Hyundai-Kia posts 4.6% y/y decline in May sales due to pressure in overseas sales; YTD down 2.3%

South Korean automakers Hyundai and Kia recorded combined global vehicle sales of 642,069 units in May, according to separate data releases issued by the two companies, and compiled by IHS Automotive. This total compares with 673,157 units sold in May 2014, a decline of 4.6% year on year (y/y). Hyundai posted a larger drop of 6.4% y/y in its global vehicle sales last month to 389,299 units. Domestic sales declined 8.2% to 54,990 units, with passenger car sales slipping 16.4% y/y to 28,126 units, sport utility vehicle (SUV) sales up 9.5 y/y to 13,466 units (mainly on the back of the new Tucson SUV, which was launched in March), and commercial vehicle sales down 4.2% y/y to 13,398 units. Meanwhile, Hyundai's overseas sales fell by 6.1% y/y to 334,309 units in May as both exports as well as sales from overseas plants remained in negative territory. Exports were down 5.9% y/y to 93,277 units, while sales from overseas plants stood at 241,032 units, down 6.1% y/y. Hyundai's Chinese plants sold 80,000 units (down 12% y/y), while plants in the United States sold 26,100 (down 17% y/y), in Russia 17,700 (down 4% y/y), and in Brazil 13,609 (down 17% y/y). Meanwhile, sales from Hyundai's plants in India gained 2% y/y to 52,500 units, while plants in Czech Republic and Turkey contributed with volumes of 28,740 units (up 8% y/y), and 19,200 units (up 1% y/y), respectively. Hyundai's Chinese Commercial Vehicle subsidiary accounted for 2,700 units in May, up 8% y/y, while consignments as part of the vehicles produced by Turkish commercial vehicles manufacturer Karsan stood at 483 units.

Meanwhile, Kia posted a sales decline of 1.7% y/y with total volumes of 252,770 units, against 257,131 in May 2014. The automaker's sales slowed in most of its overseas markets, including the single top-selling Chinese market, where it registered sales of 50,675 units (down 7.4% y/y). Kia's European sales came in at 49,124 units (down 6% y/y), 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 – stood at 43,075 units, down 5.9% y/y. While Kia sold 69,886 units in North America, registering a sales growth of 2.6% y/y, the automaker continued to perform significantly better in South Korea with a sales gain of 10.4% y/y to 40,010 units during May. The top-selling cars for the brand last month were the Rio/K2 (39,365 units), the Cerato/Forte/K3 (33,513 units), the Sportage (33,205 units), the Optima (30,226 units), and the Soul (17,690 units). It should be noted that IHS Automotive's sales figures for Kia differ from the automaker's official data because of the inclusion of Saipa-brand data for the Iranian market.

Combining the monthly sales data of the two automakers, Hyundai-Kia's domestic sales declined 1.2% y/y to 95,000 units in May, clearly due to Hyundai's performance, while combined overseas sales reached 547,069 units, down 5.2% y/y.

During the year-to-date (YTD) period in May, Hyundai's overall sales totalled 2,009,409 units (down 3.6% y/y), with domestic sales sliding 4.6% y/y to 273,277 units and overseas sales also in negative territory with 1,736,132 units (down 3.4% y/y). Kia's sales in South Korea remain impressive with a growth rate of 7.8% y/y to 197,572 units, but sales in overseas markets are down 1.4% y/y to 998,501 units. Kia's overall global YTD sales remain flat at 1,196,073 units.

Outlook and implications

Hyundai is being hit by unexpectedly slow sales of its new models, including the Grandeur, the Sonata, and the all-new Aslan, which have failed to boost its volumes in its domestic and overseas markets. Hyundai and Kia are under pressure from the strengthening South Korean won, which continues to damage their export competitiveness. Hyundai has updated a series of popular models, including the Genesis, the Grandeur, the i30, and the i40, and has recently begun selling its latest-generation Tucson model in South Korea as well as other global markets (see South Korea: 17 March 2015: Hyundai begins sale of new Tucson SUV in South Korea). Hyundai is also planning to bring out the latest-generation Avante and a new SUV named Creta, aiming to take advantage of the current positive trends in the SUV segment, specifically in India and the US (see World: 2 June 2015: Hyundai names its upcoming subcompact SUV "Creta"), along with the Sonata plug-in hybrid vehicle before the end of this year. Kia has refreshed some of its key models, including the K3, and the latest K5 (known as the Optima globally) and the Morning (known as the Picanto globally), which were unveiled in early March (see Switzerland: 19 February 2015: Geneva Motor Show 2015: Kia concept to offer preview of next-generation Optima). As well as these, Kia is receiving support from new models such as the Sportage, the Sorento R, and the Carnival, which were launched in 2014.

Looking ahead, growth in overseas sales is crucial as they make up more than 80% of Hyundai-Kia's global sales volumes. According to IHS Automotive light-vehicle sales data, Hyundai is expected to witness a poor performance in most of its key markets, including China, US, and South Korea, where Hyundai is attempting to boost its market share. Some gains are predicted for Hyundai in a few markets in Europe, although these are expected to be offset by poor performances in markets such as Russia, which are expected to post significant double-digit declines.

The next few months will play a crucial role in Hyundai and Kia's sales plans for 2015. Both brands face a fight for a competitive position in global markets as the won currency has made their products more expensive. Both brands have consciously moved upmarket into a more premium price position in what is unfamiliar territory for them. In addition, supply issues are something of a cloud on the horizon as they engage in annual wage negotiations with their unions, with the stage already set to prove problematic (see South Korea: 14 May 2015: Hyundai union demands 7.8% wage increase, wants say in output planning). IHS Automotive maintains a more conservative forecast than the Korean group, expecting the two brands to fall short of their ambitious sales forecast of 8.2 million units for 2015.