Hyundai Motor recorded its largest-ever net profit in the second quarter, posting one of the best performances among global carmakers amid the worldwide economic crisis. In addition to the company's own competitive edge, many say the government's policies of keeping the value of the Korean currency low and helping promote the domestic auto market aided the results. Hyundai Motor and Kia Motors also look to be the greatest beneficiaries of the soon-to-be-ratified Korea-EU and Korea-India free trade pacts.
The government's massive tax cuts and financial support for car buyers who traded old cars for new ones greatly contributed to Hyundai's record net profit of W811.9 billion (US$1=W1,228) in the second quarter. The government scheme was especially favorable to those who bought new mid- and full-sized cars, so it particularly benefited Hyundai, which offers a wide range of such vehicles. This is in stark contrast to policies in other countries that give greater incentives to consumers buying small or environmentally-friendly cars.
According to an inside report from Hyundai Motor, Hyundai and Kia expect an annual US$500 million rise in price competitiveness on auto and parts exports when tariffs fully expire under the Korea-EU FTA. Under the Korea-India FTA, the two carmakers are expected to enjoy a rise of $1 billion in price competitiveness a year.Some critics argue that Hyundai and Kia, which together control 85 percent of the domestic market, are moving the market in a direction that maximizes their profits without taking into account the opinions of the government and consumers.
Despite the worldwide trend of focusing on sales of environmentally-friendly, small cars, Hyundai and Kia are concentrating on sales of more profitable mid- and full-sized sedans and SUVs. As they have no rivals in the domestic market, they do not see a need to develop less-profitable small cars.
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