Kia Q2 Operating Profit Falls 25%, Plans to Increase Market Share in the United States (US)

Recently, Kia Motors stated that although the company's sales in the second quarter increased by 6.5% year-on-year to a record 29.4 trillion won, operating profit fell by nearly a quarter (24%) year-on-year to 2.8 trillion won.

The company stated that in the second quarter, U.S. tariffs resulted in a loss of 786 billion KRW (approximately 570 million USD), and warned that it will face even more severe tariff challenges in the second half of the year.

Affected by the above news, Kia's stock price closed down 0.9% on the day of its earnings report, but the decline narrowed after the company announced a new share buyback plan.

Due to consumer concerns that U.S. tariffs would lead to higher car prices, prompting them to purchase vehicles early, Kia's sales in the U.S. increased by 5% from April to June. Kia also attributed the sales growth to the strong sales of the new Carnival hybrid SUV.

Image source: Kia

Kia stated that despite expecting an overall 10% decline in U.S. auto sales in the second half of the year, the company still plans to increase its sales in the U.S. by 7% to 8% during this period, thereby raising its market share from 5.1% in the first half of the year to over 6%.

Kia expects that the brand's sales will be boosted by its Carnival and K4 compact cars as some Japanese automakers raise prices.

About two-thirds of the vehicles Kia and Hyundai sell in the U.S. market are imported, making them more vulnerable to U.S. tariffs than major competitors. However, Kia stated that it has not yet formulated specific price increase plans and is instead focused on expanding its U.S. operations.

Although Kia is not currently considering raising prices in the United States, the company plans to reduce its spending on incentives. Jung Seong Kook, Head of Investor Relations and Strategic Investments at Kia, said that the company expects to save about 600 billion won (approximately 435 million US dollars) in sales incentive expenses this year.

Kia's Chief Financial Officer Kim Seung-jun stated in a conference call: "Although the current market environment is challenging, it is precisely a crucial opportunity for Kia to turn challenges into opportunities and achieve growth in market share and sales, which is our core competitive advantage."

Esther Yim, an analyst at Samsung Securities, stated that Kia's strategy to increase sales of hybrid vehicles imported from Korea may put pressure on its profits, but some of the negative impact is expected to be mitigated through proactive measures.

Kia also stated that in order to mitigate the impact of U.S. tariffs, its domestic factories in Korea will redirect some vehicles originally intended for export to the U.S. to markets such as Canada. Meanwhile, given that U.S. electric vehicle subsidies will end at the end of September, Kia's plant in Georgia, USA is accelerating its capacity transformation, planning to adjust part of its electric vehicle production to the production of gasoline models such as Sportage, Sorento, and Telluride.