Ladies and gentlemen, thank you for attending this conference call. We will now begin Hyundai Motor Company's Business Results Conference call for the fourth quarter of 2024. Once again, the presentation materials can be downloaded from the Financial Supervisory Service's Electronic Disclosure System at darts.fss.or.kr or from our IR website, www.hyundai.com. Joining us at this conference call are Executive Vice President Seung Jo Lee, Head of Planning and Finance Division, Executive Vice President Tae-hong Gu, the Head of IR Division, Vice President Tae-hwan Kim of Finance and Accounting Subdivision, Michael Yoon, the Head of IR Group, and Senior Vice President Heung-seok Lee, the Head of Planning and Finance Division at Hyundai Capital. We will first have Hyundai Motor Company's presentation on the business results, followed by a Q&A session with the attending investors.
Those who have questions are advised to press the star button, followed by number one after the presentation. Now, we will proceed with the presentation by Michael Yoon, the Head of IR Group at Hyundai Motor Company.
Hello, this is Michael Yoon, Head of IR Group. Welcome everyone to Hyundai Motor Company's 2024 Q4 Business Results Conference Call. On behalf of Hyundai Motor Company, I appreciate your time for participating in today's call. Please refer to the presentation HMC 2024 Q4 Business Results on our IR website. Today's presentation consists of two parts: Sales Summary and Financial Summary. For more information, please refer to the appendix page. First part is Sales Summary. Our 2024 Q4 Global Wholesale decreased by 2.2% year-on-year to 1,066,239 units, while retail sales decreased by 0.8% year-over-year to 1,075,434 units. In the fourth quarter, our global wholesale decreased slightly compared to previous years.
However, excluding China, our Q4 wholesale increased by 2% year-over-year. In the domestic market, sales decreased by 4.6% year-over-year due to softening demand from macro factors and seasonal cyclicality. North America saw a 4.4% increase in sales, driven by continued strong sales of high-margin vehicles. The U.S. market witnessed increased sales of hybrids and Genesis, with growth rates recording 60.6% and 9.1% year-on-year, respectively, compared to the previous year, boosted by increase in demand of overall hybrid models, including Tucson, Santa Fe, Avante, and Sonata. In Europe, although hybrid sales increased by 31.3% compared to last year, driven by strong sales of Santa Fe, Kona, and Tucson facelift hybrids, wholesale sales decreased by 3.8% compared to the previous year due to weaker demand for EVs. India wholesale witnessed a 0.7% decrease year-on-year, but the retail sales increased 2.5% due to a shift towards the retail-oriented sales strategy.
The annual wholesale decreased 1.8% year-on-year to 4,141,969 units, while retail sales decreased by 2.7% to 4,044,513 units. Next is sales by model and key status. Global SUV sales, including Genesis, accounted for 59.8%, a 1.0 percentage point increase compared to the previous year, influenced by the global expansion of Santa Fe and the sales ramp-up of Creta facelift in emerging markets. Proportion of Genesis recorded 5.5%, which increased by 0.5%, driven by strong sales of GV70. Eco-friendly vehicle sales increased by 21% due to strong sales of HEVs. EV sales were similar to that of the previous year, with some recovery in demand due to the strengthening of the EV lineup, including the launch of Casper EV. Due to EV chasm, HEV sales surged by 41.3% compared to the previous year, replacing EV demand.
The HEV proportion continues to expand as hybrid sales increase significantly in strategic markets such as North America. Next is annual sales summary. The SUV proportion, including Genesis, recorded 59.7%, which is a 2.6% increase from the previous year-end. Genesis proportion increased 0.3 percentage points to 5.6%. Despite softening of global EV demand, the sales of eco-friendly vehicles increased by 8.9% to 757,000 units, thanks to the surge of hybrid sales. This is the end of the presentation on sales summary, and now I'll move on to financial summary. This is a summary of our income statement. Consolidated revenue increased by 11.9% year-over-year to 46.6 trillion KRW, and operating income decreased by 17.2% year-over-year to 2.8 trillion KRW. The automotive division's revenue increased by 6.8% year-over-year due to an increase in regional and product mix improvement from high-margin vehicles. The operating profit decreased by 33.7% year-over-year.
Revenue from finance division increased by 44.6% year-over-year due to strong sales of vehicles in the U.S. and growth in penetration rate. Operating profit increased by 79.1%. Net income increased by 12.3% year-over-year to KRW 2.5 trillion. Next is a summary of our annual income statement. Annual consolidated revenue increased by 7.7% year-over-year to KRW 175.2 trillion, and operating income decreased by 5.9% year-over-year to KRW 14.2 trillion, with OP margin of 8.1%. Net income increased by 7.8% year-over-year to KRW 13.2 trillion. Next is quarterly revenue and operating income analysis. For revenue, volume effect from global sales increasing, excluding China, had an impact of KRW 164 billion. Despite incentive increase, strong sales in North America and the increase in ASP had a positive impact on mix effect of KRW 1,702 billion.
In addition, favorable exchange rate conditions resulted in FX effect to results in KRW 454 billion. Lastly, with revenue increase from finance business, the total revenue increased by 11.9% year-over-year. Regarding operating profit, depreciation of Korean won at quarter-end impacted the warranty provisions to be reevaluated at a higher FX rate, resulting in a negative FX effect of KRW 320 billion. Rising incentives level led to the net mix effect to result in negative KRW 425 billion. Due to increase in SG&A expenses, including the labor and R&D costs, the operating profit decreased by 17.2% year-over-year. Next is the annual revenue and operating income analysis. Global sales, excluding China, expanded compared to the previous year, leading to volume effect of KRW 396 billion.
Despite increase in the incentive spending, the mix improvement outweighed the increase in incentives and resulted in mix improvement effect of KRW 5,188 billion. The annual average one-dollar exchange rate rose compared to the previous year, contributing to the increase in revenue. Total revenue increased by 7.7% year-over-year. Operating profit was affected by volume effect of KRW 86 billion and the net mix effect of KRW 157 billion. Total operating profit decreased by 5.9% year-over-year due to the increase in SG&A expenses such as labor and warranty-related expenses. Our fourth quarter cost of goods sold ratio recorded a 0.5 percentage point increase year-on-year to 8.5%. SG&A increased by 26.7% to KRW 6.3 trillion due to an increase in labor costs. Lastly, net profit increased by 12.3% year-on-year to KRW 2.5 trillion. Our annual COGS ratio recorded a 0.2% percentage point increase year-on-year to 79.6%.
SG&A increased by 17.2% due to an increase in labor and warranty expenses and recorded KRW 21.5 trillion. Lastly, net profit increased by 7.8% year-on-year to KRW 13.2 trillion.
That concludes the end of the presentation of the fourth quarter 2024 business results. Next, Executive Vice President Seung Jo Lee, Head of Planning and Finance Division, will assess the company's business results and share information about the different payouts for Q4.
Hello, I am Vice President Seung Jo Lee, Head of Planning and Finance Division. Allow me to share our business results for the fourth quarter of 2024 and the year-end dividends. In Q4, driven by increased won-dollar exchange rate by 76 KRW year-on-year to 1,397 KRW, expanded sales in North America, and strong HEV and Genesis sales, we have continuously improved our sales mix.
Nevertheless, a high quarter-end exchange rate of KRW 1,470 of KRW 73 from the quarterly average caused a negative impact worth around KRW 700 billion that came from contribution to provision for sales warranty. As we ramp up incentives to U.S. and Europe markets, the negative incentive effect has expanded, resulting in an operating profit of KRW 2.8222 trillion, down KRW 585.6 billion year-on-year, and operating profit ratio of 6.1%. Next, I will talk about the 2024 annual performance and our compliance with the guidance. In 2024, we achieved the record high sales amounting to KRW 175.2 trillion of 7.7% year-on-year and KRW 14.2 trillion of operating profit and 8.1% of operating profit ratio. For the sales revenue, we overexceeded our sales growth guidance of 4%-5% and complied with the OPM guidance of 8%-9%.
We will continuously strive to meet the level of market trust by presenting and achieving detailed and sophisticated guidance. Next, let me address the exchange rate effect of sales warranty provision, which had the greatest impact on this quarter's operating profits. In the case of sales warranty provision, the amount in foreign currency is evaluated based on the exchange rate at the end of the quarter, and the differences in exchange rates are seen as provision corresponding to the operating profit. For this reason, despite high market expectations based on the high quarterly average exchange rate, the overall exchange rate impact caused a negative KRW 320 billion year-on-year. The sales warranty provision incurred this quarter is expected to normalize once the one-dollar exchange rate stabilizes in the near future. Let me move on to the incentive effect. We estimate that the average incentive in the U.S.
automotive market has increased by roughly $1,300 per unit year-on-year. Although we provide less incentives than the industry average, the figure increased by about $500 per unit year-on-year. Incentives increased in the European market as well due to worsening macroeconomics, which has further aggravated the negative incentive effect. In 2024, we paid out a quarterly dividend of 2,000 KRW every quarter, and based on our dividend payout policy with a ratio of at least 25%, the final dividend will be 6,000 KRW. The annual dividend per share, including quarterly dividends, is 12,000 KRW based on common stock, which is the largest ever, and the record date is February 28th, 2025. In addition, since November 28th, 2024, we have been continuously purchasing treasury stocks worth 1 trillion KRW, including common and preferred stocks.
We will make sure to implement the shareholder return policy promised to shareholders and investors, including the Value-up Program mentioned at the CEO Investor Day held in August 2024. Lastly, I will talk about the 2025 business environment and how HMC will respond to and manage risks. As the market is concerned, 2025 will be a year when internal and external risks and uncertainties have grown more than ever, including policy risks from the launch of the new U.S. administration, as well as enhanced European fuel regulations. In response, along with top executives including President José Muñoz, we will respond quickly and flexibly at the group level to respond to changes in the market and future risks based on close monitoring and analysis.
Even in the recent COVID-19 pandemic and the shortage of vehicle semiconductors, we managed to turn the crisis into an opportunity by responding quickly and flexibly to the market based on strong fundamentals. We will thoroughly prepare and strive to reverse the crisis of 2025 into an opportunity. We appreciate the unwavering support of our shareholders and investors. Thank you for listening.
Next, Senior Vice President Heung-Seok Lee, Head of Planning and Finance Division of Hyundai Capital, will assess the Q4 results for the finance business and 2025 business prospects.
Hello, I'm SVP Heung-seok Lee, CFO of Hyundai Capital. I'd like to begin with the Q4 2024 earnings results and 2025 outlook for the finance business. 2024 was a year with multiple market uncertainties from geopolitical risks, interest rate fluctuations, to political issues.
Although there were negative outlooks and concerns regarding the capital market, Hyundai Capital demonstrated improved funding competitiveness compared to the upward adjustment of global credit ratings. As a result, Hyundai Capital intensified its focus on its role as a financial partner for the group's vehicle sales. By maintaining stable profitability and asset quality through a strong automotive finance centered portfolio, we achieved favorable performance. In 2025, we plan to enhance our positioning as a leader in the global financial market by expanding Hyundai Australia business, increasing HMG's global finance coverage, such as launching the Indonesia subsidiary diversifying business through new mobility financial collaboration, and securing the basis for mid to long-term growth through innovative product development, including battery lease and care service, etc. Next, I would like to share the details for each company. First is Hyundai Capital.
Hyundai Capital has seen an 11% increase in lease transaction volume compared to the previous year through the launch of EV-focused financial products in collaboration with HMG. With the expansion of Hyundai Capital's lease-centric captive asset size, the proportion of automotive finance remains at 83%. Due to the increase in lease assets, lease revenue is expected to rise by 13% in 2024 compared to the previous year. Additionally, enhanced competitiveness of installment products and improved profitability have led to an 18% increase in interest income from installment sales, resulting in a 9% growth in operating revenue for 2024. Although interest expenses have risen due to high interest rates, we minimize the impact of these cost increases through excellent funding competitiveness and a diversified borrowing portfolio.
By maintaining a delinquency rate in the 0% range throughout the year and stabilizing loss provisions, operating profit for 2024 is projected to increase by 29%, with pre-tax profit rising by 27%. In 2025, unstable market conditions are expected to persist due to fluctuations in exchange rates and interest rates. We will maintain a lower delinquency rate compared to our competitors through stable asset portfolio management and preemptive risk management, thoroughly preparing for domestic and international uncertainties. Also, we plan to continue creating more synergy through enhanced collaboration with Hyundai Motor Group, such as releasing various eco-friendly vehicle financial services in line with Hyundai Motor Group's electrification strategy. Next is Hyundai Capital America HCA. With the increase in vehicle sales for the group, including the expansion of hybrid sales, the U.S. market recorded a 7 percentage point increase in acquisition rate, reaching 67%.
This led to a significant rise in all products, with the total asset size projected to exceed $70 billion by the end of 2024, representing a 21% expansion. With structural growth, the operating revenue for 2024 increased by 24% compared to the previous year, driven by rising returns on installment and lease products. Although interest expenses rose due to high interest rates and increased borrowing, operating profit grew by 23% year-over-year, benefiting from efforts to improve OpEx efficiency. In terms of soundness, the delinquency rate remains at a lower level before the pandemic, and the proportion of high-quality customers is managed at a robust 88%, preparing for market uncertainties. For 2025, the economic impact of new government policies and interest rate volatility are expected to be the most significant variables affecting profit and loss.
HCA has proactively secured liquidity by successfully issuing $2 billion in bonds in January and plans to continue stable vehicle sales financing through flexible funding activities. Through these efforts, we aim to defend profitability alongside steady asset growth in 2025 with thorough risk management. This is the end of my presentation on the finance business. Thank you for your attention.
Next, Executive Vice President Tae-hong Gu, the Head of IR Division, will present the 2025 annual guidance.
Good afternoon. I am Executive Vice President Tae-hong Gu, Head of IR Division. HMC has been releasing annual guidance on vehicles from 2021 to help shareholders and investors understand HMC's business. And from 2022, we have been publishing annual guidance with extended application of consolidation basis.
Also, our purpose is to boost visibility and trust of shareholders and investors in Hyundai Motor Company's performance by reflecting various internal and external business environment changes in our year-long guidance updates. Just like Executive Vice President Lee has said, in 2024, we achieved our guidance sales growth and operating profit mentioned at the beginning of the year. Let me walk you through our 2025 annual guidance. First is wholesale-based sales plan. HMC's 2025 sales target, considering the industrial demand of each RHQ and segment, is 4.17 million units, up 32,000 units from the previous year. Please refer to page 2 for the sales target of each region. Consolidated basis revenue of 2025 is expected to see a 3%-4% increase given the continued ASP increase, including sales volume growth in North America and boosted sales of Genesis and eco-friendly cars.
Consolidated basis operating profit target for this year is 7%-8%, given Hyundai Motor Company's competitiveness and cost innovation based on enhanced fundamentals achieved by strong performance in the North America market and increased hybrid and Genesis sales despite the decline in global demand. Bigger macro uncertainties and incentives increase due to tougher CBU competition. We plan to invest KRW 16.9 trillion, a 16.3% increase compared to 2024. KRW 6.7 trillion will go to R&D investment of 37.2% compared to 2024, as we will see more vehicle development projects in line with Genesis and eco-friendly vehicle lineup enhancement, including Genesis hybrids and bigger technology investments mandated by the SDV transition. Our CapEx investment is planned to be KRW 8.6 trillion, and our strategic investment will stand at KRW 1.6 trillion.
We expect free cash flow to be between KRW 0.5 trillion to KRW 2 trillion, given Hyundai Motor Company's profitability and continued investment expansion in 2025. Next, let me explain our shareholder return policy. In accordance with the Value-up Program announced on August 28, 2024, we intend to implement a shareholder return policy of 35% or more of the total shareholder return. Also, our Value-up Program will take effect as planned, with a dividend of KRW 10,000 minimum for common shares and KRW 2,500 for quarterly dividends. Additionally, we will state the objective when conducting share buybacks, set the total amount of share buybacks to KRW 4 trillion from 2025 to 2027, and implement share buybacks considering the preferred share discount.
Though Hyundai Motor Company is set to face unprecedented levels of internal and external uncertainties in 2025, we will strive to achieve the 2025 annual guidance through business management that prioritizes continued profit creation and shareholder value based on product competitiveness and stronger fundamentals. Please refer to the 2025 guidance material posted on our website. This concludes my presentation on 2025 annual guidance. Thank you.
With that, we will conclude the presentation and take your questions.[Foreign language] 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 translation , please press star two, that is star and two, on your phone. [Foreign language]
The first question will be presented by Paul Hwang from Citi Group. Please go ahead with your question.
[Foreign language]
Hello, I'm Paul Kim from Citib ank. I have three questions. The first question is regarding the guidance. The guidance is related to OPM, foreign exchange rate, mix and volume, and finance and others.
So I'm wondering whether the 2025 guidance, which kind of direction that you have for the 2025 guidance, and what kind of assumptions you have for that. And my second question is related to foreign exchange rate assumption. I do wonder what kind of assumption you have related to the volatile foreign exchange rate. And also, I do have a question about the mix improvement and when the foreign mix sale product mix and ASP is expected to increase. So I wonder what kind of opinions you have about the mix improvement as well as ASP increase depending on the region. And I do have another question regarding your buyback plan. So you did say in your presentation that you will have separate plans for the common stocks as well as preferential stocks. So how will these plans be assessed going forward?
My last question is regarding collaboration with GM. So I'm curious about the details of the timeline as well as whether the collaboration plan with GM can be announced within this year. (Foreign Language)
(Foreign Language)
(Foreighn Language)
(Foreign Language) Okay, so the first answer regarding your question about 2025 guidance.
So the volume, we expect the volume to increase by 4.17 million compared to this year, and the market share increase of about 0.1%. And as for the global industry demand, it will be slightly increased, but not that much. So we believe that the global industry demand will largely be stagnant in 2025. And you also mentioned about the volume, the proportion of EV and hybrid will be for the EV compared to this year. The volume will increase from 218K to 336K, which is 53.7% increase. And for the HEV, the proportion will increase from 497K to 647K, which is about 30.2% increase. So that is our business plan. And regarding your question about the prospects of automotive and financial and other fields, we believe that the financial sector will be largely the same as this year.
However, the other areas will be slightly more profitable compared to this year. You also questioned about the FX assumption, and we actually established our business plan in November last year. At that time, the foreign exchange rate was very volatile. At that time, we set the exchange rate at around 1,301 per dollar. Although the specific numbers cannot be disclosed, we believe that at that time, the target was about the median of 1,300-1,301. You also had a question about the buyback, treasury stock buyback, about the proportion of common stock and preferred stock. In August last year, we said that we will differentiate the proportion of common stock and preferred stock, but that has not been reflected in this year's business plan. Going forward, we will maintain the differential rates to the similar level of other companies.
If the common, the preferred stock volume will decrease, then in order to defend that, we will increase the purchase of preferred stock. Your last question was about the collaboration with GM. The specific details are again difficult to disclose, but by each item, we are trying to sign a binding contract. Both GM and HMC are working together to proceed with joint purchase of some parts within this year, and the exact plan will soon be announced. We are also trying to make a joint purchase in North America and Latin America region. For the commercial vehicle, we are trying to make use of EV commercial vehicles, and we are trying to send those vehicles to GM to be used as a rebadging.
And we are also looking for another opportunities in the NA market in terms of commercial vehicle, sorry, passenger vehicle. We are forming a consensus on the need for collaboration of both companies, but for the specific vehicle types, we are still on designating a process. And I can say that within the first quarter of this year, we are trying to sign the final binding contract. So to recap, within the first quarter of this year, we're trying to sign major binding contracts and have a cooperation in both commercial vehicle and passenger vehicle. And to that end, we are going to announce the joint promotion. Next question, please. (Foreign Language) The following question will be provided by Ji Yong Yoo from Daol Investment and Securities. Please go ahead with your question (Foreign Language) 에 이 Yes, thank you for your question. I'm Ji Yong Yoo from Daol Investment and Securities. Thank you for your explanation. I have three questions. My first question, it seems that the performance of Q3 and Q4 show a big difference, and even if we take into account the warranties, it seems that the difference is a bit too big. So I was wondering where that difference came from, especially in terms of cost.
If we look at Q4, it seems that the exchange rate has increased dramatically, meaning that the Korean one has depreciated a lot, and the sales, there was also a difference with sales. It seems that you sold 40,000 more vehicles in Q4 compared to Q3. I have thought that you have made some improvements in terms of sales in Q4, but would that be traded off as incentives or would other factors come into play? That was my first question. My second question is about the Meta Plant that you will be operating in the United States. What are your production plans for this year? I've heard that there are talks of scrapping the IRA $7,500 benefits in the United States. What is your prediction and expectations of that?
And moving on to my last question, I have a question about strategic investment, specifically Motional. We at Daol Investment and Securities have actually took part in paid-in capital increase of Motional. And what is the timeline of that? And I also was wondering if there is a technological difference unlike Waymo. Waymo, from my understanding, Waymo is in charge of foundry business, and I was wondering why there would be a delay in commercialization. I don't know if you can get into very specifics, but if you could give us an explanation, that would be helpful. Thank you. 네
es, thank you for your question. Let me address your questions. You first asked us about the difference in operating profit of Q3 and Q4, and yes, there is a difference. And you also told us about incentives. However, we don't think that the incentive impact would be that great. We actually think it will be quite low, even lower than 200 billion KRW. But there are also effects that occur from provisions and FX rates. We expect that to be to hover around 260 billion KRW. However, with the changes in the foreign, sorry, exchange currency rates, the provision would be probably larger than 770 billion KRW.
In late December, we pegged the FX rate to be in late KRW 1,300. So overall, we're going to see we have seen an increase, and we think we will see an increase, but if we look at what has been shipped in December, that would actually fall under inventory stock, and if that inventory stock is translated into wholesale, then we will be able to see the effects, and we expect that to be around KRW 200 billion. So, and so we believe that those impacts would have an ultimate positive effect from Q1 to Q4, and other than that, we don't think there would be any specific costs incurred, and there would be some differences depending on what season it is. You know, some costs would differ depending on R&D or other factors, and that will all be paid in the end of the year. Next question, please.
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Let me answer your second question. You asked us about the meta plant, HMGMA, Savannah, and our production operation plans, and also you asked us about the IRA subsidies and what we think will happen. Yes, Trump now took office, and I know that there are talks of the IRA being reduced or IRA subsidies being completely scrapped, but I if for the IRA to be completely scrapped, then that has to pass Congress. So we don't think it even if it ultimately does get scrapped, it won't happen overnight or very fast, and we believe that IRA subsidies would remain until maybe this year, but if it is scrapped, we think it could happen in September. We are devising various scenarios and thinking exploring various options.
The Meta Plant went into pilot production last October, and this year at the Meta Plant, we plan to produce IONIQ 5 and IONIQ 9, and those two models will be eligible for subsidies as long as the IRA remains alive. We are thinking about various options and various strategies in terms of volume, but we have to take many factors into account, such as product plant operation, plant stability, and then confirm the volume. So as of now, we cannot tell you the exact number. (Foreign Language) . Let me answer your final question.
Waymo will supply and produce, sorry, Waymo will provide us with their autonomous driving technology, and that will be equipped into our IONIQ 5. We plan to roll out this service in the North America region. However, we are exploring different options to expand the region of service. At CES this year, Waymo demonstrated a show car, an IONIQ car, equipped with their autonomous driving technology. Development is underway, and collaboration is actively underway. We are having different meetings, different types of steering committees, but I will be able to share the specifics once things are more confirmed. But I can tell you that collaboration is gradually progressing. And I would like to add one more comment. You talked about the technology capability difference between Motional and Waymo. Waymo is currently operating a commercial robotaxi in the urban areas of Los Angeles.
We also are operating a robotaxi program, but it's a pilot meta program for us. We are operating those taxis in Las Vegas and Phoenix. Our target commercialization timeline for robotaxis is 2026. So to tell you about the technological gap, we can say that we are about one year behind compared to Waymo because our commercialization target is one year later than Waymo. . The following question will be presented by Theodolous Hadjidaniel from JP Morgan Asset Management. Please go ahead with your question. Yeah, thank you very much for the presentation. I have a few questions. So the first one is, can you talk about the potential impact of tariffs imposed by the U.S. to Mexico and Canada?
You mentioned earlier that your new Georgia plant, you plan to produce the IONIQ 5 and IONIQ 9 in that plant. If there's any change to tariffs or IRA provisions, are you able to shift production into other models such as hybrids or ICE cars in that plant? And the second question I have is also in terms of the European emission standards that are going to get tighter, how will that impact Hyundai? And then the third question I have is in terms of the fourth quarter warranty provisions, I think in the third quarter you incurred KRW 320 billion. Is there any similar charges that you incurred in the fourth quarter? Yeah, thank you. (Foreign Language) . Yeah, hi, this is Jaeyoung. I'd like to answer your questions. I guess your first question was on the potential impact of the tariff and, you know, what could happen basically on that basis.
As you know, we do currently have the Alabama plant with a capacity of close to about 400,000 units, and the new Georgia plant will ultimately have about anywhere from 300,000-500,000 units. So we do sell about a little bit less than a million, about a million in the U.S. So effectively, once we do get that up and running, we should be able to have approximately, you know, about 70%-80% covered out of the U.S. market going forward. So, you know, again, it may take a bit of time, but nevertheless, we do not, you know, we are definitely trying to localize the production, which will minimize the potential impact from the tariffs. And you also asked about the, you know, we don't have any production outside in Mexico right now. I mean, Kia does, but we don't do that.
We don't have that. But in case the IRA provisions, you know, change and how quickly you can shift, I mean, one of the things we have been talking about is our competitive advantage has been our flexibility. And we did mention to you earlier that the HMGMA plant originally was a dedicated EV plant. However, with the EV chasm, we have actually decided to make that into a flexible plant, which means that we can ultimately produce the hybrids as well as the ICEs depending on the needs. And we do have plans to produce the hybrids later on, which I think, again, will be beneficial for us to further ramp up in this kind of market environment where EVs are a bit slow. So, and then moving on to the second question, it was on the European, the emissions. Oh, sorry.
Okay, let me let her translate (Foreign Language) Okay, and your second question was on the emissions in Europe. As you know, yes, the emission standards will be enhanced. It will be increased by about 15%. So our overall strategy there is actually, of course, we will do our best to meet the emissions. And for us to do that, the overall proportion of EVs or, you know, EVs will actually be the sort of the main part of our strategy. In 2024, we sold a little bit less than 70,000 EVs in Europe. However, we're looking to actually double that in the European market for 2025 in order for us to be able to meet the emissions, the emission standard . (Foreign Language)Okay, and your third question was on the warranty provision for the fourth quarter. As you know, you know, the average exchange rate post the political situation in Korea actually weakened our overall currency, which resulted in a warranty provision skyrocketing at the end of the quarter, which resulted in about close to about KRW 770 billion overall.
But on the other hand, the average exchange rate also went up, but nevertheless, that average exchange rate was actually towards the end of the quarter. So that the full impact has not really been taking place on the revenue side. So that has actually had a biggest impact in our overall warranty side. And if I may add, apart from the currency effect, the actual cost for any kind of recalls was less than KRW 100 billion. So very minimal impact. 두 번째
(Foreign Language) Yes, hello.
I have three questions. My first question is about the tangible and non-tangible redemption cost for the Q4 '24 performance. What is the background and why has this happened? That is my first question. And my second question is related to guidance. It seems that based on your guidance and based on the calculations, operating profits have increased compared to 2024, and you said that you have pegged the exchange rate at about KRW 1,300, but it seems that it could also increase or decrease. And based on your settings and based on your predictions, it feels that you have set quite a conservative target for wholesale sales in the United States. Have you reflected risks that may occur from tariffs in that plan, or have those not been considered? And my last question is about Boston Dynamics. Could you share information on Boston Dynamics' IPO plans or IPO schedule? Let me answer your second question first.
You asked us about the operating profit seemingly increasing compared to 2024. I'm not sure if I understood your question correctly, but we have not, as of now, reflected the universal tax and tariffs in our guidance business plan yet because that universal tax tariffs and those details have not been confirmed yet. And we also have originally pegged the exchange rate at 1,300 KRW, but right now it's even higher than 1,400 KRW, and that's also what the market expects. So taking all this into account, you asked us that you said that it feels like it would increase and be higher than the guidance. Well, we are looking into various scenarios, and if the 10% universal, if the 10% tariff goes into effect, we think it may go into effect in April if it happens fast.
If it doesn't happen fast, we still think that it will go into effect within the first half of this year. We are currently calculating the impact and how it will impact our company, and we are also looking into different scenarios and different profit changes under various outcomes. Those two factors, they represent, you know, completely different effects. I cannot tell you the exact number right now, and it's kind of difficult to tell you the exact number, but based on the proposition that the universal tariff of 10% goes into effect, we still believe that we will be able to make up for the losses with the 4% FX rate impact. Tariff goes into effect. It won't be only Hyundai Motor Company being impacted. We have a plant up and running in the United States, and 60% of our cars are being produced in the United States.
So we believe that the limits would not be as big. We don't have to talk about other companies, but just to tell you a bit about how other companies will be impacted. For example, there's Honda and Toyota, and they have plants up and running in Mexico and Canada. And a lot of the production of key models of those two companies come from the Canada and Mexico plants. For example, 81% of Honda's main model comes from the Canada plant, and 50% of its main model comes from the Mexico plant. Same for Toyota, 53% of one of the main models come from Canada and Mexico, and 100% of another one of their major models comes from the Mexico plant. So yes, if the universal tariff goes into effect, it will have a negative impact, but we won't be impacted more than Toyota and Honda.
We are reviewing various scenarios, and we are looking into how we can adjust FOB and how we can adjust guidance depending on how the tariff situation unfolds, and we are also taking various things into account, such as anti-dumping and APA profit rates, and with that all in mind, we will continue to look into how we can make FOB adjustments and how we can reduce the impact of universal tariffs.
To address your question about the IPO of Boston Dynamics, we as of now don't have any confirmed plans or timeline of Boston Dynamics IPO. If we have plans to pursue an IPO of Boston Dynamics, we will let you know. We did an IPO in India, and we are open and open-minded about Boston Dynamics going public. But right now, we really cannot tell you anything because we have not reviewed anything. And right now, we don't have plans to immediately review the possibility of a Boston Dynamics IPO. 2024년. To answer your first question, you asked us about what differences lie in what items.
We will have to look into that more because our financial statements have not been confirmed yet. So we will let you know about this later through the IR group. 2024 4(Foreign Language) 다. If you have any questions, please contact Hyundai Motor Company's IR group. Thank you very much for your attention.