Hyundai Motor Group <005380.KS> and its affiliate Kia Motors <000270.KS> aim to boost vehicle sales by 10 percent this year after robust December sales, as the sector shows a gradual recovery, led by China and the United States. Hyundai Motor shares rose 2 percent on Monday, while shares in Kia Motors jumped 3.75 percent in a broader market <.KS11> up 0.9 percent, with Hyundai expected to outperform other car makers this year.
Hyundai, the world's No.5 auto maker along with Kia, is expected to outperform its peers and gain more market share, driven by new models and its strength in compact cars.
Hyundai will post lower volume growth this year, but still outperform the market. Hyundai does not want to be another Toyota which was hit by quality issues following fast volume expansion, Lee Sang-hyun, an analyst at NH Investment & Securities, said.
Although the South Korean currency remains a major factor, Hyundai's earnings are expected to improve this year on the back of new models, which will help increase selling prices.
Hyundai said on Monday it would target sales of 6.33 million cars in 2011, up 10 percent from 5.75 million units sold in 2010. The auto giant did not give a breakdown of Hyundai and Kia sales target. In 2010, Hyundai Motor sold 3.6 million cars, up 16 percent, and Kia shipped 2.1 million vehicles, up 40 percent.
Hyundai Motor Group's 2011 target appears to be conservative and fully achievable, Tong Yang Securities analyst Ahn Sang-jun said.
Sales growth will be slowing because of a high base effect during the 2009 downturn, but Hyundai will still gain a share in the market, which is expected to grow 7 percent this year led by China and the United States.
The global auto industry rebounded strongly until the first half of 2010 from the industry's worst ever downturn, but has started losing steam because of the euro zone debt crisis and as the U.S. economy struggles with weak consumer spending.
The market, however, is on track to report healthy growth this year, as the U.S. market is gradually recovering and on robust growth from China, now the world's biggest auto market.
STRONG DECEMBER DATA
Automakers are due to report December U.S. car sales on Tuesday and analysts expect December to be the third straight month that U.S. auto sales held above 12 million vehicles on an annualized basis, suggesting the recovery could kick into higher gear.
Indian automaker Tata Motors
Hyundai said its total sales rose 2.8 percent in December from a year ago, as a 11 percent rise in overseas sales counter the impact of a 21 percent drop in domestic sales. Kia's total shipments also jumped 27.8 percent last month, helped by a 40 percent growth in foreign sales. Hyundai Motor gained market share in the United States last year, helped by strong sales of its Sonata mid-sized sedan, its best-selling model in America, while its new Avante compact showed a solid performance in the home market.
Hyundai Motor plans to roll out 10 new models this year globally, including FS utility vehicle, which will be unveiled during the January's Detroit auto show.
But limited production capacity is likely to keep Hyundai Motor from boosting output sharply, analysts said.
Hyundai's factories are already running at nearly full capacity and the only major capacity addition is its Russian plant with an annual production capacity of 150,000 units. Risks also remain over Hyundai Motor Group's expansion into the construction sector as it seeks to acquire Hyundai Engineering & Construction <000720.KS> for $4.4 billion after shareholders of South Korea's top builder scrapped a sales deal with rival Hyundai Group. Hyundai shares rose 43 percent last year and Kia jumped 152 percent, beating a 22 percent gain in the wider market.
(Editing by Anshuman Daga)