Hello, this is Sangya Yoon, Head of Investor Relations at Kia. I'll begin with business results for the fourth quarter of fiscal year 2025. I'll commence with the sales summary, followed by the consolidated income statement, revenue and earnings analysis, the consolidated balance sheet, and finally, Kia's business plan for 2026. First, we will begin with the global retail sales performance. In Q4 2025, global industry demand declined by 1.6% year-on-year due to mounting pressure on consumer purchasing power in the U.S. market, following the expiration of IRA subsidies at the end of September, and rising vehicle prices and budget constraints on the trade in policy in certain local regions in China.
Kia's global retail sales witnessed a 1.6% growth year-over-year, led by higher sales centered around the Sportage HEV and Carnival HEV in the U.S., and increased sales led by the Sonet in India following the goods and services tax rate cuts, lifting our global market share by 0.1 percentage point to 3.3%. By market, domestic sales dropped by 5.9% year-over-year, reflecting deferred year-end demand due to the extension of the individual consumption tax cuts. In the U.S. market, in response to changing market conditions such as tariffs, the expiration of EV subsidies, and easing environmental regulations, we leveraged our flexible production system and focused sales efforts more on ICE and HEV models than on EVs. As a result, despite an overall decline in market demand, our sales increased by 1.7% year-over-year, resulting in our market share expanding to 5.3%.
In the Western European market, despite continued strong sales of the EV3, fourth quarter sales were somewhat subdued due to the impact of the discontinuation of the Ceed and the aging of the existing ICE lineup, including the Sportage. However, we expect sales to recover in 2026, driven by the full-scale contribution of newly launched models such as the EV4 and EV5, released in the fourth quarter. In the Indian market, the September 22 Goods and Services Tax rate cuts drove a sharp surge in A-segment SUV demand. Benefiting from these tax incentives, our Sonet and Carens lifted sales 41% year-on-year and took our market share to 5.7%.
Major emerging markets such as Central and South America and CIS markets reported sales growth driven by increased supply from expanded export volumes from Chinese plants by the start of mass production at the Kazakhstan plant in October and increased CKD volumes in Uzbekistan. Next is our electrified vehicle sales summary. In Q4 2025, electrified vehicle sales increased by 13.2% year-over-year to 186,000 units, driven by Kia's powertrain strategies aligned with shifting demand in each market, amid strong demand for HEVs in the U.S. market and EVs in Western Europe. As a result, the share of electrified vehicles in our global sales expanded by 2.4 percentage points from 21.5% in Q4 2024 to 23.9% in Q4 2025, and the sales mix for HEVs and EVs accounted for 15.6% and 7%, respectively.
HEV models continued to lead the growth of our electrified vehicle sales, driven by strong demand in the U.S., with global sales of the Sportage HEV and Carnival HEV increasing by approximately 16,000 units and 5,000 units respectively. Consequently, Kia's market share in the U.S. HEV segment nearly doubled, expanding from 4.2% on a full year basis in 2024 to 8.2% in the fourth quarter of 2025. In the EV segment, continued strong sales in Western Europe, together with the introduction of the EV4 and EV5 in the fourth quarter, contributed to a 0.3 percentage point increase in Kia's EV market share in Europe from 3.2% for full year 2024 to 3.5% as of Q4 2025. The following is the regional wholesales performance. In Q4 2025, Kia's wholesales decreased by 0.9% year-over-year to 763,000 units.
Looking at the key regions, North America saw a 2.5% growth year-over-year to 258,000 units owing to expanded shipments of the Carnival and Sportage HEV based on robust HEV-led demand and stronger SUV-focused wholesale volume. In Europe, despite continued strong sales of the EV3, sales volume declined by 10.2% year-over-year to 119,000 units due to the discontinuation of the Ceed, production adjustments for the new EV2 launch at our Slovakia plant, and heightened competition. In India, sales grew 40.9% year-over-year to 74,000 units, driven by the impact of the GST rate cuts and strong demand for the Sonet, which benefited from such. Finally, in the rest of the world, such as the CIS region, sales increased nearly 30% year-over-year owing to increased sales of the Sportage produced at the Kazakhstan plant and the Sonet produced at the Uzbekistan plant. Next is the consolidated income statement.
In Q4 2025, revenue rose 3.5% year-on-year to KRW 28.088 trillion as higher ASP resulting from continued price effect and favorable FX effect outweighed the decline in consolidated sales volume. Operating profit reported KRW 1.843 trillion, down 32.2% year-on-year, as the benefit from the retroactive application of the 15% Korea-U.S. tariff effective November 1 was offset by the temporary burden of a 25% tariff on U.S. inventory through October and November and higher incentives in overseas markets. Pretax profits stood at KRW 2.111 trillion and net profit at KRW 1.471 trillion, down 13.6% and 15.5% year-on-year respectively.
Next, operating profit analysis. Breaking down the evolution of operating profit by factor. First, some impact of U.S. tariffs continued into the fourth quarter, reducing profit by KRW 1.022 trillion. Increased spending for competition in the North American and European markets resulted in a KRW 342 billion year-over-year increase in consolidated incentive, reducing earnings. In addition, vehicle sales declined by more than 8,000 units year-over-year, resulting in a KRW 132 billion decrease in earnings. However, the PP mix turned positive in the fourth quarter after having been a negative factor until the third quarter, reflecting an improvement in our fundamentals. Even amid a challenging business environment, Kia improved profit by KRW 90 billion through a price effect driven by enhanced product value, and efforts to mitigate the impact of U.S. tariffs resulted in approximately KRW 108 billion in cost savings.
Lastly, the continued favorable impact of the Korean won USD exchange rate increased earnings by KRW 424 billion, and as a result, operating profit for the fourth quarter of 2025 amounted to KRW 1.843 trillion, down KRW 874 billion Y-o-Y. Next, revenue analysis. First, based on the regional sales share data on the left, consolidated revenue increased by 3.5% Y-o-Y. In North America, revenue increased on the back of higher wholesale volumes and higher ASP centered on HEVs, lifting its share by 1.3 percentage points from 43.3% in Q4 last year to 44.6% in Q4 2025. In terms of domestic sales, despite a 2.1% increase in ASP, revenue declined by nearly 6%, leading to a 1.2 percentage point decrease in its share Y-o-Y to 17.6%.
Despite a decline in sales compared to the fourth quarter of last year, Europe's revenue share remained at a similar level to the previous year, supported by a relatively higher share of EV sales and a favorable one euro exchange rate. India's revenue share expanded to approximately 5%, driven by sales growth of over 40%. Now moving on to the ASP improvements on the right. The global ASP for Q4 2025 increased by 4.7% Y-o-Y to KRW 39.1 million, driven by the expanded HEV, EV sales centered on advanced markets in the U.S. and Europe, along with positive exchange rate effects. Domestic ASP also increased by 2.1% YOY to KRW 35.1 million, continuing its growth trend. Next, cost of sales and SG&A.
Despite revenue expansion driven by favorable foreign exchange rates, rate effect, the cost of sales ratio for Q4 2025 rose 2.9 percentage point Y-o-Y to 81.7% due to the previously mentioned impact of U.S. tariffs amounting to KRW 1.022 trillion. Without the tariff impact, however, the Q4 cost of sales ratio is estimated to have slightly improved Y-o-Y to 78.1%. The SG&A ratio for Q4 rose 0.6 percentage point Y-o-Y to 11.8%, mainly driven by increased volatility in the Korean won US dollar exchange rate at quarter end and the reflection of quality costs, which led to a 0.8 percentage point Y-o-Y increase in the sales warranty expense ratio. Next, non-operating income. First, equity method results posted a loss of KRW 72 billion in the fourth quarter of 2025, following a loss in the same period last year.
However, results improved by KRW 79 billion Y-o-Y, driven by absence of one-off impairment losses recorded in the fourth quarter of last year, and improved performances at affiliates. Financial and other non-operating income improved by KRW 462 billion Y-o-Y to KRW 341 billion, reflecting FX gains driven by quarter-end exchange rate movement, as well as improved gains on disposals of tangible assets. As a result, net non-operating income/expense for Q4 2025 increased by KRW 541 billion Y-o-Y to KRW 268 billion. Next, the balance sheet. As of year-end 2025, total assets amounted to KRW 98.979 trillion, an increase of KRW 6.223 trillion compared to year-end 2024. The key drivers behind the asset expansion were increases in tangible and intangible assets, inventory assets, and equity method investments.
Total liabilities at year-end 2025 amounted to KRW 37.789 trillion, an increase of KRW 879 billion compared to the year-end of the previous year. Despite a reduction in borrowings of KRW 890.2 billion, total liabilities increased compared to year-end 2024, mainly due to increases in accounts payable and warranty provision. Total equity stood at KRW 61.19 trillion, an increase of KRW 5.35 trillion compared to the year-end of the previous year, and the debt ratio improved by 4.3 percentage point Y-o-Y to 61.8%. Lastly, our business plan for 2026. For 2026, Kia targets wholesale sales of 3.35 million units, representing an increase of 214,000 units Y-o-Y or 6.8% growth. Retail sales are also expected to grow 6.5% Y-o-Y in line with wholesale growth.
In the U.S., we plan to drive sales growth centered on SUV and HEV, supported by full model changes of our core models, the Telluride and Seltos ICE, along with the addition of new HEV variants for both models. In Europe, with the early year launch of the EV2, we will complete our mass EV full lineup spanning EV3, EV4, and EV5, and focus on a full recovery in sales, further strengthening our EV leadership. In India, we will continue to strengthen our market leadership by targeting premium SUV customers through the new Seltos. For 2026, Kia's sales revenue target is KRW 122.3 trillion, representing a 7.2% growth Y-o-Y. Operating profit is targeted at KRW 10.2 trillion, an increase of KRW 1.1 trillion Y-o-Y, with an operating profit margin of 8.3%.
In 2026, despite the application of a 15% U.S. tariff and an expected increase in incentives amid the intensifying competition, Kia will pursue robust top-line growth driven by ambitious volume growth targets and ASP improvements, supported by increased HEV and EV sales, while continuing to enhance profitability through multifaceted cost reduction efforts. More details on our 2026 business plan will be provided at the CEO Investor Day scheduled for early April. This concludes the earnings results for the fourth quarter of fiscal year 2025. Thank you.
Next, CFO, Senior Vice President Seung Jun Kim will deliver a review on Kia's earnings for the fourth quarter of 2025 and business outlook for 2026.
Hello, I am Seung Jun Kim from Kia. First of all, we'll talk about the fourth quarter and year, the performance, and also the business plan for 2026, and also the shareholder returns. We will divide those three buckets and explain each and every one of them. First, about the fourth quarter and 2025 performance. Here in Q3, as we have explained during the performance results, we have went on a bottoming out, but now we are on a recovery stage. However, as Head of IR, Young Lee has said, the tariff being affected in 15% was November 1, but due to the inventory in October and November, it was after December that the 15% was clearly shown.
In Q4, compared to what we had thought, the reason why we didn't go as much as we expected was because the Q4 sales, as we have explained, in domestic and Europe, compared to the year before, we were a little bit low. In domestic, due to the individual consumption tax rate extension, there was an impact and also there was an intensified competition of our competitors and the incentive strategy impacted in Kia also. For EV transition, we have a later full EV launch, and that impact did not show in the fourth quarter of 2025. That impact will show in 2026. That's why we have reflected it in our business plan for 2026. Our trough was in Q3 2025, but we have turned around in our recovery stage for Q4 2025. In 2026, we expect our earnings to normalize.
I don't know if normalize is the term to use, but from Q1 2026, we believe that we'll be able to show better performance regarding this. In relation to our business plan for 2026, we will explain. Our 2026 business plan, we do not think that the market conditions will be much different from 2025. However, Kia believes that there will be about 6.8% or up to 7% growth. We can divide it into Europe and the United States. In the United States, the first time in seven years, the Telluride model has been newly released, and we have competitiveness in that model. And also, there's the hybrid model that we have scheduled for release. Therefore, we believe that it will play a role as a cash cow.
From fourth quarter of 2025, Carnival hybrid is also increasing in our supply, and also it will impact in our sales globally in 2026. We had the Seltos that released recently, not only in the U.S., but for Seltos domestically and in India and all over the world, from profitability perspective, is a big contributor to Kia's growth. However, in Europe, in 2025, we were lacking in some extent, but in 2026, compared to 2025, we believe that we'll be able to achieve 10% growth. The reason is because we did launch the EVs in 2025, but they were usually at the end of the year. In 2026, we believe that we can sell in full. At the beginning of the year, we have EV2, which is a low-cost model that is deemed to be released.
Therefore, according to the EV transition period, we will be able to supply accordingly. Also for the Ceed, the ICE has been discontinued. As the K4 that was produced in Mexico was being sold in Europe, the ICE model and EV model balance was being met, and we believe that that will be able to drive growth. According to this, the electrified vehicle, EV new cars increasing will be able to impact our revenue growth in 2026. Also, the earnings compared to the year before, we'll be able to see a significant growth. It may seem aggressive growth or conservative growth, but we believe that in sales, we will be able to achieve profitability growth. As I said, the Telluride and the cash cow models have been released.
Backed by these models, we will continue on enhancing our profit, product value, and also our financial stability will also be increased. We will reduce our debt and also have our cash increase. That will be our 2026 business plan.
I want to move on to our shareholder return policy. From 2025, we mentioned that we would achieve TSR of 35% for three consecutive years. Last year there was the tariff impact partially, but our fundamental policy towards our shareholders and our promises to our shareholders should be met regardless of these external headwinds. Therefore, we are going to keep to our original promise that we've already made. Whatever the situation may be, in Kia we are going to show increasing sales, and we believe that that is right since our shareholders have shared our burden and supported us. Therefore, we will increase the dividend per share from KRW 6,500 to KRW 6,800, and therefore the TSR is going to be kept at 35%. Through our efforts, shareholders and investors may be able to see Kia as a credible company.
Once again, I'd like to stress that we are going to keep to our promise. If our cash increases, then we will make reinvestments internally, and we will also provide some of that free cash balance to our shareholders as well. We will make reasonable decisions. Thank you very much.
Next, we will begin the Q&A session. Please follow the instructions from the operator.
Now Q&A session will begin. Please press star one, that is star and one. If you have any questions. Questions will be taken according to the order you have pressed the number star one. For cancellation, please press star two, that is star and two on your phone. The first question will be provided by Yoon Young Lim from Samsung Securities. Please go ahead with your question.
Yes.
Hello, I am Yoon Young Lim from Samsung Securities. I have two questions. The first question is on the tariff. You have explained about the tariff, but in the morning there was the Hyundai Mobis earnings results that was announced to the public, and they have said that all of the tariff impact in the manufacturing parts have all been recovered. When you have announced your impact of the tariff, you included the numbers of giving back the cost of the parts included in your statistics and regarding the 3.75%, does it also include the duty drawback of the parts in the tariff? The second question is regarding the CapEx. Kia has announced about the investments in robotics and also physical AI. Although Kia's cash flow is very good at the moment, they cannot help but the investments with this.
This year, what are your plans for CapEx? Will there need to be additional financing for this?
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First, regarding the tariffs, I think that the cash basis and the accrual basis would be different. If we look at the tariffs that are impacting the OEMs and the parts, it can be divided into three parts. First is the OEM that pays for the tariffs when they export to the country. Second is for the parts tariff, and this could be divided into two parts as well, for the key parts as well as the general parts tariff. Regarding the MSRP, we have the 3.75% refund provision that we have, but that is already been burdened, and so it does not reflect additionally into our income statement. In regards to our parts and OEMs, so there will be impacts of only the general parts that have not been refunded yet.
The two that it will actually be burdened by the OEMs would be the OEMs exports to the United States and also the general parts that will also be burdened. Also, for the general parts, there are exports that we do directly ourselves, which we take the burden of, and also there's the exports that are done by the vendors. It has also been 100% reflected in our pricing, therefore, we do not believe that there will be any changes in the acknowledgment in our accounting, unless there's any changes to the tariff amount. If we consider the 2025 tariff total burden, it was KRW 2.9 trillion.
Also, if we consider in mind that the U.S. volumes will go up this year, we believe that there will be a full reflection of the tariff that has been burdened in May, which is about KRW 3.5 trillion. 80% of the tariff is burdened by OEMs, and 20% will be the general parts tariffs that will be refunded. Because it has been 100% being reflected, we do not think that there will be any confusion now going forward. Regarding the exports from Mexico and the tariffs from Mexico, we believe that we have to wait until Q1 in order to see how much refunds will need to be done. After the Q1 is over, we'll be able to know a little bit better.
Second question regarding CapEx, adjustments will be needed based on rolling basis in the mid to long-term calculation, based on the mid to long-term in 2025. In 2025, we have our calculations that has KRW 5.7 trillion. For 2026, KRW 5.5 trillion, and in 2027, KRW 5 trillion. Based on our top-line growth, we have our 2025 set as 5.1%, 2026 at 2.4%, and also 2027, 3.5%. Although our group has announced our plans to invest in autonomous vehicles and also AI, and additional investments may be needed.
However, even if they are reflected, we believe that we have the fundamentals very solid in place that we are able to take care of that CapEx increase. Regarding the cash flow as well, as our Senior Vice President has announced, we have increased our generational core, generational business capabilities, therefore, we believe that we will be able to go to the extent that we can take care of the increase in the CapEx.
Next question, please.
The following question will be presented by Yong-Kwon Moon from Shinyoung Securities. Please go ahead with your question.
Hello. I am Moon Yong-kwon from Shinyoung Securities. Thank you for giving me the opportunity to ask this question. I'd like to first of all ask about the 2026 sales target. It seems like there's a launch of EV and Seltos, and in regions like Europe, you're targeting for 11%. In APAC, you're targeting for 13% sales growth, and that is seemingly above the industry average. You're targeting to go above the industry. However, when we look at these regions, there has been very aggressive entrance of the Chinese OEMs recently. In the fourth quarter, I'd also like to ask about how much the incentives have played a factor, because other than the U.S., it's very difficult to track the incentive status going on.
I'd like to ask how the fourth quarter incentive has differentiated from the year before on the Y-o-Y basis, other than the U.S. I have two questions regarding the 2026 sales target as well as the incentives, and also how much the incentives will be impacting the sales target of 2026.
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Thank you very much. Regarding the question on the Chinese OEMs. Yes, you have seen correctly. The competition is intensifying from Chinese OEMs. The price difference between us and Chinese OEMs is quite large. However, we are not thinking of offsetting all of their impact through giving more incentives and through price transfers. Compared to 2024 and 2025, to put it roughly, per unit, the incentive increased by 10%, which was around KRW 200. In 2026, when we set the business plan, we also set it at a similar rate. The incentive increased at a similar rate to last year. In Europe, you also have to think about the fact that there's not only Chinese OEMs in the competition. There is the European OEMs that are very aggressive in their sales promotion.
Therefore, we need to deal with the European OEMs as well in that market, and to increase our sales, yes, we have to increase our incentive ratio. However, when thinking about the direct impact that incentives have had on the actual sales unit, it's very difficult to say, especially when we think about countries like the U.S. and the regions like Europe and India. Especially for India, there's not been that big of a change in incentives, and we've tried to rather take the new model launch effect with the Seltos, and we have targeted aggressive sales volume increase based on that rather than incentives. In Europe, yes, incentives have played a big part in the volume increase around more than 10%.
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You've asked regarding the different situations of different regions when we look at the 2026 BP. Now, I want to mention that the market environment is very different region by region. If you look at the very big numbers, then yes, we will see that the numbers volume will actually increase from 3.14-3.15 million. However, we have to see that the characteristics are different by emerging market and advanced markets. The share would be emerging markets half and advanced markets half. The situation is especially very different from Europe and the U.S. When we first look at the U.S., the EV subsidy has ended and their regulatory framework has also changed very much. Therefore, we will be focusing on increasing the sales of ICE and HEVs more and decreasing the sales of and the ratio of EVs.
When we look at the very big picture in terms of our product, we will be focusing on increasing the Telluride from 120,000- 180,000, which is around 50% growth. We will have a new lineup of the Seltos. We will be targeting for a Y-o-Y 90% increase when it comes to HEVs in the U.S. There will be an increase of 120,000 going to 250,000. That is the business plan. Basically in the U.S., in a nutshell, we will be focusing on our new car as well as the transition to hybrid-centered sales. Now in the EU, of course, EVs are going to take center front and center. In the fourth quarter, we have for the very first time set the milestone of EV sales outpacing that of gasoline vehicle sales. We believe that this trend will continue on forward.
In the EU, the success of EV lies in how we can really take the lost volume of ICE and we transition that to the EV portfolio. That will be the most important factor for us to gain the upper hand. In 2024, we did post a negative number. However, that was because we were not able to transition the demand from ICE to EVs fully. Now that we have the full lineup of EV2 to EV5, and we also have the PV5 as well as Seltos, we believe that in Europe we do have the strength to now transition away from ICE and take all of that demand into EVs. For Europe, the plan is 11%. The thing is, the numbers may be similar, but the market characteristics is very different when we look at the U.S. and Europe.
In Europe, we are targeting for 80% growth rate in terms of EVs. Now, in emerging markets, the competition is very high from Chinese OEMs. In A/B segment we have the Sonet and the Seltos, and these are very strong SUV segments that we can lead with. Also when it comes to the pricing, we are going to try to expand the production in the Chinese plant to reduce the cost of sales. Also we will be making use of the regional hubs in Asia-Pacific, like Malaysia, and also increasing the ratio of CKDs. Therefore, we will be using our product lineup as well as the regional hubs to target that area and to reduce cost of sales specifically. We're especially thinking of going more aggressive in Asia-Pacific in terms of our expansion.
In CIS, we also have the production base of Kazakhstan and Uzbekistan. Therefore, when we look at the numbers in the U.S., it's 4%-5%. EU, it's more than 10%. For other emerging markets, we believe that we will be able to achieve a high single-digit growth rate.
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The following question will be presented by Kim Jun-sung from Meritz Securities. Please go ahead with your question.
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Hello, I am Kim Jun-sung from Meritz Securities. I have two questions. The first question is regarding the earnings from the United States region. The United States region earnings has a big impact on our performance. This year you probably have scheduled increase for sales. I would like to know the details about the pricing and the incentives and the tariff impact on the earnings and compared to the year before, YOY, how will it be? If we look at the tariffs itself for 8 months, there was the implementation of the 25% tariffs, and for 12 months there will probably the impact of 15% tariffs. What will the cost of tariffs go down or be maintained or go up YOY? The second question is regarding the robotics and the autonomous vehicle related features that HMC Group has announced recently.
There's a lot of people that are expecting a lot with regard to the autonomous vehicle technology and robotics in the Hyundai Motor Group. There will also be the demos and Atlas and a lot of test cars that will be in place and a lot of events. Are there any events that you can explain at the moment to the public? What is the difference between Hyundai Motor Group and Kia's perspective on these features and robotics? Although this is the earnings results announcement call, regarding the CES recently, there was events that happened, and we would like to know if there's any other events that will be happening soon.
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Regarding the earnings in the United States region in Kia, the NA region holds a big part in our earnings. In 2025 as well, but in 2026 we expect the same to be true. The basis for this is because of the sales volume increase. Also we have our Telluride, which is a high profit model that will be released in the United States, which we have the volume set as reaching from 120,000 to increase to 180,000. It's not regarding just the NA region, but Kia in our good times had reflected the increase in the costs of sales reflected in the pricing. With the intensified competition with other OEMs, like Chinese OEMs, we cannot reflect all of our costs into our pricing. Therefore, we are putting in a lot of efforts to secure our cost competitiveness.
I have emphasized this several times, but Kia has put in a lot of efforts with a desperate heart in order to reduce our fixed costs as well as reduce our cost in general. It's not just the NA region, but Kia as a total, in order to secure our profitability and maintain our profitability, have done our best in order to reduce our cost and fixed costs. We believe that the earnings in NA region will be maintained.
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At the CES, we take turns doing the announcement, and it was HMC's announcement this time. In the group perspective, autonomous vehicle technology and robotics is a strategic asset and a future industry, and it is a common investment that we are putting in together, as well as a common development and a common project that we are engaging in together. Through the Robotics LAB and diverse arenas, it's like the E-GMP is our common asset. We have the autonomous vehicle technology as well as robotics as our common asset as well. Regarding the CES, we have been able to show our big picture in our robotics, and at the end of the year, we have the demonstration in place. We are going towards the mass production POCs and also the industry mass production as well.
Rather than showing this and our plans on a one-off event basis, I think that there will be a better place for us to show you the progress on the roadmap through a structured manner. If we have plans in order to have this event in place, after our preparation, we will be able to let you know. Also, it's the same for autonomous vehicle technology. Our big plan is to have the SDV launch in 2027, and also have the L2++ stage of autonomous vehicle technology as an initial launch, and also have our L4 autonomous vehicle technology developed with Motional. This year we have our launching as well. Therefore, after our preparation is over, I think that we are going to go to the stage of mass production development and our leadership is looking into ways to accelerate this.
We have assignment in place for this as well. We will be able to have a structured event where we can regularly tell our audiences about our plans and our big picture.
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The following question will be presented by Kim Gwi-yeon from Daishin Securities. Please go ahead with your question.
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Hello, I am Kim Gwi-yeon from Daishin Securities. Thank you very much for this opportunity to ask the question. I have two questions for you. The first is regarding the recent DRAM price increases. I'm talking about semiconductors. Is this going to impact our cost of sales? It seems like there's a lot of talk about this overseas. So I'm wondering if there has been any long-term contracts in place regarding the DRAMs and how the volume is going to be planned for the future. Second is regarding the conversion cost. In the fourth quarter, it seems to go up. Is there a special reason for this?
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Regarding the very first question, the semiconductors that go into automobiles are different from DRAM, so we are not impacted right now. It's difficult to say if we'll be impacted if our cost of sales will be impacted going forward. However, what's more important for us is basically the price of platinum and rhodium, as well as palladium that goes up. That is what impacts us even more. We have experienced a semiconductor shortage in the past, and that was a very difficult time for us. Of course, we do have long-term contracts in place to prepare ourselves. That is not a big risk that we think. Regarding the increase in warranty provision, there were a lot of new model launches in 2025, and therefore, when there's a new model launch in the beginning, we need a bigger provision.
also we saw increased sales in EVs, and EVs do need more warranty provision than ICE. that is why there was a Y-o-Y increase. when we look at the comparison with the third quarter, you can see that the ratio has actually gone down. I want to say that this difference in ratio is because of the new model launches as well as just organic differences in the cycle.
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Also, I would like to add on about the question regarding semiconductors. When we actually sign the contract regarding semiconductor procurement, we actually do individual contracts for different models. It is not like for semiconductors, we have a yearly procurement repricing contract altogether. Therefore, of course, these factors are forecasted, and that is included in our contracts.
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Next question, please.
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The following question will be presented by Shin Yoon-chul from Kiwoom Securities. Please go ahead with your question.
[Non-English content] 19.6 [Non-English content] 20[Non-English content] CapEx [Non-English content] M&A [Non-English content] TSR [Non-English content] Automotive FCF [Non-English content] 100[Non-English content] TSR [Non-English content] General Motors[Non-English content] TSR 35% [Non-English content] .
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Hello, I am Shin Yoon-chul from Kiwoom Securities. Thank you for the opportunity to ask a question. I have a question on the net cash. About KRW 19.6 trillion has been announced, but you have also announced that in 2026 with the cash generation capabilities that you have from Kia side, you'll be able to have more cash accumulated. I believe that there's already enough that is accumulated from Kia side, and I have more questions about how it will be used effectively. If we compare it with HMC as well, it looks like you have a lot of net cash on Kia side, therefore will there be any other plans for the usage of the net cash? For example, like the increase in TSR.
If we look at the earnings results, that call that was done by Kia recently, they announced that out of the KRW 10 billion, about $6 billion will be done as a share buyback, which is over 50% of the TSR. Therefore, if we look at the EV transition that GM is going towards, there will be a lot of costs that will be incurred from GM side. Even with that in mind, they are increasing their shareholder returns. Therefore, if we look at Kia, the TSR being 35%, I believe is a little bit lower compared to the net cash that Kia has. Although you have talked about the common investment that will be done on autonomous vehicles and robotics, I still think that TSR could be done on individual level, separate from the other groups in HMG.
Therefore, are there any other plans to use your net cash?
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I believe that the answer is in the question itself. To summarize the comments, I think that although the net cash that we hold on Kia is KRW 20 trillion, the reason why it has gone up is that it has been to this level in the recent five to six years. Compared to the scale of our company, the KRW 20 trillion net cash that we have isn't that excessive if we compare the net cash to our peer groups, as you're well aware. The reason why I said that the answer is in the question is because of the rule of the increase in the TSR. Of course, we are reviewing this, but within the situation that there may be another variables that may be in place or unexpected situations that may arise, we are holding the net cash in Kia currently.
As I said before, if the performance and our earnings go up, then our cash goes up accordingly as well. We cannot help but think about the increase in our TSR.
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This concludes the fiscal year 2025 fourth quarter earnings results by Kia. If you have any further questions, please contact the Kia IR team directly. Thank you for your time and participation.