SEOUL, South Korea (AP) — The tight grip of Hyundai Motor Co. over the South Korean auto market is being loosened by a rise in foreign competition and labor strife that dented car production.
Hyundai Motor Co. said Thursday its April-June profit fell 1 percent from a year earlier to 2.5 trillion won ($2.2 billion) even as sales rose 6 percent to 23.2 trillion won ($20.8 billion). Operating profit declined 5 percent to 2.4 trillion won.
It said weak domestic car sales that partly stemmed from a labor dispute undermined its brisk performance overseas.
The bottom line beat market expectations but underlined that Hyundai is losing ground in its home market. A survey of analysts by Factset, a financial data service provider, forecast 2.4 trillion won net profit.
The maker of the Elantra has been struggling to overcome a testy relationship with its workers’ union. In the latest dispute, car production was dented by the union’s refusal to work overtime on holidays, according to Hyundai. The workers agreed to return to overtime work in early June.
Exports of domestically produced vehicles dropped 10 percent in the quarter while sales of vehicles produced overseas jumped 24 percent.
Hyundai also faced heightened competition from German and Japanese auto brands in the South Korean market, which contributed to lower sales at home.
BMW and Volkswagen recorded higher sales in South Korea after a free trade agreement lowered tariffs. They also released more mid-priced cars in South Korea while Toyota and Honda have lowered prices of their vehicles thanks to a cheaper yen.
Hyundai said it marked down prices of some models earlier this month to battle rivals at home.
The company gave a grim outlook for the remainder of the year as China’s economic slowdown and the end of stimulus in the U.S. could dampen demand.
Hyundai’s chief financial officer Lee Won Hee said the company sees softer global demand for autos for the rest of the year than it did a few months ago because demand in Europe will be worse than expected.
But Hyundai is considering an increase in its China car production by building more production lines at its third Chinese factory completed last year. China’s government will continue to prop up the economy with stimulus, so Hyundai expects continued growth in China, Lee said.