Hyundai Motor Co's <005380.KS> quarterly profit jumped by nearly half to a record high thanks to a weaker won boosting offshore sales and government incentives at home, factors which should help it outperform rivals this year.

South Korea's Hyundai expects overall vehicle sales to rise 8 percent this year and its U.S. market share to grow further in the second half, throwing a gauntlet to larger competitors such as Toyota Motors Corp <7203.T>, whose overall U.S. sales dropped by almost 35 percent in June.

Hyundai and its affiliate Kia Motors Corp <000270.KS>, together the world's No.5 car maker, are expected to continue to benefit from increased global appetite for smaller cars and an improving brand image, analysts said.

But with the global economy still struggling and automakers reliant on government stimulus packages to boost demand, analysts questioned whether Hyundai's strong performance could be replicated in the second-half.

Hyundai's earnings came out quite strong, but that was also helped by government's stimulus plans, said Nara Lim, a market analyst at Hanwha Securities.

As global economies, including that of the United States, are still weak, investors are wondering if second half numbers will post as strong as seen in the second quarter.

South Korea's government has introduced measures such as tax incentives and easier consumer financing to boost domestic car sales.

Hyundai shares fell 3 percent, having jumped more than a third in the quarter ended on June 30, outpacing the wider market's <.KS11> 15 percent gain.

Over the longer term, say six months or a year, Hyundai will be able to continue to increase its market share and sales volume, said Lee Seung-jun, a fund manager at Midas Asset Management.

A strengthening won currency could become cause for concern, but not immediately.

The impact from the recovering won would be tolerable for the time being, Lee said. If the won strengthens to the early 1,100 per dollar level it will hurt Hyundai's profitability, but it's an unlikely scenario until year-end at least.

STRONG OPERATING PROFIT

To support its ambitions, Hyundai is counting on older standby models along with newer cars such as the i30 wagon and the Genesis coupe.

It can take heart from the successful launch of its Genesis sedan, which J.D. Power and Associates ranked as the most smoothly launched vehicle for this year.

Hyundai posted a net profit of 811.9 billion won ($649.9 million) in the second quarter, soundly beating a 456 billion won forecast by 10 analysts in a Reuters poll.

That compared with a 546.9 billion won net profit a year earlier and a 225 billion won profit posted in the first three months of the year.

Contributions from overseas affiliates, especially in China and India, contributed to the strong numbers, Hyundai said.

Its operating profit during the quarter ended on June 30 was 657.3 billion won, well above a forecast for a 496.5 billion won profit. The company's operating profit margin was 8 percent, its highest level in 5 years, it said.

The maker of the Elantra compact sedan reported a 662.5 billion won profit a year earlier and a 153.8 billion won profit in the first quarter.

The average value of the won in the second quarter was down 20.8 percent against the dollar from a year earlier although it rose 10.3 percent from the first quarter, according to Reuters calculations.

Sales in the April-June period rose to 8.08 trillion won from 6.03 trillion won in the prior quarter but fell from 9.11 trillion won a year before.

For the whole of 2009, Hyundai's net profit is expected to fall 5 percent to 1.38 trillion won, a Reuters Estimates poll of 20 brokerages shows.

Japanese makers are faring worse, struggling with weaker demand and a firmer yen. Toyota is seen reporting a 354 billion yen ($3.76 billion) net loss in fiscal 2009/10.

($1=1249.1 Won=94.16 Yen)

(Writing by Marie-France Han; Editing by Lincoln Feast)

South Korea