By Heekyong Yang and Heejin Kim
SEOUL, July 23 (Reuters) – Hyundai Motor reported a 21% fall in second-quarter operating profit on Thursday, missing analysts’ estimates, as weaker vehicle sales, production disruptions, and higher costs offset support from a weaker won.
The weaker results highlight mounting challenges facing the auto industry, as carmakers contend with rising energy and raw material costs as well as supply chain disruptions linked to U.S. tariffs and conflict in the Middle East.
The South Korean firm, which faced additional production disruptions in the second quarter after a fire at a supplier, forecasts economic uncertainty will persist and competition in the industry will be tougher.
Hyundai, which together with affiliate Kia Corp is the world’s third-biggest automaking group by sales, posted operating profit of 2.9 trillion won ($1.98 billion) for the April-June period.
That compared with a 3.2 trillion won forecast by LSEG SmartEstimate, which is weighted toward analysts who are more consistently accurate.
The company also faces intensifying competition in South Korea, one of its most profitable and biggest markets, as global automakers expand their electric vehicle and software offerings.
Tesla, the largest imported auto brand, plans to roll out a new version of its Full Self Driving software in South Korea.
The country’s imported vehicle market has become increasingly competitive, with China’s BYD overtaking Lexus and Volvo as the fourth-largest imported foreign brand.
Imported passenger cars accounted for nearly one-fourth of newly registered passenger vehicles in the first half of 2026, the highest in five years, according to market researcher Carisyou.
The company reported a 16% plunge in second-quarter vehicle sales in South Korea. In its other key markets of the U.S. and Europe, the automaker increased incentives as consumers grappled with higher energy prices and persistent inflation during the quarter.
While U.S. sales were little changed from a year earlier, electric vehicles’ share of Hyundai’s sales in the country — its largest market by revenue — fell to 4.0% from 10.2% following the end of federal EV subsidies last year.
Hyundai Motor said revenue rose 2% from a year earlier to 49.2 trillion won.
PIVOT TO AI
Hyundai has stepped up investments in robotics, “software-defined vehicles” and autonomous driving, as it seeks new growth engines beyond traditional car manufacturing.
Last week, Hyundai Motor Group said it would take full control of robotics company Boston Dynamics, giving it greater flexibility, as it prepares to deploy Atlas humanoid robots at its Georgia manufacturing plant from 2028.
Investor enthusiasm for the group’s push into so-called “physical AI” helped drive Hyundai shares to record highs earlier this month, although some analysts have questioned whether the rally has outpaced near-term earnings prospects.
Shares of Hyundai Motor rose 2% after the earnings announcement.
($1 = 1,467.2000 won)
(Reporting by Heekyong Yang and Heejin Kim; Editing by Ed Davies and Kim Coghill)
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