Hyundai Motor Company, the multinational South Korean auto major, is losing ground on its global profits because of the negative impact of local currency getting stronger against dollar. Further, the company has also reimbursed large sums of money to its North American customers for overstating fuel efficiency claims of its products, which has hit hard its profits margins. The South Korean auto majors' stellar run of impressive profits could end soon, since the prevalent foreign exchange rates favours Hyundai's Japanese rivals, such as Toyota and Honda.
Hyundai Motor Company and its subsidiary Kia Motors together rank fifth in the global automobile industry, in terms of unified vehicle sales recorded worldwide. The auto major's earnings are slowing down and it is expected to stop enjoying growth-stock premium soon, since South Korean currency (Won ₩) is appreciating, whereas Japanese Yen and United States Dollar have started normalising into tolerable levels.
As per reports, Hyundai has paid $ 100 million from its net profits, in order to pay as compensatory sums to its customers, for overstating mileage claims on some of its models sold in Canada and United States. Further, Hyundai and Kia have affirmed to help owners of their models by paying for additional fuel costs.
The South Korean Won has gained value by 8 per cent against the dollar in 2012, in what was its heaviest percentage gain in the three years, since 2009. However, the Japanese Yen has eased in value by 11 per cent, which again hands the advantage in favour of Hyundai's Japanese competitors- Toyota and Honda.
Evidently, Hyundai has always relied on affordable and value-for-money models to pump up its sales in the European and North American auto markets. The South Korean auto major has been recording impressive sales figures and profits year-on-year, but weak local currency and overstating fuel economy of its cars have cost Hyundai some big numbers in unified global profits.
