By Heekyong Yang and Joyce Lee

SEOUL (Reuters) -South Korea’s Hyundai Motor (OTC:) on Thursday predicted slower gross sales progress this yr as a result of weak demand and financial uncertainties reminiscent of rates of interest and inflation, signalling additional challenges for the auto trade.

Hyundai, which with affiliate Kia is the world’s quantity three automaker by gross sales, reported a 31% rise in fourth-quarter revenue, lacking analysts’ forecast as a result of unfavourable alternate charges and one-off prices associated to the sale of its Russia plant in December.

“Hyundai Motor expects the enterprise atmosphere will stay troublesome to foretell, as a result of macro uncertainties centred on rising markets and a downturn in the actual financial system,” the corporate stated in a press release.

Hyundai reported a web revenue of two.2 trillion gained ($1.7 billion) for the October-December interval, up from 1.7 trillion gained a yr earlier. That was beneath the two.9 trillion gained common forecast by LSEG SmartEstimate, which is weighted in direction of estimates from analysts who’re extra constantly correct.

In December, Hyundai stated it might take a 287 billion gained ($219 million) loss on promoting its plant in Russia, the place operations have been suspended since March 2022, the month after Russia invaded Ukraine.

Hyundai is concentrating on income progress of between 4.0% and 5.0% this yr, with a 4.9% rise in North American car gross sales however declines of three.7% in China and 0.6% in Europe.

The gross sales steering is “comparatively conservative”, reflecting “obvious softening demand within the broad auto sector in the USA, Hyundai’s greatest market,” stated analyst Shin Yoon-chul at Kiwoom Securities. Its U.S. gross sales rose 14% final yr.

Competitors within the U.S. market will possible intensify this yr as part shortages from the pandemic stabilise and as different automakers resume regular manufacturing, Shin stated.

EV UNCERTAINTY

Hyundai predicted an working revenue margin between 8.0% and 9.0%, in step with final yr.

“It seems that pent-up demand for autos from restricted provides has been disappearing as excessive rates of interest eat away automobile patrons’ willingness to buy,” stated Lee Jae-il, an analyst at Eugene Funding & Securities.

Hyundai will possible handle its car stock degree extra tightly than in earlier years because the lack of pent-up demand, together with extreme inventories, harm profitability, Lee stated.

One other uncertainty is electrical autos (EVs), the place Hyundai and Kia collectively path EV large Tesla (NASDAQ:) for highest U.S. market share. Tesla CEO Elon Musk on Wednesday warned of a pointy slowdown in gross sales progress this yr.

Hyundai’s world EV gross sales are anticipated to rise 12% this yr to about 300,000 autos, stated Zayong Koo, the automaker’s senior vp.

“The EV market has undoubtedly been slowing down,” Koo informed a convention name after Hyundai introduced its outcomes. “It is not going to be a linear progress. We will certainly see a little bit of a hiccup, or ups and downs, however nonetheless we’ll proceed with that.”

However Shin at Kiwoom Securities stated that regardless of stiffer competitors within the U.S. auto market typically, “With regards to the U.S. EV market, Hyundai and Kia collectively would possible safe market share as they plan to launch new EVs”.

Hyundai shares rose 2.0% on Thursday, whereas the benchmark was flat.

($1 = 1,335.6100 gained)