Hyundai Sonata + Kia Sorento = Record Profits
Hyundai Sonata + Kia Sorento = Record Profits
Although they're not yet generating quite the same kind of hype as the sales numbers, automakers' financial reports are getting a particularly sharp look nowadays. And on that basis, you have to say that the South Korean automakers are looking particularly sharp themselves, as big sales for new products like the Hyundai Sonata and Kia Sorento have pushed their respective brands to record first-quarter profits for 2010.
Hyundai reported its global profits for Q1 hit a cool $1 billion, a fivefold increase over the same time in 2009. That makes Kia's numbers seem relatively paltry in comparison, what with international profits only quadrupling to $358 million. Nonetheless, that was another new financial benchmark, and you could almost start thinking the two South Korean brands were going to be well-nigh unstoppable for the foreseeable future. Almost.
But let's put these financial results into context. We haven't seen the figures from the Japanese big three, but Ford put up a pre-tax operating profit of some $2 billion through the first three months of the year, an improvement of $4 billion over the first quarter of last year; further, the Blue Oval's North America operations were good for a $1.2 billion first-quarter profit on its own.
And even Chrysler managed to eke out an operating profit of $143 million during Q1, although the company ended up with a net loss of $197 million. (General Motors, which is notorious for its late, oft opaque financial results, won't present first-quarter numbers until mid-May.)
So, while the South Koreans continue to show remarkable improvement, part of that "remarkable-ness" is a function of the position from which they started: way down at the bottom of the automotive barrel. What I mean is, it's a lot easier to set new records when your old ones weren't that impressive to begin with.
Here's one example: KIa sold 30,522 vehicles in March, besting its previous March record, set in 2007, by nearly 11 percent. That sounds pretty good, until you realize that Dodge put up nearly the same numbers, moving 29,506 units last month, and that was a 19 percent drop. Plus, now that Chrysler has, in theory, set up Ram as its own brand, the Dodge numbers don't take into account the 17,818 Dodge Ram Pickup sales from March (nor the 1,109 Dodge Dakota sales, for that matter).
The story is similar for Hyundai. That brand also tallied record March sales, finding customers for 47,002 of its vehicles last month. That's moving a lot of metal, but the Blue Oval sold almost that many Ford F-150 pickups alone'”42,514'”in March.
Even when one combines the numbers for Hyundai and Kia, the same way one does for Ford, Lincoln and Mercury, a March sales total of 77,524 units is more than 15,000 fewer sold by Chrysler during the same time.
I know Chrysler is making hay in the fleet segments to boost those figures, but even so, I'm starting to think there simply isn't enough room in the overall U.S. auto market for the South Koreans to find much more volume, at least not any time soon. Competition is just that fierce in the industry today, while overall demand was still growing slower than expected in March.
It's a measure of how bad things were just a few years ago that so many automakers did so well on the sales-increase front in March even though last month's seasonally adjusted annual selling rate'”an important gauge of the industry's health'”still didn't crack the 12-million-vehicle mark. That's more than 5 million vehicles fewer than put up in the record-setting pre-meltdown days. And early estimates for April actually show the rate headed down compared to March.
In other words, with the purchasing pie remaining stable, at best, it's going to be very hard for Hyundai and Kia to increase the size of their slices. Especially when the automakers' diet doesn't include full-size trucks'”still responsible for a significant number of sales'”or credible full-size family sedans.
Kia doesn't even offer a current full-sizer, although the company has managed to unload 97 of its 2009 Kia Amanti sedans this year and is working on an Amanti replacement. Hyundai, on the other hand, will soon offer three big sedans, but none that really match up with the mainstream domestic offerings. The Hyundai Genesis sedan and upcoming Hyundai Equus are distinctly upscale propositions, and the soon-to-debut 2011 Hyundai Azera seems likely to get lost among its flashier brethren.
So, records aside, it will be more telling, for the companies' long- and short-term success, to see whether their new big sedans get lost among the 2010 Ford Taurus, the all-new 2011 Chrysler 300 and Dodge Charger, and the highly anticipated next-gen Chevrolet Impala.