Modern Motors Group had reduced its reliance on the Chinese market due to being marginalized by the Chinese Communist Party, but this turned out to be a blessing in disguise. for two consecutive years, it has ranked among the top three in global car sales. This year, it is poised to surpass Volkswagen, which heavily relies on the Chinese market, and its profits have surged to become the second-largest in the global automotive industry.
In the third quarter and first three quarters of this year, the operating profits of the Modern Motors Group (including Hyundai and Kia brands), ranked third globally, far exceeded those of the second-ranked Volkswagen Group, only behind Toyota.
According to the performance reports released by Modern Motors Group, the operating profits for the third quarter and the first three quarters of this year were approximately 65 trillion Korean won (about 46.7 billion U.S. dollars) and 214 trillion Korean won (about 154 billion U.S. dollars), respectively.
In comparison, Volkswagen Group’s operating profits for the same periods were approximately 28.6 billion euros (about 30 billion U.S. dollars) and 129 billion euros (about 140 billion U.S. dollars) respectively, while Toyota Group’s were around 1.2 trillion Japanese yen (about 76 billion U.S. dollars) and approximately 3.6 trillion Japanese yen (about 234 billion U.S. dollars).
In terms of operating profit margins, Modern Motors Group also significantly outperformed Volkswagen Group. The operating profit margins of Modern Motors Group in the third quarter and the first three quarters were 9.3% and 10.2%, while Volkswagen’s were 3.6% and 5.4%, and Toyota’s were 10.1% and 10.4% respectively.
Industry analysts predict that if this performance trend continues into the fourth quarter, Modern Motors Group will surpass Volkswagen, becoming the second-largest automotive company globally in terms of profitability.
Having once flourished in the Chinese market with production exceeding 1.82 million vehicles in 2016, Modern Motors Group faced setbacks following the THAAD incident and suffered from being squeezed by the Chinese government. This led to a halt in production at its Chinese factories, causing a sharp decline in sales, dropping to below 400,000 vehicles in 2023. Due to continued sluggish sales in the Chinese market, the Modern Motors Group, which previously had five factories in China, sold its Beijing first and Chongqing factories in 2021 and 2022, respectively, and plans to sell the Changzhou factory this year. Currently, only the Beijing second and third factories of Modern Motors are in operation. Kia Motors also closed its Yancheng first factory in 2019 and now operates the Yancheng second and third factories.
Data from the China Passenger Car Market Information Joint Conference (CPCA) in January this year showed that Modern Motors Group’s market share in China decreased from 1.7% in 2022 to 1.4% last year, reaching its historic low.
After facing challenges in the Chinese automotive market, Modern Motors Group quickly adjusted its strategy, focusing on markets such as the United States, Europe, and India. As a result, in 2022, it leaped to third place in global sales. In 2023, Modern Motors Group saw increasing production volumes in India, Turkey, the Czech Republic, Slovakia, and the United States, with production in India exceeding 1 million vehicles.
In the first half of this year, Modern Motors sold over 430,000 vehicles in the United States, breaking its previous sales record with a 1.3% increase from the previous year. Kia also sold over 380,000 vehicles. Data from Motor Intelligence, a U.S. automotive market research company, showed that from January to July, Modern Motors Group captured a 10% share of the U.S. electric vehicle market, surpassing Ford and General Motors, and trailing only Tesla.
Moreover, in a “New Car Satisfaction” survey conducted by the U.S. automotive market research firm JD Power in July, both Hyundai and Kia cars ranked first among seven car models, surpassing brands like BMW, Toyota, and Strantis.
In the world’s third-largest automotive market in India, Modern Motors Group is also making rapid progress. In September, Hyundai and Kia ranked second and sixth, respectively, in the Indian market.
South Korean public opinion has praised the Modern Motors Group’s ability to turn adversity into opportunity due to the repercussions from the THAAD incident in China which weakened its position in the market.
Addressing the forced reduction in reliance on China and the unexpected growth, Professor Sun Guoxiang from the Department of International Affairs and Business at the University of South China said in an interview with Epoch Times on November 17 that the slowing economic growth, weakening consumption, and high policy risks in the Chinese market have put enterprises that overly rely on it, such as Volkswagen, in a difficult situation. After the setbacks in the Chinese market, Modern Motors quickly shifted its focus to high-potential markets like the U.S., Europe, and India, thereby avoiding the risks of relying on a single market and demonstrating strong market responsiveness.
At present, Modern Motors Group has a low reliance on the Chinese market. According to a report from Samsung Securities in May this year, Modern Motors and Kia’s sales proportion in China is 5%, with 90% of their operating profits coming from markets such as the U.S., India, and South Korea, where Chinese companies face difficulties entering.
On the other hand, Volkswagen has long had a high dependence on China. The recent downturn in domestic car sales in China has been a major factor leading to the deterioration of Volkswagen’s earnings. China is Volkswagen’s largest market, with nearly half of the 10 million passenger cars it sold in 2017 heading to China. However, with the local electric vehicle companies rapidly gaining market share in China through aggressive pricing strategies, the company’s car sales in China last year amounted to only 3.2 million vehicles, accounting for one-third of Volkswagen’s total sales of 9.24 million vehicles. Last year, the best-selling car brand in China for the company was overtaken by the Chinese company BYD for the first time.
In the third quarter of this year, Volkswagen’s sales in China dropped by 15%, with only 711,500 vehicles sold, resulting in a global sales decline to 2.176 million vehicles, a 7% year-on-year decrease, while net profits also significantly contracted by 63.7% to 1.576 billion euros (1.66 billion U.S. dollars).
Facing challenges, Volkswagen announced at the end of October that it would close at least three factories in Germany, downsize all remaining factories, and proceed with layoffs of tens of thousands of employees.
Despite becoming the second-largest automotive company globally in terms of profitability in the first three quarters of this year, Modern Motors Group has yet to surpass Volkswagen in global sales. Its cumulative global sales for the first three quarters of this year reached 5.395 million vehicles, ranking behind Toyota (7.177 million vehicles) and Volkswagen (about 6.5 million vehicles).
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