Hyundai's Warranty Provisions Sap Profits

  • By Ryu Jung

    October 27, 2020 12:44

    Automaker Hyundai suffered a W313.8 billion operating loss in the third quarter of this year due to massive warranty provisions despite generating W27.58 trillion in sales (US$1=W1,130).

    It was the automaker's first loss since it began reporting earnings based on international financial reporting standards in 2010.

    Hyundai last week said it set aside W2.1 trillion to cover costs for recalls and quality control involving its Theta 2 GDi engine, which ended up taking a toll on its bottom line.

    The Korean giant sold 997,842 cars around the world in the third quarter, down 9.6 percent on-year due to the coronavirus pandemic. But sales in Korea jumped a whopping 21.9 percent to 199,051 cars thanks to new models and tax cuts to stimulate spending.

    Overseas sales dropped 15 percent on-year in terms of numbers of cars, but that was moderated by strong sales of the high-end Genesis brand, which is more profitable, so revenues increased 2.3 percent on-year.

    Meanwhile, affiliate Kia's third-quarter sales increased a healthy 8.2 percent on-year to W16.3 trillion, though operating profit dropped 33 percent to W195.3 billion. That was because Kia also set aside W1.26 trillion to cover potential warranty issues.

    Otherwise Kia would have achieved record profits. 

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