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Hyundai, Kia see slower sales growth in 2012

Hyundai Motor Chairman Chung Mong-koo attends the company's opening ceremony for the year in Seoul
Hyundai Motor Chairman Chung Mong-koo attends the company's opening ceremony for the year in Seoul

SEOUL (Reuters) - Hyundai Motor <005380.KS> and affiliate Kia Motors <000270.KS> aim to boost global vehicle sales by 6 percent this year to a combined 7 million vehicles, which would mark a slowdown for a duo that has enjoyed double-digit sales rises in recent years.

The South Korean automakers, which together rank fifth in global car sales, are unable to keep up with demand because of stretched production capacity. But they have refrained from boosting capacity sharply, instead focusing on improving product quality and profits.

Bigger rival Toyota Motor <7203.T> last month forecast a 20 percent jump in 2012 sales to a record 8.48 million vehicles, as it is recovering from output losses caused by natural disasters in Japan and Thailand last year.

"We will strengthen quality management we have continuously pursued," Chung Mong-koo, chairman of Hyundai and Kia's parent group, said on Monday in his annual speech to employees.

The 73-year-old Chung has headed Hyundai Motor Group since 2000 when he led auto-related firms out of the parent Hyundai Group, then South Korea's biggest conglomerate marred by financial troubles and a bitter family feud.

The son of Hyundai's founder is credited with transforming the once maker of cheap, poor-quality vehicles into a stellar performer, especially during the global economic downturn.

Hyundai Motor Group, South Korea's No.2 conglomerate, is expected to top Samsung Group, which also includes Samsung Electronics <005930.KS>, in terms of net profit in 2011, media reports said, showing how fast the motor group has grown in the past decade.

Shares of Hyundai Motor dropped 0.9 percent and Kia shares fell 0.3 percent in the wider market <.KS11> that was down 0.2 percent as of 0534 GMT on Monday.

Shares in Hyundai Motor rose 23 percent and Kia shares rose 32 percent last year, far outperforming the wider market's 11 percent fall.

CONSERVATIVE TARGET

The South Korean carmakers enjoyed sales gains in the United States, Europe and other key markets last year when their Japanese rivals suffered from Japan's earthquake and Thailand's floods as well as the strong yen.

Hyundai and Kia sold 6.6 million vehicles in 2011, beating their earlier target of 6.33 million and up 15 percent from the previous year.

In December, Hyundai's global sales jumped 22 percent and Kia sales rose 8 percent from a year earlier, as strong overseas sales continued to offset declines in domestic sales.

Hyundai is expected to report biggest year-on-year sales gains of about 40 percent among automakers in the United States in December.

But Japanese rivals are recovering from output losses caused by natural disasters, while a free trade deal with the United States is set to take effect early this year and cut tariffs on U.S. auto imports in South Korea.

"I expect the automotive industry to see growth slowing because of the European debt crisis and the global economic slowdown, while competion is expected to intensify among automakers this year," Chung said.

He did not give a breakdown of Hyundai and Kia's individual sales targets.

Analysts noted Hyundai and Kia have history of topping their earlier sales targets.

"Hyundai and Kia have offered a conservative sales target based on the negative economic outlook. I expect it to be fully achievable and sales to reach 7.2 million (vehicles) next year," said Ahn Sang-jun, an auto analyst at Tong Yang Securities in Seoul.

"The U.S. and Chinese auto markets are not worse than expected and will improve this year," he said.

The global car market will grow by 4 percent to 68 million vehicles in 2012 from an estimated 65.4 million in 2011, driven in part by robust sales in the United States, German auto industry association VDA said in December.

Hyundai plans to start production at its third Chinese plant and its first factory in Brazil in 2012, while Kia has no new plants beginning operations this year.

Hyundai plans to launch a fully revamped version of its Santa Fe SUV and a Brazil-dedicated model, the HB, in 2012. Kia is set to roll out large-sized sedan K9 and an all-new Cee'd this year, and is also discussing the launch timing of a fully revamped Forte compact.

Chung said he will beef up personnel and investments to develop eco-friendly vehicles and to secure core technology in the electronic control area.

Hyundai and Kia are playing a catch-up in the race for electric vehicles, earmarking 4.6 trillion Korean won ($3.99 billion) this year for the development of eco-friendly and fuel-efficient vehicles.

($1 = 1152.0000 Korean won)

(Reporting by Hyunjoo Jin; Editing by Jonathan Hopfner and Matt Driskill)

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