly launched Creta is expected to bring volumes of nearly 51,708 units in its first year of sales. Nevertheless, sales in the company's single largest market of China are forecast to fall by 13.1% y/y, while South Korean sales also slip 1.2% y/y.

Meanwhile, Kia is expected to enjoy a bumper performance in the United States, South Korea, and markets in the Middle East/Africa, although its sales are likely to come under pressure in its top-selling Chinese market and a few European markets such as Russia, which is unlikely to result in significant growth levels for the automaker overall. Kia's US sales are predicted to gain by 8.2% y/y this year, thanks to the Sorento, Forte, and Sportage, while South Korean sales are to be helped by the Sorento R, New Carnival, and Bongo. The top-10 best-selling nameplates for Hyundai and Kia are expected to be the Hyundai Sonata, the Hyundai Elantra, the Kia Sportage, the Kia Rio, the Hyundai iX35 (known as the Tucson globally), the Hyundai Elantra Langdong (known as the Avante globally), the Hyundai Accent, the Hyundai Verna, the Kia Sorento, and the Kia Soul.

Given that the group's combined YTD global sales total about 7.2 million units, the brands will struggle to achieve their combined global sales target of 8.2 million units in 2015. Sales in the domestic market are likely to remain strong, given that December will be the last month to enjoy reduced special consumption tax, so demand is likely to be pulled forward from the first quarter of 2016. But the brands will continue to face a fight to achieve a competitive position in overseas markets, where they have consciously moved upmarket into a more premium price position. Hyundai last month announced its plans to launch the Genesis standalone luxury brand for global markets, which is expected to have as many as six models under it by 2020 (see World: 4 November 2015: Hyundai reveals new "Genesis" standalone global luxury brand, confirms it is hiring former VW design chief). In addition, supply issues are a cloud on the horizon as the automakers engage in this year's annual wage negotiations with their labour unions, which have staged a series of partial strikes in recent months. Hyundai's union has elected a hardliner as its new chief and negotiations are expected to resume by the middle of this month (see South Korea: 30 November 2015: Hyundai union elects hardline leader). IHS Automotive maintains a more conservative forecast than the South Korean group, expecting the two brands to post combined global sales of 7.34 million units in 2015, short of their ambitious sales forecast of 8.2 million units. We expect Hyundai's total sales, including light, medium, and heavy commercial vehicle sales, to come in at 4,541,476 units, down 2.7% y/y, while Kia's total sales are predicted at 2,763,310 units, up just 0.2% y/y.