Fierce EV Competition And Aging Markets Will Undermine Prospects

Key Takeaways

• Accelerating EV adoption and shifting urban mobility trends threaten Hyundai's future growth, market share, and ability to maintain strong unit sales in key regions.
  
• Rising input costs, rigid labor structures, and unfavorable demographics present long-term risks to Hyundai's profitability and sustained revenue expansion.
  
• Accelerating hybrid and EV growth, production localization, and premium segment expansion are strengthening Hyundai's profitability, minimizing risk, and supporting stable, long-term financial performance.

Catalysts

Manufactures and distributes motor vehicles and parts worldwide.

• The rapid global push towards electric vehicles is likely to expose Hyundai to intensifying competition and the risk of failing to keep pace with evolving technology and regulatory requirements; this may squeeze future market share and revenues as cost and innovation races with both legacy and emerging EV leaders escalate.
  
• Demographic shifts in Hyundai's core markets, such as aging and shrinking populations in Korea and parts of Europe, are set to cap long-term volume growth and drag on top-line performance despite near-term gains, ultimately weighing on the company's ability to generate sustained revenue increases.
  
• Hyundai's profitability faces mounting headwinds from structurally higher costs, including persistent inflation in raw materials, the impact of rigid labor structures, and elevated tariff costs in key markets like the U.S.; these factors threaten to structurally erode operating and net margins unless drastic cost reduction is achieved.
  
• The company's ambitious investments into EVs and battery supply chains may fail to translate into improved margins if economies of scale are not reached quickly enough, particularly since short-term EV profitability remains under severe strain due to higher input costs and consumer price sensitivity.
  
• As urbanization accelerates and alternative transportation models such as car sharing and micro-mobility gain traction, Hyundai is at risk of experiencing shrinking demand for private vehicle ownership in the long term, undermining both unit sales and growth in key urbanized geographies.

Hyundai Motor Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Hyundai Motor compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Hyundai Motor's revenue will decrease by 0.8% annually over the next 3 years.
• The bearish analysts assume that profit margins will shrink from 6.0% today to 4.8% in 3 years time.
• The bearish analysts expect earnings to reach ₩8818.6 billion (and earnings per share of ₩32663.08) by about August 2028, down from ₩10692.8 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 9.3x on those 2028 earnings, up from 4.4x today. This future PE is greater than the current PE for the GB Auto industry at 4.3x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 12.76%, as per the Simply Wall St company report.

Hyundai Motor Future Earnings Per Share Growth

Risks

• Hyundai's rapid growth in eco-friendly vehicle sales, including a 36.4 percent increase in hybrids and a 33.9 percent increase in electric vehicles year-over-year, demonstrates strong alignment with long-term electrification trends, which could support sustained revenue and limit downside risk to future earnings.
  
• The company is actively expanding its hybrid and EV pipeline, with successful launches like the Palisade HEV and IONIQ 9, and is planning further production optimization and localization, which may offset margin pressures from tariffs and help support gross margin recovery over the long term.
  
• Operating income and profitability, while pressured in the short term by tariffs, are already showing resilience through flexible incentive policies, local sourcing initiatives, and cost reduction strategies, positioning Hyundai to potentially defend or expand operating margins as these programs scale.
  
• Hyundai's Genesis luxury and premium segment continues to rise and now comprises 5.5 percent of total sales, with hybrids and Genesis together surpassing 20 percent of global sales, offering a pathway to higher average selling prices and improved profitability over time.
  
• Strong performance from Hyundai Capital and global auto financing activities-including growth in high-quality loan portfolios and international expansion-bolsters group cash flow and could provide a stabilizing effect on consolidated revenue and net profits, even during periods of manufacturing volatility or external shocks.

Valuation

• The assumed bearish price target for Hyundai Motor is ₩209528.49, which represents two standard deviations below the consensus price target of ₩284131.92. This valuation is based on what can be assumed as the expectations of Hyundai Motor's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩380000.0, and the most bearish reporting a price target of just ₩200957.5.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be ₩183279.2 billion, earnings will come to ₩8818.6 billion, and it would be trading on a PE ratio of 9.3x, assuming you use a discount rate of 12.8%.
  
• Given the current share price of ₩212500.0, the bearish analyst price target of ₩209528.49 is 1.4% lower. The relatively low difference between the current share price and the analyst bearish price target indicates that the bearish analysts believe on average, the company is fairly priced.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.