Kia Corp., South Korea’s second-largest carmaker, has reported its highest-ever operating profit margin of 13.2% for the second quarter, more than doubling Tesla Inc.’s 6.3% and surpassing other major rivals, including Hyundai Motor Co. and General Motors Co.
This record margin is attributed to strong sales of electric and hybrid vehicles, along with sports utility vehicles (SUVs), which generally offer higher profit margins than internal combustion engine cars. Despite a 1.6% year-on-year decline in sales volume, Kia’s operating profit soared by 7.1% to 3.64 trillion won (US$2.6 billion) on sales of 27.57 trillion won, a 5% increase from the previous year.
Kia’s achievement marks the seventh consecutive quarter of double-digit profit margins, a streak that began in Q4 2022. Among major carmakers, Kia’s profit margin is currently the highest in the industry.
In Q2, Kia sold 795,183 units globally, with electric vehicles (EVs) and hybrids making up 21.4% of total sales. The company’s flagship electric SUV, the EV9, played a significant role in this growth. Hybrid models, particularly popular SUVs like the Sportage and Tucson, also contributed significantly to sales, with hybrids alone accounting for 11.7% of Kia’s global sales in the quarter.
The first half of 2024 saw Kia’s sales rise by 7.7% year-on-year to 53.78 trillion won. This trend suggests that Kia could achieve annual revenues exceeding 100 trillion won for the first time in its 62-year history.
Kia’s profitability has been bolstered by sleek redesigns, favorable exchange rates, and reduced raw material costs. To further elevate its brand image, Kia recently recruited former designers from luxury carmakers BMW AG and Mercedes-Benz AG for its design centers in China and Europe.
The strong performance in North America and Europe, which accounted for 44.3% and 21.6% of global sales respectively, has been crucial to Kia’s margin growth. However, a decline in sales in Europe and India poses challenges, particularly among small car drivers.
On a conference call, CFO Joo Woo Jeong highlighted that Kia plans to offset slowing EV sales with hybrid and internal combustion engine models. The company will also focus on marketing revamped hybrid versions of its popular SUVs, including the Sorento Hybrid and Carnival Hybrid, and the facelifted K4 compact sedan. The Kia Sorento SUV was the best-selling passenger car in South Korea in the first half of the year.
