REUTERS – Hyundai Motor Co reported a smaller-than-expected drop in profit on high-margin domestic sales and said, while demand should pick up soon, the pace of recovery will be slow due to the impact of the coronavirus pandemic, acording to Reuters.

Auto demand is expected to pick up from the third quarter, but economic recession impact from COVID-19 and uncertainties around re-proliferation remain.

South Korea’s Hyundai, which together with sister company Kia Motors (000270.KS) is the world’s fifth-largest automaker, said weakness in both mature and developing economies means auto sales may only recover to 2019 levels around 2023. 

“Auto demand is expected to pick up from the third quarter, but economic recession impact from COVID-19 and uncertainties around re-proliferation remain,” CFO Kim Sang-hyun said. 

Hyundai said it will not pay interim dividends this year due to the uncertainty and need to secure capital as it unveiled its results for the second quarter on Thursday. 

For April-June, Hyundai turned in an operating profit of 590 billion won ($493 million), versus an average analyst estimate of 377 billion won compiled by Refinitiv, driving its shares up 5.1% in a slightly weaker wider market .KS11. 

The results were buoyed by sales in South Korea, which rose 13% from a year earlier to 200,000 vehicles, led by demand for large cars and sport-utility vehicles (SUVs) such as the G80 sedan and GV80 SUV from premium brand Genesis. 

Hyundai’s global retail sales fell 33% for the period, which included double-digit percentage sales drops in markets such as the United States, China, Europe and India.  South Korea has surpassed China and the United States as the top market for Hyundai, after the country managed the COVID-19 outbreak better than others and extended auto tax cuts. 

Investors see this as “Hyundai being one of the few that can pursue R&D while competitors’ business environment is very unstable”, Shinhan Investment Corp analyst Jung Yong-jin said. 

Except for Tesla (TSLA.O), Hyundai and Kia, other automakers are expected to report losses this quarter, the analyst added.  Hyundai’s net profit for April-June fell to 227 billion won, from 919 billion won a year earlier, likely due to foreign currency debt and lacklustre China business, analysts said.

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