SEOUL — Hyundai Motor posted a first-quarter profit that nearly tripled to its highest in four years, but warned it would have to adjust production again in May because of a chip shortage.
Unlike its rivals, the automaker avoided production halts in the first quarter, thanks to a healthy chip inventory. But the shortage, exacerbated by factors including a fire at a chip factory in Japan and storms in Texas, is now catching up with Hyundai.
Hyundai, which together with affiliate Kia is among the world’s top 10 automakers by sales, has temporarily paused production three times since the beginning of this month and saved chips for its most popular models.
“The condition of semiconductor parts is being a little more prolonged than we expected,” said Seo Gang-hyun, an executive vice president at Hyundai. “As the semiconductor procurement condition is rapidly changing, it’s difficult to predict production status after May. We expect that there will likely be similar production adjustment in May, similar or more than what we had in April.”
Analysts have said the halts so far are likely to cost Hyundai about 12,000 vehicles in lost production, and future results will be hurt as the chip crisis continues.
“Although Hyundai could end up cutting some production (in the second quarter), the company likely won’t see huge impact,” said Lee Jae-il, an analyst at Eugene Investment & Securities.
This was because favorable market conditions backed by strong demand as well as average selling prices boosted by sales of higher-margin cars would probably help offset the decreased output, he added.
In the quarter ended March 31, however, Hyundai was unscathed as buyers at home and in the U.S. snapped up its high-margin crossovers and premium Genesis cars as the coronavirus pandemic dragged on, fueling car ownership.
Net profit surged 187 percent to 1.3 trillion won ($1.16 billion) from 463 billion a year earlier, when business slumped as countries shut down to limit the spread of the coronavirus.
Hyundai is expected to report net profit of 1.4 trillion won for the April-June period, up 536 percent from the corresponding period a year earlier, according to Refinitiv SmartEstimate.
Hyundai, which has lagged its rivals in the electric-vehicle race, also said on Thursday that it was developing solid-state batteries and planned to mass produce EVs using the batteries in 2030.
In February, Hyundai launched its Ioniq 5 midsize crossover, the first in a planned family of EVs that it hopes will help it become a major EV maker by 2025. Hyundai and Kia together aim to sell 1 million EVs in 2025.
Hyundai affiliate Kia reported operating profit of 1.1 trillion won for January-March, up 142 percent on the year.