Hyundai Motor Company, South Korea’s largest car maker, has reported an unexpected decline in profit for the fourth quarter of 2004.

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The company saw profits fall by 21%, citing a rise in steel prices and an appreciating local currency as major factors, the value of the won having appreciated by 11% during the period.


Analysts have also indicated that sales in the domestic market are not likely to recover until the second half of 2005.


Despite these niggling problems, Hyundai has seen a rise in share price of 4%, the main reason for which was the company’s announcement of its intention to repurchase $US683 million of its stock in the coming months. That aside, Hyundai has shown strong potential in other areas too.


The company is ranked seventh in terms of overall sales in the large US market with sales rising by 18.7% in January 2005 compared to January 2004. Whilst an appreciating domestic currency will dent sales in overseas markets, the opening of a US factory to produce the Sonata should hedge some of the subsequent losses. Another key development which shows the company’s potential is its newly-gained position as the leading new car seller in China, the fastest growing automotive market in the world.

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Even though Hyundai faces several key challenges in the short-term, its long term growth is set to be fundamentally strong. The business itself is in good condition and has been victim of some tough trading conditions rather than poor decision-making. If Hyundai can capitalise strongly on its position in the Chinese market and make a success of its foray into the US, it should enjoy more positive financial returns. However, in an industry that remains volatile economically, Hyundai’s greatest advantage could yet prove to be the improving reputation of its product.


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