hyundai: High-margin SUVs help Hyundai earn more per car than Maruti
The local unit of South Korea’s Hyundai Motor, which sold just about half the number of cars Maruti Suzuki dispatched in fiscal 2021, has been closing in on the market leader in revenue and profitability over the last five years. Hyundai Motor India’s revenue rose 5% annually between FY16 and FY21, faster than Maruti Suzuki’s growth of 3.38%.
The operating profit (Ebitda) at Hyundai Motor India fell 2.5% to Rs 4,174 crore in FY21, even as sales volume fell a steeper 12% to 0.56 million units during the year when two months of business was lost on account of lockdowns.
Revenue for the maker of the Creta SUV slid 5.3% to Rs 40,674 crore in FY21, while profit after tax dropped 21% to Rs 1,847 crore, according to the company’s filings with the Ministry of Corporate Affairs, shared with ET by business research platform Tofler.
Higher operating leverage, better management of raw material cost and lower other expenses helped Hyundai improve its profitability. Consequently, the operating profit per vehicle of the Hyundai reached Rs 72,471 in FY21, which was nearly double of what Maruti Suzuki achieved.
Reviewing the performance of FY21 — the directors report stated that post lockdown in wave-1 of the pandemic, Hyundai was able to immediately rebound to its normal domestic sales of 38,200 units in July 2020, achieving 97.92% of its July 2019 sales. This growth momentum was maintained with average growth of 20% month on month sales in the next three quarters. This is clearly seen in the operating performance of the company.
Hyundai Motor India’s operating profit margin rose 0.29 percentage point to 10.26%, while Maruti Suzuki’s margin slipped into a single digit for the first time in nine years. The operating profit of Hyundai was 78% of Maruti in FY21 — compared with previous five year’s average of 42% — while the volume sold by the Korean carmaker was just 39% of the market leader.
Hyundai Motor India’s premiumisation strategy has been delivering better returns as the average realisation of Hyundai cars stood at Rs 7.06 lakh a car. For Maruti, this was Rs 4.56 lakh.
The Ebitda per vehicle of Maruti at Rs 65,993 in FY17 was Rs 6,089 higher than Hyundai’s, but it has since been consistently declining at a compounded annual rate of 13.6%.
Hyundai is in the process of increasing the production capacity to 0.75 million units per annum to meet the market demand by further automating certain processes, clearing a few bottlenecks in the production process and supply chain and introduction of new models.