Hyundai and Kia Predict Slow Recovery for Sales During 2018

On Tuesday, Hyundai Motor and Kia Motors in South Korea predicted a sales growth of 4% for 2018, suggesting that the slump tied to the company’s lack of offering SUVS in the U.S. plus diplomatic problems with China would be slow in recovering.

Hyundai as well as its smaller affiliate Kia have said that demand was predicted to soften across the China and U.S. markets as they announced a combined target for sales of 7.55 million vehicles during 2018 compared to its prediction of 7.25 million in 2017.

In a prepared statement, Hyundai said that the market environment in 2018 should be difficult because of major markets such as China and the U.S. slowing down, prolonged sluggish growth across the global economy and trade protectionism in the major countries.

Sales were down 7% in 2017 compared to 2016, coming up far short of the target set by the company of more than 8.25 million vehicles which marked the third straight annual shortfall in projections, as buyers in the U.S. and China are shunning sedans more and more and buying SUVs.

A diplomatic dispute between South Korea and China over the deployment by Seoul of a missile defense system of the U.S. hit sales for the carmakers in the largest auto market in the world, although both countries agreed recently to normalize ties.

The target this year for the two South Korea carmakers is lower than was expected. It appears to be conservative reflecting the slow recovery for China and the ongoing difficulties in the U.S., said an analyst with a Korea based Securities firm.

Hyundai shares were down 4.2% Tuesday while Kia Motors ended lower by 2.1%. The broader market increased by 0.5%.

The negative outlook came as the won in Korea strengthened to a high of three years against the U.S. dollar Tuesday, threatening the competitiveness of exporters in South Korea as their rivals in Japan benefit from the yen weakening.

The tax cut expiration for small engine vehicles in China would also negatively hit Hyundai’s lineup of sedan heavy vehicles, they said.

While Hyundai is planning to offer additional SUVS in China and the U.S. in 2018, analysts believe the new models might arrive too late in the year to impact sales significantly.

South Korea and the U.S. will have talks on a trade deal January 5 although the pact has been threatened to be withdrawn by President Donald Trump.

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