S&P 500 falls as traders turn sour on tech
Kia Corp reported its Q2 FY2025 earnings, showcasing a 6.5% increase in revenue to 29.35 trillion KRW despite facing significant challenges from U.S. tariffs and increased incentives that impacted profitability. The company’s operating profit fell by 24.1% year-over-year to 2.765 trillion KRW, leading to an operating margin of 9.4%. The stock price rose by 2.83%, closing at 37,050 KRW, reflecting investor optimism about Kia’s strategic initiatives and strong performance in key markets.
Key Takeaways
- Kia’s Q2 FY2025 revenue increased by 6.5% year-over-year.
- Operating profit declined by 24.1% due to U.S. tariffs and increased incentives.
- Electrified vehicle sales rose by 14% YoY, with a notable increase in market share.
- Kia’s stock price increased by 2.83% post-earnings announcement.
- The company plans to expand its EV lineup and adjust its production strategy.
Company Performance
Kia’s overall performance in Q2 FY2025 was marked by a notable revenue increase, driven by strong demand in the U.S. and effective cost controls. However, the company’s operating profit was significantly impacted by external factors such as U.S. tariffs, which cost the company 786 billion KRW. Despite these challenges, Kia’s electrified vehicle sales and strategic market positioning in key regions contributed positively to its performance.
Financial Highlights
- Revenue: 29.35 trillion KRW (↑6.5% YoY)
- Operating Profit: 2.765 trillion KRW (↓24.1% YoY)
- Operating Margin: 9.4%
- Electrified Vehicle Sales: 185,000 units (↑14% YoY)
Outlook & Guidance
Kia anticipates more challenging market conditions in the second half of the year, with the full impact of tariffs expected to persist. The company aims for a 7% internal retail growth target and plans to increase its U.S. market share to over 6%. Kia is focusing on expanding its EV lineup with models such as EV4, EV5, and new hybrid models, while also optimizing its production and sales strategies to mitigate tariff impacts.
Executive Commentary
Sung Joon Kim, CFO, emphasized Kia’s commitment to leveraging its strengths, stating, "Rather than blaming external factors, we will continue to increase what Kia is good at and look at it from a long-term perspective." Kia’s management also highlighted the opportunity to enhance their position, saying, "We believe that this is a great opportunity for us to level up."
Risks and Challenges
- U.S. tariffs continue to pose a significant financial burden.
- Potential EV subsidy phase-out in Europe could impact sales.
- Intensified competition in the European market is expected.
- Anticipated demand decline in the U.S. market in the second half.
- Increasing cost of sales ratio could affect profitability.
Kia’s strategic focus on expanding its EV lineup and optimizing its production capabilities demonstrates its resilience in navigating current market challenges. The company’s ability to adapt to changing conditions and leverage its strengths will be crucial in achieving its growth targets for the remainder of the year.
Full transcript - Kia Corp (000270) Q2 2025:
Conference Moderator, Kia: Hello. Thank you for joining us today. We would like to begin the conference call for the Fiscal Year twenty twenty five Second Quarter Earnings Results by Kia. As a reminder, today’s presentation will reference the earnings materials available in the IR library on the KIA website. Joining us on today’s call from KIA are CFO, Senior Vice President, Sung Joon Kim IR Strategic Investment Group Senior Vice President, Jake Jung and Head of IR, Pyongyang Yeon.
Today’s call will begin with the earnings presentation followed by a Q and A session for investors and analysts. And we’ll take questions in the order received. With that, I would like to invite Head of IR, Pyeong Yeon, to present the Q2 results. Hello. This is Pyeong Yeon, Head of Investor Relations at KIA.
I will begin with business results for the 2025. I’ll commence with the sales summary followed by the consolidated income statement, revenue and earnings analysis and finally, the consolidated balance sheet. First, will begin with the global retail sales performance. In Q2 twenty twenty five, global industrial demand increased by 3.2% year on year due to pull forward demand in The U. S.
Market ahead of expected tariff implementation and a demand side stimulus measures in China under the trade in policy. Kia’s global retail sales witnessed 4.2% growth year over year led by the Carnival Hybrid in The U. S. The new CEROS model in India enabling us to maintain a 3.7% share of the global market. By market, despite the discontinuation of the K3 in the second half of last year, domestic sales grew by 3.2% year over year driven by the new model effects of our compact pickup truck Tasman and the EV4, both of which began full scale sales from the second quarter.
In the EV segment, continued strong sales of last year’s EV3 combined with the new launch of the EV4 contributed to achieving a 29.3% market share in the domestic EV market in the first half, securing the number one position. In The U. S. Market, solid demand growth continued into the second quarter with April demand rising nearly 10% due to concerns over potential price hikes in the second half driven by tariff adjustments that began in early April. Supported by the new model effects of the Carnival Hybrid and K4 launched in the second half of last year, our sales outpaced overall industry growth increasing by 5.2% and expanding our market share to 5.2%.
In the Western European market, despite the strong sales of the EV3 ranked third among best selling electric vehicles, sales decreased by 4.1% year over year due to the increased deferred demand prior to our key ICE volume model, the SPORTH PE launch and the discontinuation of the previous year’s Seed PHEV. However, we plan to aim to close the temporary gap in our ICE lineup and further strengthen our EV market dominance through concentrated new model launches in the second half, including the Sportage PE, EV4, EV5, K4 and PV5. In the Indian market, the new CERES model released at the beginning of the year offset declining sales due to aging of existing Seltos and Sonet models, driving a 9.5% year on year sales increase expanding our market share to 6.3%. Major and emerging markets achieved sales growth centered on The Middle East and Africa and Central And South America markets driven by the strategic expansion of export volumes from Chinese plants. Next is our electrified vehicle sales summary.
In Q2 twenty twenty five, electrified vehicle sales increased by 14% year over year to 185 ks units driven by strong demand for hybrids in The United States market and EVs in Western Europe. As a result, the share of electrified vehicles in our global sales expanded by two percentage points from 21.4% in Q2 twenty twenty four to 23.4% in Q2 twenty twenty five and sales mix for hybrid and EVs accounted for 147.4% respectively. By model, the sales growth in hybrid was led by the Carnival, while in the EVs, the growth was driven by the EV3. At the end of last year in The U. S.
Market, the Carnival hybrid introduced for the first time targeted the midsize MPVHEV segment previously dominated by Toyota Sienna and achieved a 23% market share in the segment. In Western Europe, the EV3 recorded sales of 27 ks units exceeded the Q2 business plan volume by approximately 10% supported by popularity and positive response on product appeal thereby driving Kia’s EV sales growth. From the second half of this year through early next year, Kia plans to complete its full lineup of mass market EVs with the EV4, EV5 and EV2, while also adding new models to the HEV lineup such as the Telluride and Seltos to swiftly respond to evolving demand and regulatory changes in advanced markets like The United States and Western Europe, thereby further strengthening Kia’s position as a leading global brand in electrification. The following is the regional wholesale performance. In Q2 twenty twenty five, Kia’s wholesales increased 2.5% year over year to eight fifteen ks units.
Looking at the key regions, North America saw a 4.1% increase year on year to two eighty nine ks units owing to expanded shipments of the Carnival and Sportage Hybrid based on market demand and stronger SUV focused wholesale volumes despite the full implementation of tariffs in The U. S. Market. In Europe, despite strong sales of the EV3, sales volume declined by 4.5% year over year to 140 ks units due to decreased sales ahead of the Sportage PE launch and a new lineup gap before the introduction of new EV models. In India, sales grew 9.5% year on year to 57 ks units driven by strong sales of the new zeros and the current Clavis PE models, while in the Middle East and Africa region, sales increased nearly 10% year on year to 62 ks units owing to expanded sales of the Pegas produced at the China plant and the launch of new models such as Tasman and the K4.
Next is the consolidated income statement. In Q2 twenty twenty five, revenue reached a quarterly record high of KRW 29,350,000,000,000.00, up 6.5% year on year, backed by a 1.5% increase in consolidated sales, up 12 ks units and higher ASP resulting from expanded HEVEV sales in advanced markets and continued price effects based on product value added. Operating profit recorded KRW2.765 trillion, down 24.1% year on year, primarily due to the imposition of tariffs in The U. S, which began affecting our earnings from April onward. However, earnings and profitability was well protected with the operating margin for the second quarter remaining high at 9.4% underpinned by robust demand in The U.
S. And effective cost control, including maintaining incentive levels more than 30% below the industry average.
Sung Joon Kim, CFO, Senior Vice President, Kia: The following is an analysis of operating profit in detail. Breaking down the change in operating profit by factor. First, The U. S. Tariffs imposed starting in early April had a negative impact of $786,000,000,000.
Despite the efforts to reduce intense incentives to partially offset these in The U. S. Market, overall incentives increased due to increased spending for competition in Europe, resulting in additional KRW $341,000,000,000 decline in earnings. In addition, due to a reduction in both the profitability and sales contribution of EVs, which was higher in the first half of last year following the launch of EV9 in North America, the mix effect continued to weigh negatively into Q2 following Q1 with KRW265 billion decline year over year. However, driven by increased HVA and ICE volume in The U.
S, the launch of SPORTY PE in Europe and new model effects from the EV4 and EV5, we expect the mix effects to gradually recover in the second half. Consequently, the mix impact is forecast to turn positive in the fourth quarter. Despite the negative impact on earnings from used tariffs, Kia’s solid fundamentals continue to improve. Amid market uncertainty, volume growth primarily in advanced market and regional mix improvement contributed billion. Continued product value enhancement drove pricing gains of KRW88 billion and favorable currency effect added billion.
As a result, HEAT’s operating profit for the 2025 came in at KRW2.765 trillion, a decrease of KRW879 billion year over year. Excluding the tariff impact, operating profit would have exceeded KRW3.5 trillion. Let me now walk you through the revenue analysis. Starting with the chart on the left, consolidated sales increased by 6.5% year over year. North America share rose from 44.3% in Q2 twenty twenty four to 45.1% in Q2 twenty twenty five, up 0.8 percentage points, driven by expanded wholesale, stronger ASPs led by HD and SUV sales and favorable FX.
Moving on to domestic sales, the launches of the Tasman and EV4 as well as a stronger mix centered on hybrid and SUVs led to ASPs rising 6.2%, pushing the domestic market share to 18.1%. Europe share in revenue declined 0.5 percentage points due to lower sales Y o Y, while India maintained its year over year share. Looking at the chart on the right, global ASP for Q2 twenty twenty five rose 4.9% Y o Y to million, reflecting an increased hybrid and EV sales in developed market and FX benefits. Domestic ASP also grew 6.2% Y o Y to KRW35.2 million, maintaining strong upward momentum. Next is cost of sales and SG and A.
The cost of sales ratio rose 4.1 percentage points Y o Y to 80% in Q2 twenty twenty five. Despite higher sales volume, ASP improvement and favorable FX, the increase was driven by the previously mentioned seven eighty six billion U. S. Tariff impact and a rise in incentives. Excluding tariff impact, cost of sales ratio would have stood at 77.3%.
SG and A ratio improved by 0.3 percentage points Y o Y to 10.6%. The decrease in warranty cost supported by a weaker $1 spot rate at quarter end offset the rise in testing costs and labor costs. Moving on to non operating income. Equity method gains declined KRW99 billion Y o Y to KRW115 billion, 50,000,000,000, mainly due to weaker performance at certain affiliates. Financial and other non operating income decreased by KRW 62,000,000,000 Y o Y to KRW 85,000,000,000, reflecting foreign exchange related losses and heightened FX volatility.
As a result, the net non operating profit came in at KRW235 billion, down KRW161 billion from the same period last year. Now lastly, turning to the consolidated balance sheet. As of the end of the 2025, total assets stood at KRW93.662 trillion, up KRW906 billion from year end 2024. Increase was largely due to higher accounts receivable, inventories and tangible intangible assets. Total liabilities of the period declined by KRW 164,000,000,000 to KRW 36,752,000,000,000.000.
It was mainly driven by a reduction of approximately KRW 1,000,000,000,000 in borrowings and lower provisions from a weaker period end exchange rate despite an increase in accounts payable. Total equity rose KRW1.07 trillion to KRW56.911 trillion and the debt to equity ratio improved to 1.5 percentage points from year end to 64.6%. This concludes the earning results for the second quarter. Thank you.
Conference Moderator, Kia: Next, CFO, Senior Vice President, Seung Joon Kim will deliver a review on KYO’s earnings for the 2025 and business outlook for the second half of the year. Hello, I am Kim Seon Joon, the CFO, Senior Vice President, IKEA. I would first like to talk about the 2025. Based on the first half, we have been able to reach a record high sales and we have been able to go up 2%. And on six month basis, we have been able to set a record high.
And there were a slowdown in EV, but with the strong sales of the EV three, we have been able to break through the EV chasm. In Rio and K three, there was a discontinuation of those models, but we were able to start new cycles. And with the increase of hybrid, we were able to offset this. And amid this, through product mix improvement, the ASP has gone up 5% and KRW38 million has been reported. And currently, when customers buy cars rather than high ASP, high trim and the trade down of trend in the ICE demand is in stone, but we were able to push through the ASP increase with the and so overall, I would like to say that based on the first half, the actual impact of tariffs have been fully impacted from May.
Nevertheless, in the first half, we have been able to record an OPM of 10.1%. And in the second quarter, 9.4%, we weren’t able to achieve two digit OPM. But regardless, we have been able to record high level of OPM when we believe it is linked to our fundamentals. And after the third quarter, we were able to we have been having two digit OPM, and then now we are in one digit OPM. But still, I think that we have been able to probably have more better operating profit, but we have still been able to prove our fundamentals.
Not only this, one thing that we thought could have been better is the EV CASM and also the options or high profitability vehicles. In the high option trims, because the situation is harsh, the option selections have deteriorated. And because of the trade down market stance, the mix deterioration worsened compared to the year before. And we had low incentives. And due to that base effect, this year, there was a little bit of an uptick in the incentives and that’s why the profitability deteriorated.
However, Kia still has our strong fundamentals, which enabled us to have a high OPM and profitability. To talk about the tariffs, tariffs, as you’re well aware, it’s not only hit from Kia’s side. This is a difficult situation that is faced by all OEMs. Therefore, whether we’re going to sit on our hands on this, we will not do so. And basically, we had our basic fundamentals and we will continue to enhance our core competitiveness and profit generation capability.
We think this is an opportunity for us, not only tariffs. Right now, this is an external factor of tariffs. But next time, there may be a different factor that may come in. And rather than blaming the external factors, we will continue to increase what we, Kia, is good at and think about it and look at it from a long term perspective and increase our core competitiveness and to be able to become an industry leading profitability and also be able to have better profitability. We will make sure to put in more efforts to make this happen.
Next is for the H2 outlook. As you’re well aware, in H2, it will be a more difficult situation than the first half. If we just look at the tariffs in May and June, there was impact, but in the second half of the year, we will probably get full impact of the tariffs. Not only this, if we look at the key regions for The United States, in the first half, there will be inflation. Therefore, there was the pull forward demand because of front loaded demand from the first half because of the high base effect.
And also, we anticipate price hikes in the second half and phase out of EV subsidies around September. And major forecasting agencies anticipate a 10% year on year decline in demand in the second half. In Europe, compared to COVID-nineteen situation, we believe that there will be a decline in demand. And due to the tariffs, due to the deterioration of exports to The U. S, we believe that there will be intensified competition in the European market.
And also the Chinese competitors have also entered the market. Therefore, we think that it will be difficult in the second half.
Sung Joon Kim, CFO, Senior Vice President, Kia: So let me brief you on our strategy. First regarding tariff policy, for the vehicles produced in Georgia plant, they will be distributed in The U. S. First. At the early of this year, some of the volumes was planned were planned to be exported to other regions including NEA.
But we will change the plan to distribute the models in The U. First. And the Korea products models will be sent to Canada and The U. S. So that we can reduce the impact from tariff to an extent.
Efficient production and less oil production will be pushed forward further, which is Kia strength. So if the sales is stagnant, the solvent or telluride will be produced more so that we can offset the tariff impacts in The U. S. That’s the strategy we are looking to establish. And our internal goal for the second half of this year for the retail is the 7% growth.
That’s the internal goal. So in the first half, our market share was maintained at 5.1%. But in the second half, we are targeting market share of over 6%. That is the operational strategy. So that’s the direction that we will take.
And in the case of the Asian market, so in May and June, there were some challenges in the microcoding power judgment. But the EV3 sales in Europe are very well received And EV4 will be launched in the second half as a new model and EV5 and next year EV2 will be launched in the market. And we had a challenge in IC in the first half for models like Sportage. They are aging models, so the sales were stagnant of the model in the market. However, in August, the new PE model will be launched in the market and the share of the Sportage in Kia is the most significant than any other models.
In terms of profitability and sales volume, it serves a great role in our mix. So if Sportage PE sales go up, then I think we can offset the challenges we experienced in the first half. And we will also expand the market share in Europe in the second half. And I think this will be questioned by many people here. So the annual guidance of Kia, I think this is the part where you have the most curiosity about.
But as you know, the tariff negotiation has been halted. So then so we need to think whether we will we need to expect 25% tariffs or whether it will be declined to 50% as we as in the case with Japan or 10% like The UK, but nothing has been decided yet. So accordingly, with the tariff impacts, the pricing plan and incentive strategy will be highly impacted. So as of now, it’s very hard to determine the potential impact of the tariffs and making an announcement on that might be a misguidance to our investors. So for that regard, after the tariff policy is settled, we will make a separate announcement by venue like this.
Okay. Thank you for listening. Thank you.
Conference Moderator, Kia: Now we will begin the Q and A session. Please follow the instructions from the operator.
Operator: Please press 1, that is 1, if you have any questions. Questions
Conference Moderator, Kia: will
Operator: be taken according to the order you have pressed the number 1. For cancellation, please press 2, that is 2 on your phone. The first question will be provided by Paul Huang from Citi Securities. Please go ahead with your question.
Sung Joon Kim, CFO, Senior Vice President, Kia: Hello, I’m Paul Wang from Citi Securities. I have three questions in total. The first question is a rather simple one. In the materials distributed by TIA, as far as I remember, there was a figures of raw material cost stated in the materials. This quarter, the material does not include that information.
So please elaborate on the impact of the raw material cost on the operation margin. And second question is about incentives. As you mentioned, the competition will be more intensive in the second half in the European market. And of course, the incentives were somewhat growing in The U. S.
Market, but in other market, I think incentives can have a negative impact on operating margin. So you also mentioned about the potential improvement in the mix in the fourth quarter. And as the new car cycle will commence in the European market soon, so I wonder whether incentives will have any impact on the profitability in the second half of this year in that market. My third question is the most important one. Regarding the tariff impact, I think your presentation did not show a huge amount of future plans for the potential tariff impact.
As we heard from the competitors’ presentation yesterday, they included 40% of the total tariff impact potentially include that was included in their plan. However, in the PS presentation, I think there were not much about the potential tariff impact excluding for the distributing The U. S. Produced cars in the market directly. So I would like to ask you more about the time line and the potential result of the such future plan that will be shown in the second quarter.
Let me first answer to your question about the raw material cost. There has been a lot of fluctuations regarding the raw material cost. So that’s why we included that information in Onyx Bridge so far. However, recently, the prices cost including the commodity cost and the battery cost has been stabilized. So that’s why we included that information in this Chorus Bridge.
So for your information, we are expecting that the stabilized raw material cost will have KRW 50,000,000,000 positive impact in our revenue. When we look at the details of the raw materials, in the second half, we are expecting that the price will be still stabilizing. So if we think that we need to include that information in our bridge again, then we will do that as well. And next question about the incentive. In the first half, the incentive was truly lower than the last year.
So that’s why it might look like it’s increasing year again. But in the second half, are already reducing incentives in The U. S. Market, but and that is in operation starting from May actually. However, in the European market, situations are not very great in countries like Germany and France.
So that’s why we expect there will be some addition in the incentive. However, as we launch new models like Sportage PE, EBIT four and EBIT five, there will be some kind of positive impact following the new model launches. And so that’s why we don’t see that the incentive situation will not be worsened in the first half. And your last question about our plan to offset the tariffs impact. Actually, we are we started to get impacted from the tariff impact starting in May and June.
So, so far, our company has not been responding to the impact very actively, but that will be reflected in our second half operation. As I mentioned, we will see the impact from the reduced incentives as well. And it will be applied to all the companies around the world, but there will be duty drawbacks for the parts that will be installed in cars produced in The U. S. So that’s why we are looking and expecting to have 25% to 30% of offset of tariff impacts.
Conference Moderator, Kia: Next question.
Operator: The following question will be presented by Eunyoung Lin from Samsung Securities. Please go ahead with your question.
Conference Moderator, Kia: Hello. I’m Lee Min Young from Samsung Securities. I have three questions. The first question is on the impact of H2. You said that you Kia will put in diverse efforts in order to mitigate such impact of tariffs.
And if we include the duty drawbacks that the United States government has announced, then, because if we have the simple calculation done of the impact in May and June, I think it will be about KRW $380,000,000,000. So how much can that be reduced with the mitigation plans from TSI? And the second question is, it was mentioned in the presentation that in the second half of the year, The United States market share will be pushed ahead to 6%. But in H2, I don’t think that there’s any special new cars that will be released from TS side. Therefore, considering the tariff impact and the incentive decline, how will you be able to increase the market share to 6%?
And the third question is on the share buybacks. And so in H1, it was KRW350 billion. So when will the share buyback be for the second half of the year? On the first question, rather than talking about the specific decline, that we will be able to mitigate, I would first like to talk about the big chunks of the items that we will be able to contribute to, to having impact of the mitigation. So first, we can divide it into the pricing and the non pricing measures.
And for the non pricing measures, it could be the adjustments of the production base as well as the sales base. And so we can also adjust the 25,000 of volume in order to move it to The United States. And also, there’s also the impact of the duty drawback. And therefore, we think that, that will hold 20% of the non pricing measures. And also regarding the incentives, there is about $500 that are less that we are operating compared to our business plan.
And we have to look at the economic situation. And so we cannot talk about the specifics, but currently, we are selling about 865 ks in The United States. And looking at the $100 incentives and the sensitivity of that, it will probably amount to about KRW 120,000,000,000. Therefore, it will be about a KRW 600,000,000,000 impact yearly. And so having those three together, we believe that it will hold about 30% of the mitigation.
And for the pricing measures, it will be the same for all OEMs. The sensitive it’s a very sensitive topic and we will have our common pricing adjustments according to the change of the model year. However, excluding that in place, we don’t know when we will make a decision to for the pricing measures. So excluding that, the non pricing measures of 20% and the indirect measures of incentives, which will account for 10%. In total, it will probably be 30% of the mitigation.
Regarding the market share in The United States, we believe that there will be about 10% of industrial demand that will drop like the other agencies have anticipated. However, we believe that our retail sales will go up about seven to 8%. And the basis for this is because of our hybrid models. And compared to last year, last year, we weren’t able to fully supply the hybrids that we wanted to. And the hybrids hold about 70% in H1 and we are going to increase it to 100% in H2.
And the IRA will be will go out in September 30 and will end in September 30, but and we think that it will have impact on the EV sales. However, with the even though there’s impact in EV sales, we think that the regulation cost will also go down along with it. And also, the cafe has also been less stringent. Therefore, it will contribute to lesser cost on regulations. And with the flexible adjustments in the EV and hybrid mix, we have the advantage of able to produce mixed production.
Therefore, in H2, we are proactively going to increase our HEV and ICE production in order to adjust to the market situation. Although the outlook in the market is bleak at the moment, we believe that with our mixed production advantage that we have, we will be able to grow by 7% and be able to achieve growth in a degrowth market. And to add on, as SVP, JK has mentioned, we have high demand for the hybrids. We have been able to get a lot of requests for the supply of hybrid in diverse markets, but we weren’t able to supply to all of the markets at a timely speed. And that was the reason why there was impact in the first quarter first half.
But if we look at the market share of Carnival, is currently at third rankings, but we believe that with the supply ready, we will be able to push it up to the second rankings. And so I believe that this will help in the second half of the year. And for the K4 as well, it has been newly launched in the first half of the year and the demand is still very solid and we believe that this will continue on into the second half of the year as well. And based on these factors, we believe that the market share in The United States in the second half will be able to achieve our target. And for the pricing, it is different by OEMs, but in Japan, partially, there are some OEMs that are adjusting their prices and some that are not adjusting their prices while they have low incentive.
It differs according to the company. But for Kia, we believe that we have our base of foundation and fundamentals in order to grab more demand. And based on that, we although there will be difficulties that we face in 2025, we believe that this is a great opportunity for us to level up, and that is our key advantage that Kia holds. This concludes the fiscal year twenty twenty five second quarter earnings results by Kia. If you have any further questions, please contact the Kia IR team directly.
Thank you for your time and participation.
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