Global Decarbonization And Urbanization Will Usher In An EV Era

Key Takeaways

• Hyundai's expansion into EVs, hybrids, and emerging markets, along with production and localization efforts, could drive major gains in sales, margins, and global market share.
  
• Investment in autonomous tech and connected services may unlock lucrative new revenue streams, enhancing earnings growth and shareholder returns.
  
• Protectionist trade policies, rising costs, and slow EV transition threaten Hyundai's margins and market share amid intensifying competition and ongoing industry price pressure.

Catalysts

Manufactures and distributes motor vehicles and parts worldwide.

• Analyst consensus expects robust hybrid and EV sales growth, but current trends indicate that Hyundai is in the very early stages of capturing large addressable markets fueled by global decarbonization and electrification, suggesting the company could far exceed volume and revenue expectations as both developed and emerging markets rapidly require more EVs and hybrids.
  
• While analysts broadly acknowledge Hyundai's production optimization and tariff-mitigation strategies, they may be underestimating the company's ability to structurally improve cost management and localization, enabling a lasting increase in net margins and resilience that could outperform expectations even under ongoing global trade disruptions.
  
• Hyundai's accelerating push into emerging markets, where growing middle classes are driving the next wave of vehicle demand, positions the company for substantial, sustained retail sales and market share gains globally, potentially leading to long-term revenue and earnings outperformance.
  
• Aggressive investments in autonomous driving and connected mobility, coupled with Hyundai's strong track record in software and smart city solutions, open significant new high-margin revenue streams-such as mobility-as-a-service and vehicle data monetization-which could transform the company's EPS trajectory.
  
• Hyundai's healthy net cash position of ₩14.1 trillion in the auto business provides it with exceptional financial optionality to accelerate share buybacks, fund next-generation technologies, and pursue strategic partnerships or acquisitions-potentially driving both earnings growth and higher returns to shareholders.

Hyundai Motor Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Hyundai Motor compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Hyundai Motor's revenue will grow by 6.6% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.0% today to 7.4% in 3 years time.
• The bullish analysts expect earnings to reach ₩16044.0 billion (and earnings per share of ₩67739.4) by about August 2028, up 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 bullish analyst cohort, the company would need to trade at a PE ratio of 8.8x 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

• Escalating tariffs and trade barriers, particularly in the US market where tariff impacts already caused an operating profit decline of ₩828 billion in Q2, raise the risk of persistent margin compression and can significantly reduce net earnings if protectionist policies are sustained or spread to other major markets.
  
• The company faces growing pressure to keep pace with the global transition to electric and autonomous vehicles, yet Hyundai's current reliance on hybrid and ICE sales suggests a risk that R&D and production ramp-up in EVs may lag leading competitors-potentially eroding future market share and compressing both revenue and net margins.
  
• Hyundai's exposure to low-margin, cost-sensitive entry and mid-range segments is highlighted by the rising cost of goods sold (81.1 percent in Q2, up 2.7 percentage points), limiting improvements in operating profitability and constraining growth in overall earnings even as topline sales rise.
  
• Intensifying competition and overcapacity in key markets, combined with increased incentive spending (up ₩535.6 billion year-over-year) to defend market share, risks driving further price wars and discounting, leading to weaker net margins and heightened volatility in future revenues.
  
• Ongoing cost inflation for raw materials and components, along with uncertainty in shifting the supply chain toward localized or lower-cost sourcing, poses the threat of continued pressure on cost structures, which may further squeeze operating margins and impact return on equity over the long term.

Valuation

• The assumed bullish price target for Hyundai Motor is ₩358735.34, which represents two standard deviations above 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 bullish 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 bullish analysts, you'd need to believe that by 2028, revenues will be ₩216781.2 billion, earnings will come to ₩16044.0 billion, and it would be trading on a PE ratio of 8.8x, assuming you use a discount rate of 12.8%.
  
• Given the current share price of ₩212500.0, the bullish analyst price target of ₩358735.34 is 40.8% higher.
  
• 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.