A year ago, Hyundai Motor. analysts were predicting the stock would be breaking record highs by about now. They were wrong.
Shares of South Korea’s largest carmaker tumbled 10 percent on Tuesday to their lowest close since August 2010, making Hyundai the worst-performing stock among any major automaker in the past year.
It’s been a sobering 12 months for a company that until a few years ago was posting record profits and rattling larger competitors such as Volkswagen.
Today, the Seoul-based auto manufacturer is facing headwinds as foreign brands catch on in Korea and unfavorable exchange rates undermine Hyundai’s ability to compete against the likes of Japan’s Toyota .
“It’s hard to see any short-term fix to Hyundai’s problems at this point,” Lee Suc Won, head of equities at HI Asset Management, which oversees about $11 billion including Hyundai Motor shares, said .
“I’m holding partmakers on top of a very small Hyundai stake, but think I may need to review that.”
The latest development that spooked investors came on Monday, when the South Korean carmaker announced that domestic and overseas sales in May declined for a second consecutive month.
Local deliveries fell 8.2 per cent, while overseas sales dropped 6.1 per cent. Hyundai’s offer of interest-free loans, a tactic it last used during the Asian financial crisis almost two decades ago, wasn’t enough to entice buyers at home. Its sales have declined this year in China, the company’s biggest market, while gains in the US have come on the back of an increase in incentives.
One reason could be that the carmaker offers more saloons than sport utility vehicles, which have gained popularity in an increasing number of markets, including China.
Hyundai offers 10 saloons in South Korea including four in the premium category, while the SUV lineup in the country consists of four models. None of Hyundai’s vehicles ranked among China’s 10 best- selling SUVs in the first quarter.
In April, Hyundai showed a version of its revamped Tucson SUV at the Shanghai auto show that it plans to introduce in China this year. And on Tuesday the company said it will introduce its new Creta SUV in India in the second half.
These steps haven’t encouraged investors. The automaker’s shares have dropped 18 per cent this year, in contrast to the 8.5 per cent gain in the key Kospi index.
- Bloomberg
