Earnings Call: Q1 2026

Apr 23, 2026

Slides

Good morning. Thank you for joining us today. We'll now begin the Hyundai Motor Company's Q1 2026 earnings call. Please note once again that the earnings presentation materials are available for download from the Financial Supervisory Service's Electronic Disclosure System or under Sales Results within the IR Resources menu of the HMC website. For the call, we are joined by Head of Finance Division, EVP Scott Lee, Head of IR, EVP Zayong Koo, and Head of Finance, Accounting Sub-Division, VP Hyosok Han, Head of IR Group, VP Michael Yoon, and Finance Division, Head of Finance Division of Hyundai Capital, VP Hyung-Seok Lee. The conference call will begin with earnings announcement, followed by a Q&A session with the attending investors. If you have questions, please press the asterisk and one on your phone after the presentation concludes. Now, we'll begin the earnings presentation by Head of IR Group, VP Michael Yoon. Hello, I am Michael Yoon, Head of IR Group. Welcome everyone to HMC's Q1 2026 business results conference call. Please refer to the presentation HMC 2026 Q1 Business Results on our IR website. This presentation includes quarterly highlights, sales performance and profit analysis. For quarterly summarized cash flow statement and detailed regional sales breakdowns, please refer to the appendix. First, Q1 highlights. Despite the global demand slowdown due to the geopolitical risks, our global market share rose by 0.3 percentage point this quarter. Our market share in the U.S. market rose by 0.4 percentage point, maintaining MS of 6% range for fourth consecutive quarters. In response to strong hybrid demand, the global hybrid sales reached 174,000 units. The share of global hybrid sales recorded 17.8%. Also, in the U.S. market, the share of hybrid sales recorded 24.8%, continuing the momentum. Finally, despite unfavorable business conditions with demand slowdown, market share increase in major markets and robust hybrid sales led to the highest first quarter revenue on record. Next, the sales performance. In the first quarter of 2026, while global demand declined by 7.2%, global wholesale sales recorded 976,000 units, a decrease of 2.5%. Retail sales recorded 949,000 units, reflecting a 0.7% decrease. Next, I'll go over details about our wholesale by key markets. In the U.S. market, sales increased by 0.3% year-over-year, totaling 244K units, despite industry demand declining 5.5%. Sales of eco-friendly vehicles rose 27.7% year-over-year, reaching 69K units, thanks to strong eco-friendly vehicle sales. Hybrid sales accounted for a record high 24.8% of total sales. SUV sales also recorded share of 75.2% in the U.S. market, driven by strong sales performance of SUV models. In Europe, sales decreased by 7.8% year-over-year, totaling 140K units. Optimization of product mix drove SUV sales to rise 3.6% year-over-year, and hybrid sales increased by 27.7%. Despite challenges, mix improvement was achieved by focusing on high-margin vehicles. Sales of eco-friendly vehicles rose 7.1% year-over-year, reaching 70K units, driven by strong hybrid sales in Europe. We expect to sustain this momentum by launching the new IONIQ 3 in the second half of this year. In the domestic market, sales decreased by 4.4% year-over-year, totaling 159,000 units. However, EV sales rose 65.5% year-over-year, driven by government incentives for eco-friendly vehicles and IONIQ lineups. Hybrid sales grew 5.3%, reaching the share of 24.9%. Sales of eco-friendly vehicles reached 60K units, a 21.2% year-over-year increase. Next, I'll explain the sales analysis by vehicle types. Global SUV sales, including Genesis, totaled 607,000 units, accounting for 62.2% of total sales. While EV sales dropped 8.3% year-over-year, and hybrid sales continued their strong momentum, growing 26.9% year-over-year. Eco-friendly vehicle sales increased by 14.2% year-over-year, driven by strong hybrid sales. This concludes the discussions on sales. I will now move on to the profits and losses. This page summarizes our income statement. Consolidated revenue increased by 3.4% Y-o-Y to KRW 45.9 trillion, and operating income decreased by 30.8% year-over-year to KRW 2.5 trillion. The auto business's revenue decreased by 0.5% year-over-year due to the global demand slowdown and increase in incentives, which is a revenue deduction item. The operating profit decreased by 36% year-over-year, with a tariff impact and one-off temporary external factors. Revenue from finance business increased by 21.5% year-over-year, and operating profit increased by 1.4% due to continuous growth in the U.S. market penetration rate and asset size. Net income decreased by 23.6% YOY to KRW 2.6 trillion as a result of operating profit decline. Next is quarterly revenue and operating income analysis. Revenue benefited from favorable exchange rates, contributing KRW 997 billion, while decreased global wholesales resulted in negative volume effect of KRW 857 billion. Additionally, general increase in incentives resulted in negative mix effect of KRW 31.9 billion. Combined with growth in the financial segment, total revenue rose 3.4% year-over-year. Despite the record high first quarter revenue, negative foreign exchange impact on sales warranty provisions due to quarter end exchange rate increase reduced positive Forex impact to KRW 25 billion. Sales shortfall caused by the Middle East war and the sales halt of Palisade led to negative volume effect of KRW 247 billion. Higher incentives driven by intensified competition in key markets led to negative mix effect of KRW 337 billion, along with tariff impact of KRW 860 billion. Unfavorable business conditions and one-time cost negatively impacted our profitability, so the operating profit decreased by 30.8% year-over-year to KRW 2.5 trillion, resulting in operating profit margin of 5.5%, despite contingency plan partially offsetting tariff effects. The last part is SG&A and net profit. Our Q1 cost of goods sold ratio recorded 82.5%, a 2.7 percentage point increase year-over-year due to the rise in materials cost. SG&A recorded KRW 5.5 trillion, which is a 2.9% increase compared to last year due to increase of sales warranty provisions owing to quarter end exchange rate increase. Finally, our net profit decreased by 23.6% to KRW 2.6 trillion as a result of operating profit decline. That is the end of my presentation. Thank you. Next, Head of the Finance Division will give us the Q1 business performance. Good afternoon, I'm Scott Lee, Executive Vice President and Head of Finance Division. I'll now present HMC's Q1 business performance and the Q1 dividend. As previously noted, Q1 results recorded revenue of 49 point... KRW 45.9 trillion, operating profit of KRW 2.5 trillion, and operating margin of 5.5%, which is broadly in line with market consensus. Compared to January, when we announced our annual guidance, the global auto industry environment has become more uncertain than ever. As a result, global auto demand, including major markets, declined by approximately 7.2% in the first quarter. In response to the demand slowdown and uncertainty, such as the potential repeal of the U.S. IRA legislation, incentive costs increased by approximately KRW 200 billion compared to last year. Additionally, sales disruptions caused by the Middle East conflict and the suspension of Palisade sales resulted in a negative impact on operating profit of around KRW 250 billion. Regarding foreign exchange effects, the average exchange rate against the dollar in Q1 was 1,465.2 Korean won, representing a 0.9% increase compared to the same period last year. However, sharp Forex volatility toward the end of March led the quarter-end exchange rate to close at 1,513, marking a 5.5% increase compared to 2023 year-end. This quarter-end exchange rate, which was higher, temporarily increased the Korean won-denominated valuation of Korean currency-based warranty provisions at the end of the quarter. This resulted in approximately KRW 270 billion negative impact on the operating profit. Regarding the tariff effect, as sales subject to the 15% tariff rate began to materialize, the decline in operating profit was approximately KRW 860 billion, which was material, which was significantly lower compared to the quarterly tariff impact in the second half. Despite intensified macroeconomic uncertainty, we still achieved solid sales performance by leveraging hybrid models and maximizing sales mix optimization in key markets such as North America. Our global market share expanded by 0.3 percentage point from 4.6% to 4.9%, and the U.S. market share increased by 0.4 percentage point from 5.6% to 6%, reflecting continued strong strengthening of our market presence. In addition, hybrid vehicle sales reached a record high mix of 17.8%, sustaining strong growth momentum. Accordingly, revenue reached KRW 45.9 trillion in Q1, the highest ever first quarter result, underscoring sustained top line growth. To offset profitability pressures stemming from macroeconomic challenges and tariff headwinds, we are actively executing zero-based budgeting-driven contingency plans and mobilizing company-wide efforts to protect margins on a sustained basis. For reference, excluding contemporary external factors such as negative forex impact and the Middle East conflict, the suspension of Palisade sales, operating profit is estimated at around KRW 3 trillion, with the operating margin of 6.6%. Next, I would like to address the dividend for the first quarter of this year. In accordance with the value program announced in August 2024, we plan to distribute a quarterly dividend of KRW 2,500 per share for both common and preferred stocks. The record date for the first quarter dividend is May 31st, and the payment date is June 30th. As mentioned earlier, the global auto industry is facing unprecedented level of uncertainty driven by macroeconomic headwinds, tariff policies, and the ongoing conflict in the Middle East. Despite such challenges, with our improved fundamentals, including record high hybrid sales and resilient performance in the North American market, we remain confident in our ability to achieve our annual operating margin guidance of 6.3%-7.3% through the launch of the new model cycle in the second half of the year and continued execution of contingency measures, including zero-based budgeting initiatives. Going forward, we'll continue to strengthen profitability to support shareholder return and future investment by leveraging our company-wide capabilities. We deeply appreciate the continued support of our shareholders and investors. Thank you. Next, the finance business results will be shared by the head of Hyundai Capital. Good afternoon. I'm Head of Finance Division of Hyundai Capital, VP Hyung-Seok Lee. I'll now report on the Q1 performance of financial business and first half outlook. Although external uncertainties persisted in the first quarter, such as the war in Iran and increased domestic and international exchange rate volatility, Hyundai Capital and Hyundai Capital America maintained a stable earnings trend by strengthening collaboration with the group and leveraging their sound captive asset portfolios. Next, I'll provide details for each company. First, Hyundai Capital. Based on our excellent financing competitiveness, we continue to provide financial support for the group's car sales, maintaining the proportion of auto financing within our product assets at 82% in the first quarter. Following the resumption of new car promotions, such as the Grandeur interest-free installment program and the launch of Genesis specific financial products in the last quarter, the new car and lease volume increased by 9.4% and 10.4%, respectively, growing our product assets by 4.8% year-over-year. Driven by higher lease revenue resulting from the growth of lease assets and expanded gains on the disposal of loan receivables due to the active sale of bailout loans, operating revenue increased by 2.1% year-over-year. Operating expenses decreased by 1% year-over-year as interest expenses and bad debt expenses improved. As a result of selectively expanding the sources for low interest, such as overseas bonds and ABS, interest expenses in Q1 decreased by 0.7% year-over-year. Total bad debt expenses decreased by 23.7% year-over-year. This reflects Hyundai Capital's portfolio management focused on high quality captive assets and proactive risk management with the Q1 delinquency rate at 0.78%. As a result, operating profit increased by 31.8% and pre-tax profit increased by 25.7% year-over-year. We anticipate that the first half of 2026 will also see significant volatility due to international circumstances. In preparation for this, Hyundai Capital will manage profitability through operational efficiency improvements, such as reducing interest expenses through continuous OpEx optimization and funding diversification, and secure stable business stability by managing financial soundness centered on high quality auto finance assets. In addition, we'll continue our global expansion and plan to finalize preparations for the launch of our financial subsidiary in India in the second half of this year. Through this, we'll continuously enhance our capabilities to support the auto business globally and strengthen our role as the group's global mobility partner. Next is Hyundai Capital America, HCA. Along with the group's solid sales performance in the first quarter and maintaining a high penetration rate of 67%, total assets grew 13.1% year-over-year. Operating revenue increased by 15% year-over-year, driven by expanded installment and lease revenue resulting from stable asset growth. Operating expenses increased by 17% year-over-year due to rising interest and bad debt expenses. Interest expenses in Q1 rose by 12.4% due to the expansion of total borrowings driven by asset growth. Bad debt expenses also increased due to the accumulation of additional provisions. Although the delinquency rate rose due to increased macroeconomic uncertainty and the slowdown in the U.S. economy, it remains below the market average, and the company is strictly managing its customer portfolio, with prime customers accounting for over 87% of the market. Due to the factors, operating profit and pre-tax profit decreased by 12.6% year-over-year. The first half of 2026 is expected to present an unfavorable business environment marked by increased external market volatility, including not only the impact of tariffs and inflationary pressures, but also concerns regarding supply chain disruptions stemming from the deteriorating situation in the Middle East following the war with Iran. However, Hyundai Capital America is thoroughly prepared for these external shocks and market uncertainties based on its excellent credit rating, and will strengthen financial synergies to support the group sales in the U.S. and respond safely to the market environment. This concludes the presentation on the financial business. Thank you for listening.