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Focus More On Europe And US Recoveries Than China; Momentum To Be Especially Strong For HMG
June 14, 2020
In the midst of automobile doldrums, Hyundai Motor Company and Kia Motors are expected to outperform the industry in 2Q20 by managed risks during the pandemic and are likely to meet with strong upside momentum as the stock market recovers.
Table 1: May’20 Korea’s Automobile Shipments
June 14, 2020
In the midst of automobile doldrums, Hyundai Motor Company and Kia Motors are expected to outperform the industry in 2Q20 by managed risks during the pandemic and are likely to meet with strong upside momentum as the stock market recovers.
Table 1: May’20 Korea’s Automobile Shipments
China, both at the state and local government levels, has consumed a variety of measures including incentives for scrapping of high-emission vehicles, subsidies for new cars, extension of subsidies for eco-friendly cars, and deregulation of license plates. Accordingly, demand is unlikely to recover faster than its GDP after the “two sessions.” We are more focused on industries that are poised to benefit from the economic reopening of the US and Europe than those which stand to benefit from China's recovery. In particular, considering the measures to boost sales of green cars in Europe, parts suppliers with high exposure to Europe and green vehicles are expected to enjoy strong upside momentum around the time for 2Q20 earnings announcements.
Table 2: May’20 HMG Wholesale Automobile Shipments
Table 2: May’20 HMG Wholesale Automobile Shipments
HMG and Toyota should also enjoy especially strong momentum after COVID-19, and polarization among companies to accelerate over the long term. HMG and Toyota were relatively mildly hit by COVID-19 vs. others and their recoveries should be stronger than others too. GM and Renault delayed their new model launches by six to twelve months while Ford (F) and Nissan put the brakes on their investment plans. This should help increase the market shares of their competitors during that period, and could result in polarization of sales between them and those that introduce new models on schedule. HMG moving forward with its new model launch schedule and future strategies thanks to stable domestic production and sales. When the world begins to recover from the coronavirus crisis of 2020, HMG’s new models, launched on schedule, will help the group gain more market share. In the long run, after COVID-19 when demand for eco-friendly autonomous vehicles grows HMG will be able to take the leadership position thanks to its differentiated strategies.
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Barry Young
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