Hyundai Motor Co

Ladies and gentlemen, thank you for attending this conference call. We will now begin Hyundai Motor Company's business results conference call for the fourth quarter of 2024. Once again, the presentation materials can be downloaded from the Financial Supervisory Services Electronic Disclosure System at dartsfss.or.kr or from our IR website, www.hyundai.com. Joining us at this conference call are Executive Vice President Seung Jo Lee, Head of Planning and Finance Division, Executive Vice President Da Hyun Goo, the Head of IR Division, Vice President Dong Hwan Kim of Finance and Accounting Subdivision, Michael Yoon, the Head of IR Group, and Senior Vice President Hyung Seok Lee, the Head of Planning and Finance Division of Hyundai Capital. We will first have Hyundai Motor Company's presentation on the business result, followed by a Q&A session with the attending investors. Those who have questions are advised to press the star button followed by number one after the presentation. Now we will proceed with the presentation by Michael Yoon, the Head of IR Group at Hyundai Motor Company. Hello, this is Michael Yoon, Head of IR Group. Welcome everyone to Hyundai Motor Company's 2024 Q4 Business Results Conference Call. On behalf of Hyundai Motor Company, I appreciate your time for participating in today's call. please refer to the presentation HMC 2024 Q4 business results on our IR website. Today's presentation consists of two parts, sales summary and financial summary. For more information, please refer to the appendix page. First part is sales summary. Our 2024 Q4 global wholesale decreased by 2.2% year-on-year to 1,066,239 units while retail sales decreased by 0.8% year-over-year to 1,075,434 units. In the fourth quarter, our global wholesale decreased slightly compared to the previous year. However, excluding China, our Q4 wholesale increased by 2% year-over-year. In the domestic market, sales decreased by 4.6% year-over-year due to softened demand for macrofactors and seasonal cyclicality. North America saw a 4.4% increase in sales, driven by continued strong sales of high-margin vehicles. The U.S. market witnessed increase to sales of hybrids and Genesis with growth rates recording 60.6% and 9.1% year-on-year, respectively, compared to the previous year, boosted by increase in demand of overall hybrid models, including Tucson, Santa Fe, Avanti, and Sonata. In Europe, although hybrid sales increased by 31.3% compared to last year driven by strong sales of Santa Fe, Kona, and Tucson facelift hybrids, wholesale sales decreased by 3.8% compared to the previous year due to weaker demand for EVs. India wholesale witnessed a 0.7% decrease year on year, but the retail sales increased 2.5% due to a shift towards the retail-oriented sales strategy. The annual wholesale decreased 1.8% year on year to 4,141,959 units, while retail sales decreased by 2.7% to 4,044,513 units. Next is sales by model and key status. Global SUV sales, including Genesis, accounted for 59.8%, a 1.0 percentage point increase compared to the previous year, influenced by the global expansion of Santa Fe and the sales ramp-up of Creta facelift in emerging markets. Proportion of Genesis recorded 5.5%, which increased by 0.5%, driven by strong sales of GV70. Eco-friendly vehicle sales increased by 21% due to strong sales of HEVs. EV sales were similar to that of the previous year, with some recovery in demand due to the strengthening of the EV lineup, including the launch of Casper EV. Due to EV chasm, HEV sales surged by 41.3% compared to the previous year replacing EV demand. The HEV proportion continues to expand as hybrid sales increase significantly in strategic markets such as North America. Next is annual sales summary. The SUV proportion, including Genesis, recorded 59.7%, which is a 2.6% increase from the previous year end. Genesis proportion increased 0.3% to 5.6%. Despite softening of global EV demand, the sales of eco-friendly vehicles increased by 8.9% to 757,000 units thanks to the surge of hybrid sales. This is the end of the presentation on sales summary, and now I'll move on to financial summary. This is a summary of our income statement. Consolidated revenue increased by 11.9% year-over-year to 46.6 trillion Korean won, and operating income decreased by 7.8%. 17.2% year-over-year to 2.8 trillion KRW. The automotive division's revenue increased by 6.8% year-over-year due to an increase in regional and product mix improvement from high margin vehicles. The operating profit decreased by 33.7% year-over-year. Revenue from finance division increased by 44.6% year-over-year due to strong sales of vehicles in the US in growth and penetration rate.

And operating profit increased by 79.1%.

Net income increased by 12.3% year-over-year to 2.5 trillion Korean won. Next is a summary of our annual income statement. Annual consolidated revenue increased by 7.7% year-over-year to 175.2 trillion Korean won, and operating income decreased by 5.9% year-over-year to 14.2 trillion Korean won with OP margin of 8.1%. Net income increased by 7.8% year-over-year to 13.2 trillion Korean won. Next is quarterly revenue and operating income analysis. For revenue, volume effect from global sales increasing, excluding China, had an impact of 164 billion Korean won. Despite incentive increase, strong sales in North America and the increase in ASP had a positive impact on mixed effect of 1,702 billion won. In addition, favorable exchange rate conditions resulted in FX effect to results in 454 billion Korean won. Lastly, with revenue increase from finance business, the total revenue increased by 11.9% year over year. Regarding operating profit, depreciation of Korean won at quarter end impacted the warranty provisions to be revaluated at a higher FX rate, resulting in a negative FX effect of 320 billion Korean won. Rising incentives led level led to the net mixed effect to result in negative 425 billion Korean won. Due to increase in SGMA expenses, including the labor and R&D costs, the operating profit decreased by 17.2% year-over-year. Next is the annual revenue and operating income analysis. Global sales excluding China expanded compared to the previous year, leading to volume effect of 396 billion Korean won. Despite increase in the incentive spending, the mixed improvement outweighed the increase incentives and resulted in mixed improvement effect of 5,188 billion Korean won. The annual average $1 exchange rate rose compared to the previous year, contributing to the increase in revenue. Total revenue increased by 7.7% year-over-year. Operating profit was affected by volume effect of 86 billion Korean won and the net mixed effect of 157 billion Korean won. Total operating profit decreased by 5.9% year-over-year due to an increase in SG&E expenses such as labor and warranty related expenses. Our fourth quarter cost of goods sold ratio recorded a 0.5 percentage point increase year on year to 8.5%. SG&A increased by 26.7% to 6.3 trillion won due to an increase in labor costs. Lastly, net profit increased by 12.3% year on year to 2.5 trillion won. Our annual COGS Ratio recorded a 0.2% percentage point increase year-on-year to 79.6%. SG&E increased by 17.2% due to an increase in labor and work expenses and recorded 21.5 trillion won. Lastly, net profit increased by 7.8% year-on-year to 13.2 trillion won.

That concludes the end of the presentation of the fourth quarter 2024 business results.

Next, Executive Vice President Seung Jo Lee, Head of Planning and Finance Division, will assess the company's business results and share information about the dividend payout for Q4. Hello, I am Vice President Seung Jo Lee, Head of Planning and Finance Division. Allow me to share our business results for the fourth quarter of 2024 and the year-end dividends. In June, we were driven by increased $1 exchange rate by 76.1 year-on-year to $1,397. Expanded sales in North America and strong HGV and Genesis sales. We have continuously improved our sales base. Nevertheless, a high quarter-end exchange rate of 1,471, up 73.1 from the quarterly average, caused a negative impact worth around $700 billion that came from contribution to provision for sales warranty. As we ramp up incentives to the U.S. and Europe market, the negative incentive effect has expanded, resulting in an operating profit of $2.8222 trillion, down $585.6 billion year-on-year, an operating profit ratio of 6.1%. Next, I will talk about the 2024 annual performance and our compliance with the guidance. In 2024, we achieved the record high sales amounting to $175.2 trillion of 7.7% year-on-year and $14.2 trillion of operating profit and 8.1% of operating profit ratio. For the sales revenue, we over-exceeded our sales growth guidance of 4% to 5% and complied with the OPM guidance of 8% to 9%. We will continuously strive to meet the level of market trust by presenting and achieving detailed and sophisticated guidance. Next, let me address the exchange rate effect of sales warranty provision, which has the greatest impact on this quarter's operating profits. In the case of sales warranty provision, the amount in foreign currency is evaluated based on the exchange rate at the end of the quarter, and the differences in exchange rates are seen as provision corresponding to the operating profits. For this reason, despite high market expectations based on the high quarterly average exchange rate, the overall exchange rate impact cost a negative $320 billion one year on year. The sales warranty provision incurred this quarter is expected to normalize once the $1 exchange rate stabilizes in the near future.

Let me move on to the incentive effect.

We estimate that the average incentive in the U.S. automotive market has increased by roughly $1,300 per unit year on year. Although we provide less incentives than the industry average, the figure increased by about $500 per unit year on year. Incentives increased in the European market as well due to worsening macroeconomics, which has further aggravated the negative incentive effect. In 2024, we paid out a quarterly dividend of 2,000 won every quarter, and based on our dividend payout policy, with a ratio of at least 25%, the final dividend will be 6,000 won. The annual dividend per share, including quarterly dividends, is 12,000 won based on common stock, which is the largest ever, and the record date is February 28, 2025. In addition, since November 28, 2024, We have been continuously purchasing Treasury stocks worth 1 trillion won, including common and preferred stocks. We will make sure to implement the shareholder return policy promised to shareholders and investors, including the value-up program mentioned at the CEO Investor Day held in August 2024. Lastly, I will talk about the 2025 business environment, and how HMC will respond to and manage risks. As the market is concerned, 2025 will be a year when internal and external risks and uncertainties have grown more than ever, including policy risks from the launch of the new U.S. administration, as well as enhanced European fuel regulations. In response, along with top executives, including President Jose Munoz, we will respond quickly and flexibly at the group level to respond to changes in the market and future risks based on close monitoring and analysis. Even in the recent COVID-19 pandemic and the shortage of vehicle semiconductors, we managed to turn the crisis into an opportunity by responding quickly and flexibly to the market based on strong fundamentals. We will thoroughly prepare and strive to reverse the crisis of 2025 into an opportunity. We appreciate the unwavering support of our shareholders and investors. Thank you for listening. Next, Senior Vice President Hyeongseok Lee, Head of Planning and Finance Division of Hyundai Capital, will assess the Q4 results for the finance business and 2025 business prospects. Hello, I'm SVP Hyeongseok Lee, CFO of Hyundai Capital. I'd like to begin with the Q4 2024 earnings results and 2025 outlook for the finance business. 2024 was a year with multiple market uncertainties from geopolitical risks, interest rate fluctuations, to political issues. Although there were negative outlooks and concerns regarding the capital market, Hyundai Capital demonstrated improved funding competitiveness compared to the upward adjustment of global credit ratings. As a result, Hyundai Capital intensified its focus on its role as a financial partner for the group's vehicle sales. By maintaining stable profitability and asset quality through a strong automotive finance-centered portfolio, we achieved favorable performance. In 2025, we plan to enhance our positioning as a leader in the global financial market by expanding Hyundai Australia business, increasing HMG's global finance coverage, such as launching the Indonesia subsidiary, diversifying business through new mobility financial collaborations, and securing the basis for mid- to long-term growth through innovative product development, including battery lease and care service, et cetera. Next slide, I'd like to share the details for each company. First is Hyundai Capital. Hyundai Capital has seen an 11% increase in lease transaction volume compared to the previous year through the launch of EV-focused financial products in collaboration with HMG. With the expansion of Hyundai Capital's lease-centric cap asset size, the proportion of automotive finance remains at 83%. Due to the increase in lease assets, lease revenue is expected to rise by 13% in 2024 compared to the previous year. Additionally, enhanced competitiveness of installment products and improved profitability have led to an 18% increase in interest income from installment sales, resulting in a 9% growth in operating revenue for 2024. Although interest Expenses have risen due to high interest rates. We minimize the impact of these cost increases through excellent funding competitiveness and a diversified borrowing portfolio. By maintaining a delinquency rate in the 0% range throughout the year and stabilizing loss provisions, operating profit for 2024 is projected to increase by 29%, with pre-tax profit rising by 27%. In 2025, unstable market conditions are expected to persist due to fluctuations in exchange rates and interest rates. We will maintain a lower delinquency rate compared to our competitors through stable asset portfolio management and preemptive risk management, thoroughly preparing for domestic and international uncertainties. Also, we plan to continue creating more synergy through enhanced collaboration with Hyundai Motor Group, such as releasing various eco-friendly vehicle financial services in line with Hyundai Motor Group's elective rotation strategy. Next is Hyundai Capital America HCA. With the increase in vehicle sales for the group, including the expansion of hybrid sales, the U.S. market recorded a 7% point increase in acquisition rate, reaching 67%. This led to a significant rise in all products, with the total asset size projected to exceed $70 billion by the end of 2024, representing a 21% expansion. With the structural growth, the operating revenue for 2024 increased by 24% compared to the previous year, driven by rising returns on installments and lease products. Although interest expenses rose due to high interest rates and increased borrowing, operating profit grew by 23% year over year, benefiting from efforts to improve OPEC's efficiency. In terms of soundness, the delinquency rate remains at a lower level before the pandemic, and the proportion of high-quality customers is managed at a robust 88%, preparing for market uncertainties. For 2025, The economic impact of new government policies and interest rate volatility are expected to be the most significant variables affecting profit and loss. HCA has proactively secured liquidity by successfully issuing $2 billion in bonds in January and plans to continue stable vehicle sales financing through flexible funding activities. Through these efforts, we aim to defend profitability alongside study asset growth in 2025 with thorough risk management. This is the end of my presentation on the finance business. Thank you for your attention. Next, Executive Vice President Cha Yong-Koo, the head of IR Division, will present the 2025 annual guidance. Good afternoon. I am Executive Vice President Cha Yong-Koo, head of IR Division. HMZ has been releasing annual guidance on vehicles from 2021 to help shareholders and investors understand HMC's business. And from 2022, we have been publishing annual guidance with extended application of consolidation basis. Also, our purpose is to boost the visibility and trust of shareholders and investors in Hyundai Motor Company's performance by reflecting various internal and external business environment changes in our year-long guidance updates. Just like Executive Vice President Lee has said, in 2024, we achieved our guidance, sales growth and operating profit mentioned at the beginning of the year. Let me walk you through our 2025 annual guidance. First is wholesale-based sales plan. HMC's 2025 sales target, considering the industrial demand of each RHQ and segment, is 4.17 million units up 32,000 units from the previous year. Please refer to page two for the sales target of each region. Consolidation basis revenue of 2025 is expected to see a three to four percent increase given the continued ASP increase, including sales volume growth in North America and boosted sales of Genesis and eco-friendly cars. Consolidation basis operating profit target for this year is 7-8% given Hyundai Motor Company's competitiveness and cost innovation based on enhanced fundamentals achieved by strong performance in the North American market and increased hybrid and Genesis sales despite the decline in global demand. Bigger macro uncertainties and incentives increase due to tougher CBU competition. We plan to invest 16.9 trillion won, a 16.3% increase compared to 2024. 6.7 trillion won will go to R&D investment of 37.2% compared to 2024, as we will see more vehicle development projects in line with the Genesis and eco-friendly vehicle line of enhancement, including Genesis hybrids and bigger technology investments mandated by the SDV transition. Our CAPEX investment is planned to be 8.6 trillion won and our strategic investment will stand at 1.6 trillion won. We expect free cash flow to be between 0.5 trillion won to 2 trillion won given Hyundai Motor Company's profitability and continued investment expansion in 2025. Next, let me explain our shareholder return policy. In accordance with the value-up program announced on August 28, 2024, we intend to implement a shareholder return policy of 35% or more of the total shareholder return. Also, our value-up program will take effect as planned with a dividend of $10,000 minimum for common shares and $2,500 for quarterly dividends. Additionally, we will state the objective when conducting share buybacks set the total amount of share buybacks to $4 trillion from 2025 to 2027, and implement share buybacks considering the preferred share discount. Though Hyundai Motor Company is set to face unprecedented levels of internal and external uncertainties in 2025, we will strive to achieve the 2025 annual guidance through a business management that prioritizes continued profit creation and shareholder value based on product competitiveness and stronger fundamentals. please refer to the 2025 guidance material posted on our website. This concludes my presentation on 2025 Annual Guidance. Thank you.

With that, we will conclude the presentation and take your questions. 질문을 취소하시려면 결표와 2번을 누르시면 됩니다. Now Q&A session will begin. Please press star 1, that is star and 1, if you have any questions. Questions will be taken according to the order you have pressed the number star 1. For cancellation, please press star 2, that is star and 2, on your phone. 처음으로 질문해 주실 분은 CT증권의 황폴님입니다. The first question will be presented by Paul Hwang from Citigroup. Please go ahead with your question.

Hello, I'm Paul Hwang from Citigroup. I have three questions for you. Regarding the guidance for OPI margin, we always provide OPI bridge, so you can see the range of each OPI bridge in terms of exchange rate, volume, mix, finance, etc. I'd like to ask you a question about whether this 25-year guidance has come out. How much did you put in our rate assumption with this? And then, compared to 2024, you said that the mix improvement and ASP increase in Tailwind, especially if you look at the ASP increase, whether it's by car type or by region mix, how are you looking at the ASP increase? I'd like to ask you about the color of this. The second is about self-serve make-up. From the 25th year, I said that I would approach it as a car, but I can't tell you the specific number, but please tell me the color of how you are doing this. Finally, the third is about G&P. In the beginning of the year, there was a news about a pick-up show, and it was about what can be unveiled this year. I can't tell you the content, Hello, I'm Paul Kim from Citibank.

I have three questions. The first question is regarding the guidance. The guidance is related to OPM for an exchange rate mix and volume in finance and others. So I'm wondering whether the 2025 guidance which kind of direction that you have for the 2025 guidance and what kind of assumptions you have for that. And my second question is related to foreign exchange rate assumption. I do wonder what kind of assumption you have related to the volatile foreign exchange rate. And also, I do have a question about the mixed improvement and what when the foreign mixed sale product mix and ASB is expected to increase. So I wonder what kind of opinions you have about the mix improvement as well as ASB increase depending on the region. And I do have another question regarding your buyback plan. So you did say in your presentation that you will have separate plans for the common stocks as well as preferential stocks. So how will these plans will be assessed going forward? And my last question is regarding cooperation with GM. So I'm curious about the details of the timeline, as well as whether the collaboration plan with GM can be announced within this year.

I'll try to answer your question. There are three questions, but I think there are more questions. It takes some time to organize. First of all, regarding the guidance of the 25th year, if I tell you the standard of quantity, the total quantity is 4,174,000 units, which is 1% increase compared to this year. We have collected the goal of increasing the market share by 0.1%. Overall, our global industrial demand We are seeing that it is slightly increasing, but not so much, and we are seeing that it will be stopped. Next, if we look at the ratio of EVs and hybrids in terms of volume, we have a plan to increase EVs by 53.7% from 218,000 to 336,000 compared to this year's sales. In particular, the hybrid that we are emphasizing has been imported with a business plan to increase by 30.2% from 497,000 to 645,000 to 647,000. Then, another thing you said was what the other parts of the car and the financial sector will be like. In terms of profit, we are predicting that it will be almost the same as this year. In other parts, we are reflecting that the interest rate is slightly increasing and the interest rate is slightly improving. Another thing you mentioned was the assumption about the exchange rate. The assumption about the exchange rate was in November when we introduced the business plan. The rapid change in the exchange rate occurred in December, so the exchange rate has increased due to various complex factors, but at that time, when the company was going to import, the exchange rate was set at 1,300 won. So, the assumption about the exchange rate is 1,300 won. It's a bit difficult to tell you the exact number. It's a bit difficult to tell you the exact number. I think you can think about it. Then, when we buy and sell self-proclaimed stocks, we have the stock market and the priority stock market. I told you in August last year that I would consider the proportion of the priority stock market and make a different proportion of the stock market. The fact that we are buying and selling self-proclaimed stocks this time does not reflect that part, and we are buying and selling self-proclaimed stocks with the same proportion, but from next year, starting this year, If we think that the priority stock will fall a lot, we will increase the priority stock purchase ratio to the extent that it will not fall too much. Then, it is a little difficult to tell you specifically about GM, but now each item binding contract. So, the area we are focusing on first is the joint purchase of both companies. We are trying to sign the binding contract first for this area. We believe that it will be signed soon. So, we are planning to select an item in the center of North America or in the middle of South America and promote joint purchase. Also, in terms of We are reviewing the EV commercial vehicles that we are making for GM and re-badging for GM. So, from our point of view, we are looking for opportunities for commercial vehicles to enter the North American market. I think there will be an opportunity to look for it. We are cooperating with each other on both vehicles, and we have a great sense of empathy to do it together. However, the specific car type and selection work is in the process of selection because there is a relationship of understanding between the two companies. So, I would like to tell you in general, in the first quarter of 2025, we are in the process of promoting the completion of the final contract as a goal. Within the first quarter, Okay, so the first answer regarding your question about 2025 guidance.

We expect the volume to increase by 4.17 million compared to this year. and the market share increased of about 0.1%. And since about the global industrial demand, it will be slightly increased, but not that much, so we believe that the global industrial demand will largely be stagnant in 2025. And you also mentioned about the volume. The proportion of EV and hybrid will be, for the EV, compared to this year, the volume will increase from 200 to 336K, which is 53.7% increase. And for the HEV, the proportion will increase from 497K to 647K, which is about 30.2% increase. So that is our business plan. And regarding your question about the prospects of automotive and financial and other fields, We believe that the financial sector will be largely the same as this year. However, the other areas will be slightly more profitable compared to this year. You also questioned about the FX assumption, and we actually established our business plan November later year. At that time, the foreign exchange rate was very volatile. So at that time, we set the exchange rate at around 1,301 per dollar, although the specific numbers cannot be disclosed. We believe that at that time the target was about the middle, medium of 103,001. And you also had a question about the buyback, Treasury stock buyback, about the proportion of common stock and preferential stock. In August last year, we said that we will differentiate the proportion of common stock and preferential stock, but that has not been reflected in this year's business plan. But going forward, we will maintain the differential rates to the similar level of other companies. So if the preferential stock, the volume will decrease, then in order to defend that, we will increase the purchase of preferential stock. And your last question was about the collaboration with GM. The specific details are again, it is difficult to disclose them, but by each item we are trying to sign a binding contract. So both GM and HMC are working together to proceed with joint purchase of some parts within this year, and the exact plan will soon be announced. And we are also trying to make a joint purchase in North America and Latin America region. And for the commercial vehicle, We are trying to make usage of EV commercial vehicles, and we're trying to send those vehicles to the GM to be used as a rebatching. And we are also looking for another opportunities in the NA market. In terms of commercial vehicle, sorry, passenger vehicle, we are forming a consensus on the need for collaboration of both companies, but for the specific vehicle types, we are still on designating a process And I can say that within the first quarter of this year, we are trying to sign the final finding contract. So, to recap, within the first quarter of this year, we are trying to sign major finding contracts and have a cooperation in both commercial vehicle and passenger vehicle. And to that end, we are going to announce the joint promotions. Next question, please.

The next question is from Yu Ji-yong from Dowel Investment. The following question will be provided by Jiung Yoo from Dowell Investment and Securities. Please go ahead with your question.

Hello, I'm Jiung Yoo from Dowell Investment and Securities. Thank you for your explanation. I have three questions for you. First of all, if you compare the sales of the third quarter and the fourth quarter, the sales of the third quarter and the fourth quarter, the sales of the third quarter and the fourth quarter, the sales of the third quarter, Especially in terms of the original price, please tell us where it occurred. Especially when we look at the quarter, the exchange rate applied in the top line has increased a lot, and sales have increased by about 40,000 compared to the third quarter. So, basically, we were predicting that there would be some improvement flow, but whether this part has been closed due to incentive costs or I would like to ask if this is a fixed issue that has been reflected in the original price. Second, I know that Metaplant is now operating, but what is the plan for this year? And in the United States, it seems that the IRA subsidy is currently saying that we should give up $7,500, but I wonder how it will actually change and how you are predicting the direction. Finally, I would like to ask you I'd like to ask you a question. It's about MOTIONAL. Last year, our company participated in the summit. So, based on the current standards, I'm curious about what kind of timeline this business is running. Waymo, which we're going to be in charge of the Foundry right now, has a technical difference with MOTIONAL, so we'd like to know if commercialization is being supported. If you can share it in the possible part, Yes, thank you for your question.

I am from Dowel Investment and Securities. Thank you for your explanation. I have three questions. My first question, it seems that the performance of Q3 and Q4 show a big difference. And even if we take into account the warranties, it seems that the difference is a bit too big. So I was wondering where that difference came from, especially in terms of cost. And if we look at Q4, it seems that the exchange rate has increased dramatically, meaning that the Korean won has depreciated significantly. a lot and there was also a difference with sales. It seems that you sold 40,000 more vehicles in Q4 compared to Q3. So, I have thought that you have made some improvements in terms of sales in Q4, but would that be traded off as incentives or would other factors come into play? That was my first question. And my second question is about the meta-plant that you will be operating in the United States. What are your production plans for this year? And I've heard that there are talks of scrapping the IRA $7,500 benefits in the United States. And what is your prediction and expectations of that? And moving on to my last question, I have a question about strategic investment, specifically Motional. We at Dowel Investment and Securities have actually took part in capital, paid in capital increase of Motional. And what is the timeline of that? And I also was wondering if there is a technological difference In Waymo, from my understanding, Waymo is in charge of foundry business, and I was wondering if there would be a delay in commercialization. I don't know if you can get into the very specifics, but if you could give us an explanation, that would be helpful.

Thank you.

Yes, I will tell you. The first question is, The sales difference between the 3rd quarter and the 4th quarter is said to be different in other areas, except for the sales tax. There are not many effects from incentives, and the effect from incentives is less than 200 billion won. However, as I explained earlier, due to the evaluation of the sales tax tax, The average price has gone up, and the effect is about 26 billion won, but due to the rise in the share price of Kim Haneul, it has risen by about 7 billion won. It's about 7.7 billion won. In addition, what we can tell you is that the rate has risen rapidly. In December, we went up to the latter half of 1,400 won, and the effect seems to have risen as a whole when looking at the selection rate standard or the average rate standard, but among the selected products in December, We have it as the stock of the court. Because it is listed as the stock of the court or the stock of the court, the effect comes out only when it is auctioned, so the effect amount is estimated to be about 200 billion won. So, the effect amount will be reflected as a positive effect in the first quarter. In addition, Compared to the previous quarter, there was no unusual rise in beauty. Because of CG reality, the cost and research cost were paid at the end of the year, so some of the cost was concentrated.

Yes, thank you for your question. Let me address your questions. You first asked us about the difference in operating profit of Q3 and Q4. And yes, there is a difference. And you also told us about incentives. However, we don't think that the incentive impact would be that great. We actually think it will be quite low, even lower than 200 billion Korean won. But there are also effects that occur from provisions and FX rates. We expect that to hover around 260 billion won. However, with the changes in the foreign exchange currency rate, the provision would be probably larger than 770 billion Korean won. In late December, we pegged the FX rate to be in late December. 1,301 so overall we're going to see we have seen an increase and we think we will see an increase but if we look at what has been shipped in December that would actually fall under inventory stock and if that inventory stock is translated into wholesale then we will be able to see the effects and we expect that to be around 200 billion won so and so we believe that those impacts would have and ultimate positive effect from Q1 to Q4. And other than that, we don't think there would be any specific costs incurred, and there would be some differences depending on what season it is. Some costs would differ depending on R&D or other factors, and that will all be paid in the end of the year.

The second question is about MetaPlant. We plan to operate the HMGMA Sabana factory this year, Then, what will happen to the IRA subsidy? There was a talk about this, but Trump's government has just launched, and he is saying that he is going to reduce or eliminate this part, but we expect that part, but if you want to cancel the IRA subsidy, as the theme is, you have to pass the parliament, so the process is so will not end soon. So, it is possible that it will be maintained by this year. I think the IRA subsidy is like that now, and we are seeing that it can be pulled out from September if it is fast. Based on that, we are now establishing a scenario plan. And another thing you said is that Metaplant is now rather than mass production, it is in test mass production, so it is in a state of continuous ramp-up. So, at this year's Meta Plant, we decided to produce Ionic 5 and Ionic 9. We are going to produce them. So, the things that come out there will be able to receive subsidies. In the early stages, as long as the IRA subsidies are alive. And this year's budget is We are still thinking about various things. We are going to check the stability of the factory's operation rate and facilities, so it is a pity that we cannot tell you the fixed number at this point in time.

Let me answer your second question. You asked us about the META plant, HMGMA, Savannah, and our production operation plans, and also you asked us about the IRA subsidies and what we think will happen. Yes, Trump now took office, and I know that there are talks of the IRA being reduced or IRA subsidies being completely scrapped, but I... If for the IRA to be completely scrapped, then that has to pass Congress. So we don't think, even if it ultimately does get scrapped, it won't happen overnight or very fast. And we believe that IRA subsidies would remain until maybe this year. But if it is scrapped, we think it could happen in September. We are devising various scenarios and exploring various options. The meta plans. went into pilot production last October. And this year at the Metaplant, we plan to produce IONIQ 5 and IONIQ 9. And those two models will be eligible for subsidies as long as the IRA remains alive. We are thinking about various options and various strategies in terms of volume, but we have to take many factors into account such as product a plant operation, plant stability, and then confirm the volume. So as of now, we cannot tell you the exact number.

Yes, the third thing you said was about the cooperation relationship with Waymo. As you know, Waymo is based on IONIQ 5, which is produced by HMGMA, and we will supply vehicles for the installation of the Waymo autonomous driving system. And we started thinking about the service area in North America, but we are also thinking about expanding the scope. This time, at CES, Waymo showed you a show car equipped with a Waymo self-driving sensor based on IONIQ 5. The main development of the two companies, We are still working on the Steering Committee, and we will be able to share it at that time when a more specific number is confirmed. Anyway, it is currently in progress. One more thing I would like to say is that you said that there is a technical gap between Waymo and Motional. In that regard, We are running a robot taxi for commercial use in the city of LA. And we are not for commercial use, but we are running a robot taxi for commercial use in Las Vegas and Phoenix. And we have been running our robot taxi business for 26 years. Let me answer your final question.

Waymo will provide us with their autonomous driving technology, and that will be equipped into our IONIQ 5. We plan to roll out this service in the North America region. However, we are exploring different options to expand the region of service. At CES this year, Waymo demonstrated a show car, an IONIQ car equipped with their autonomous driving technology. Development is underway and collaboration is actively underway. We are having different meetings, different types of steering committees, but I will be able to share the specifics once things are more confirmed. But I can tell you that collaboration is gradually progressing. And I would like to add one more comment. You talked about the technology capability difference between Motional and Waymo. Waymo is currently operating a commercial robotaxi in the urban areas of Los Angeles. We are also operating a robotaxi program, but it's a pilot beta program for us. We are operating those taxis in Las Vegas and Phoenix. Our target commercialization timeline for robotaxis is 2026. So to tell you about the technological gap we can say that we are about one year behind compared to Waymo because our commercialization target is one year later than Waymo.

The following question will be presented by Theodorus Hadwin-Jaja from JPMorgan Asset Management. Please go ahead with your question.

Yeah, thank you very much for the presentation. I have a few questions. So the first one is, can you talk about the potential impact of tariffs imposed by the US to Mexico and Canada? And you mentioned earlier that your new Georgia plan, you plan to produce the IONIQ 5 and IONIQ 9 in that plan. If there's any change to tariffs or IRA provisions Are you able to shift production into other models such as hybrids or ice cars in that plan? And the second question I have is also in terms of the European emission standards that are going to get tighter. How will that impact Hyundai? And then the third question I have is in terms of the fourth quarter production, warranty provisions. I think in the third quarter you incurred $320 billion. Is there any similar charge that you incurred in the fourth quarter? Thank you.

I have three questions. First, what impact will the US tariffs have? To be exact, what impact will the US tariffs have on the Canadian and Mexican markets? Secondly, you mentioned that you plan to produce IONIQ 5 and IONIQ 9 this year. If there is a change in U.S. customs policy or I.R.A. termination, I wonder if there will be a change in the production plan as well. I wonder if you will be able to produce other models such as hybrids and existing internal combustion engines. In addition, I wonder what impact these export regulations will have on Hyundai cars in relation to Europe. Hi, this is Joyoung. I'd like to answer your questions.

I guess your first question was on the potential impact of the tariff. and what could happen basically on that basis. As you know, we do currently have the Alabama plant with a capacity of close to about 400,000 units, and the new Georgia plant will ultimately have about anywhere from 300,000 to 500,000 units. We sell about a little bit less than a million, about a million in the US. Effectively, once we do get that up and running, we should be able to have approximately about 70-80% covered out of the U.S. market going forward. Again, it may take a bit of time, but nevertheless, we are definitely trying to localize the production, which will minimize the potential impact from the tariffs. You also asked about the... We don't have any production outside in Mexico right now. Kia does, but we don't do that. We don't have that. But in case the IRA provisions change and how quickly it can shift, one of the things we have been talking about is our competitive advantage has been our flexibility. And we did mention to you earlier that the HMGMA plant originally was a dedicated EV plant. However, with the EV chasm, we have actually decided to make that into a flexible plant. which means that we can ultimately produce the hybrids as well as the ICEs, depending on the needs. And we do have plans to produce the hybrids later on, which I think, again, will be beneficial for us to further ramp up in this kind of market environment where EVs are a bit slow. And then moving on to the second question, it was on the European emissions. Okay. Okay, let me let her translate first.

First of all, you asked about the potential influence of the US customs tax. Currently, we have about 400,000 production capacity in the Alabama factory, and when the Georgia factory is fully operational, it is expected to have about 300,000 to 500,000 production capacity. Right now, the US market is selling at a number that is slightly less than 1 million, If the Georgia factory is fully operational, we expect to be able to cover about 70-80% of the entire United States. It may take some time, but what we are urgently pursuing is localization of production and localization of production. Through this, I think we will be able to increase the influence of customs. There is a production plant in Mexico, but we are currently producing in Mexico. Even if there is a change in the IAEA, we think our biggest competitiveness is flexible response. As you know, HMGMA was originally an EV-only plant. However, as the EV-CASM has been intensified recently, we are responding more flexibly to produce hybrids and existing internal combustion engines in the same plant. Your second question was on the emissions in Europe.

As you know, yes, the emission standards will be It will be increased by about 15%. Our overall strategy there is actually, of course, we will do our best to meet the emissions. For us to do that, the overall proportion of EVs will actually be the main part of our strategy. In 2024, we sold a little bit less than 70,000 EVs in Europe. However, we're looking to actually double that in the European market for 2025 in order for us to be able to meet the admissions, the admission standards.

The second question is related to the pension regulations in Europe. Compared to last year, the regulations have been strengthened by about 15%. We are making various efforts to respond to this. Nevertheless, our EV share is still a big part of our sales strategy. In 2024, the number of EVs sold was about 70,000 in Europe. In 2025, our goal is to increase this number by two times.

Okay, and your third question was on the warranty provision for the fourth quarter. As you know, the average exchange rate post the political situation in Korea actually weakened our overall currency, which resulted in a warranty provision skyrocketing at the end of the quarter, which resulted in close to about $770 billion won overall. But on the other hand, the average exchange rate also went up. But nevertheless, that average exchange rate was actually toward the end of the quarter. So the full impact has not really been taking place on the revenue side. So that has actually had the biggest impact in our overall warranty side.

And if I may add, apart from the currency effect, the actual cost for any kind of recalls was less than 100 billion Korean won.

So very minimal impact. So very minimal impact. So very minimal impact. So very minimal impact. So very minimal impact. So very minimal impact. increase the rate of return. Of course, the higher the rate of return, the higher the rate of return, but the higher the rate of return, the higher the rate of return, so the increase in the rate of return did not actually have a big impact on SONIC. The biggest impact of the increase in the rate of return was on the sales insurance. If you measure the rate of return,

The last question will be presented by Kyungjae Hwang from Merrill Lynch Securities. Please go ahead with your question.

Hello, I'm Jung Kyung-jae from Merlin. I'll give you a quick question in relation to the current situation. First of all, I would like to thank you for explaining the background, which seems to have been significantly reduced in terms of the real-estate performance in the fourth quarter. Secondly, if you look back at the guidance that has been published, it is calculated that sales will increase by about 2% when calculated from the top of the guidance. Because you said that it is a guidance set up at 1,300 won, if the current exchange rate continues to continue, I think there will be enough proof of absolute profits according to the sensitivity here. If you look at some of the U.S. financial plans here, I can see it conservatively, but do you think that some exports or risks due to the exchange rate have been affected in part? So, did you consider that it could erase some of the exchange rate? uh hello uh i have three questions my first question is about the

tangible and non-tangible redemption cost for Q4 performance? What is the background and why has this happened? That is my first question. And my second question is related to guidance It seems that based on your guidance and based on the calculations, operating profits have increased compared to 2024. And you said that you have pegged the exchange rate at about 1,300 Korean won. But it seems that it could also increase or decrease. And based on your settings and based on your predictions, it feels that you have set quite a conservative target for wholesale sales in the United States. Have you reflected risks that may occur from tariffs in that plan, or have those not been considered? And my last question is about Boston Dynamics. Could you share information on Boston Dynamics' IPO plans or IPO schedule?

First of all, I would like to answer the second question. We will try to understand the content of the first question. Regarding the second question, I don't think I can exactly understand that the sales interest rate will rise compared to the 24-year history of Guidance. We haven't yet reflected on the business plan of Guidance about whether or not we will be able to pay the premium tax. That's not yet confirmed. But then, The exchange rate is also around 1,300 won, but it is over 1,400 won now, and the prediction in the market is also a little over 1,400 won, so if you consider that part, wouldn't there be an upside than guidance? You said this, but we are accurately analyzing the tariffs according to the scenario. I said that I would attach a 10% tariff, but if I attach it like that, when will it be implemented? If it's fast, April. It could be late to the first half of the year or not, but we are calculating the impact amount according to the scenario. So we are calculating, and we are also continuing to review how SONIC will move according to the exchange rate scenario. Anyway, the two factors show the opposite effect, When I look at it, I can't tell you the numbers clearly, but under the premise that the average reflection is 10%, if the exchange rate effect is supported to some extent, I think that it will be able to reduce that part considerably. Regarding the average reflection, we were not the only ones affected, but there was a question on the third, but our influence is still There is a factory in the U.S. and the production of the factory in the U.S. is about 60%, so the influence is limited. In the case of Honda or Toyota, we don't need to talk about other companies, but I can't tell you clearly financially, but they have a lot of factories in Mexico and Canada. So, if you look at the sourcing that comes from there, Honda is sourcing 81% to 50% of its main cars, including Civic and CR-V. Toyota, which is a competitor of Tucson, is sourcing 53% of its main cars from Canada and Mexico. Tacoma is sourcing 100% of its main cars from Mexico. In terms of negative effects on the inflation rate, will not be as big as Toyota, Honda, or us, but we expect that it will not be as big as Toyota, Honda, or Honda. Regarding that, we are now reviewing various things. So, regarding the FOB guidance, how to maintain it in the office, and how to use the APA interest rate related to and how to adjust the FOV value appropriately, and how to adjust it if there is a counter-impact.

Let me answer your second question first. You asked us about the operating profit seemingly increasing compared to 2024. I'm not sure if I understood your question correctly, but we have not, as of now, reflected the universal tax and tariffs in our guidance business plan yet because that universal tax tariffs And those details have not been confirmed yet. And we also have originally pegged the exchange rate at 1,301. But right now, it's even higher than 1,400. And that's also what the market expects. So taking all this into account, you asked us that you said that it feels like it would increase and be higher than the guidance. Well, we are looking into various scenarios. And if the 10% universal If the 10% tariff goes into effect, we think it may go into effect in April if it happens fast. And if it doesn't happen fast, we still think that it will go into effect within the first half of this year. We are currently calculating the impact and how it will impact our company. And we are also looking into different scenarios and different profit changes under various outcomes But those two factors, they represent completely different effects. I cannot tell you the exact number right now, and it's kind of difficult to tell you the exact number. But based on the preposition that the universal tariff of 10% goes into effect, we still believe that we will be able to make up for the losses with the FX rate impact. tariff goes into effect, it won't be only Hyundai Motor Company being impacted. We have a plant up and running in the United States, and 60% of our cars are being produced in the United States. So we believe that the limit would not be as big. We don't have to talk about other companies, but just to tell you a bit about how other companies will be impacted. For example, there's Honda and Toyota, and they have plants up and running in Mexico and Canada. And a lot of the production of key models of those two companies come from the Canada and Mexico plants. For example, 81% of Honda's main model comes from the Canada plant and 50% of its main model comes from the Mexico plant. Same for Toyota, 53% of one of the main models come from Canada and Mexico and 100% of another one of their major model comes from the Mexico plant. So yes, if the universal tariff goes into effect, it will have a negative impact, but we won't be impacted more than Toyota and Honda. We are reviewing various scenarios and we are looking into how we can adjust FOB and how we can adjust guidance depending on how the Tariff situation unfolds and we are also taking various things into account such as anti-dumping and APA profit rates. And with that all in mind, we will continue to look into how we can make FOB adjustments and how we can reduce the impact of universal tariffs.

And there is no confirmed plan or schedule for the Boston Dynamics IPO. There are no confirmed plans, so I can't tell you in detail. Once the IPO plan is confirmed, we will communicate when it comes out. We did the Indo-IPO, but the Boston Dynamics IPO is always open. The opportunity is open. We will do it if we need to review it with an open mind. But at this point, there is no review,

And to address your question about the IPO of Boston Dynamics, we, as of now, don't have any confirmed plans or timeline of Boston Dynamics IPO. If we have plans to pursue an IPO of Boston Dynamics, we will let you know. We did an IPO in India, and we are open-minded. about Boston Dynamics going public. But right now, we really cannot tell you anything because we have not reviewed anything. And right now, we don't have plans to immediately review the possibility of a Boston Dynamics IPO.

For the first question, we will check more about how the difference occurs in specific areas. Since the balance sheet is not yet confirmed,

And to answer your first question, you asked us about what differences lie in what items. We will have to look into that more because our financial statements have not been confirmed yet. So we will let you know about this later through the IR group.

This concludes the HMC's IA conference call for the fourth quarter of 2024.

Thank you for listening.