Hyundai Motor Co

Hello, this is Michael Yoon, the head of IR Group. Welcome to Hyundai Motor Company's 2025 Q1 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 titled HMC 2025 Q1 Business Results on our IR website. This presentation includes sales performance and profit analysis. And for a summary of quarterly cash flow statement and detailed regional sales breakdowns, please refer to the appendix. First, the sales performance. For your reference, starting from this quarter, we have slightly adjusted the scope of disclosed sales performance data, taking into consideration factors such as the increased significance of the U.S. market and our major business regions. In Q1 of 2025, the global wholesale recorded 1,001,120 units, down 0.6% year over year, while global retail sales totaled 956,354 units, an increase of 1.0% year over year. Although the global wholesale slightly declined year over year, wholesale, excluding China, rose by 1.3% year over year. In the U.S. market, the market continued its steady sales momentum driven by hybrid models showing a year-over-year increase of 1.1%. Notably, retail sales experienced robust growth, rising 10.8% year-over-year. In particular, hybrid model sales increased 43.0% year-over-year, led by sales expansion of SUVs such as the Tucson and the Santa Fe. Additionally, with emerging discussions of potential changes in EV-related policies, EV sales also grew 16.8% year over year. In the European market, the total sales volume decreased by 3.8% year over year amid weakening industry demand caused by a slowdown in economic recovery. However, the planned mixed shift towards eco-friendly vehicles is progressing steadily, as evidenced by a 61.1% increase in EV sales and a 24.7% increase in hybrid vehicle sales in line with efforts to meet fuel efficiency regulations. In the domestic market, sales increased by 4.0% year-over-year, primarily due to the base effect from the previous year's shutdown of conversion work at the Asan plant. In the Indian market, SUV sales rose slightly by 1.0% compared to the previous year. However, due to intensified competition, wholesale sales for Q1 declined by 4.2% year-over-year. Next up is sales by vehicle type. Starting this quarter, to easily identify quarterly sales trends of key segments, we will share data from the current quarter along with the previous four quarters. Global SUV sales including Genesis totaled 576,385 units, accounting for 57.6% of total sales, while global passenger car sales reached 374,673 units, making up 37.4%. Amid emerging concerns about a potential slowdown in the real economy, consumer preferences for affordability have strengthened compared to the previous year. Eco-friendly vehicle sales increased by 38.4% due to a mixed shift to respond to the fuel efficiency and strong sales in the U.S. High EV sales growth rate in the U.S. and European market led to a year-over-year 40.4% increase, and hybrid sales also increased by 40.4% year-over-year driven by hybrid SUV sales growth. This is the end of sales summary, and now I'll move on to the financial summary. This page summarizes our income statement. Consolidated revenue increased by 9.2% year-over-year to 44.4 trillion Korean won, and operating income increased by 2.1% year-over-year to 3.6 trillion Korean won. The automotive division's revenue increased by 11.2% year-over-year due to favorable effects environment and expansion in high-value segments, especially hybrid models or HEVs. The operating profit decreased by 3.5% year-over-year with a hike in incentive levels in the U.S. and European market and selling expenses. Revenue from the finance division increased by 11.2% year over year due to continued growth in the U.S. market penetration rate and asset size. Operating profit increased by 34.3%. Net income increased by 0.2% year over year to 3.8 trillion KRW. Next is quarterly revenue and operating income analysis. For revenue, 2.6 trillion Korean won occurred from favorable FX rate and global sales expansion, excluding China, yielding a volume effect of 72.6 billion Korean won. Despite a higher incentive spending, hybrid model sales growth led to a positive mixed effect of 868.9 billion Korean won. Additionally, the finance division revenue increased contributing to the overall revenue growth of 9.2% year-over-year. Regarding operating profits, a favorable FX rate resulted in positive FX effect of 600.6 billion KRW. Rising incentive levels led to the net mixed effect to result in negative 416 billion KRW. The continuous growth in the finance division contributed to 14.6 billion Korean won and the operating profit increased by 2.1% year over year. Our first quarter cost of goods sold ratio recorded 79.8%, a 0.5 percentage point increase year over year. SG&A recorded 5.3 trillion won, which is a 9.8% increase compared to the last year due to the increase of our new year marketing related expenses and R&D. Finally, our net profit increased 0.2% to 3.4 trillion won. That concludes the end of the presentation of the 2025 Q1 business results. Next, Executive Vice President Seung Jo Lee, the Head of Planning and Finance Division, will assess the company's business results in Q1. Good afternoon, this is Executive Vice President Seung Jo Lee, the Head of Planning and Finance Division. I will now present our Q1 2025 business performance, U.S. tariff impact and recovery plans, as well as Q1 dividend and Treasury stock cancellation. In Q1 2025, despite industry average incentives rising in both the Europe and U.S. markets, and our investments in new vehicles and future technology have expanded, with all-time high sales of hybrid and strong sales in North America, in addition to a favorable FX rate effect compared to the same period last year. So we posted a record high first quarter operating profit of 3.6 trillion Korean won and a 8.2% operating profit margin, outperforming market consensus and annual guidance OPM. Next, I would like to address the impact of U.S. tariff on our business performance and our countermeasures. As an individual corporate entity, our focus will be on mitigating the effects through profitability recovery initiatives. As there remains a high degree of uncertainty regarding some specific elements in the tariff impact calculation, it is too early to disclose specific figures. Once uncertainty clears somewhat, we will connect with the market once again. Now I will elaborate on our countermeasures in response to the impact of the U.S. tariff policy. Instead of relying on external variables, we intend to leverage our internal capabilities to drive a structured response. So we're going to use this as a momentum to change our fundamentals. We have launched U.S. Tariff Response, TFT, as a specific countermeasure to establish a company-wide response system. And we'll optimize our production and sales strategy by region and model type to leverage our core strength. And we're preparing to pursue a CAPEX and OPEX contingency plan based on company-wide and region-wide investment by priority and efficiency. Moreover, we will conduct cost reduction via production efficiency improvement at our newly opened HMGMA and original Alabama plant. We will also implement mid- to long-term U.S. localization strategies, which include parts sourcing and logistics. Finally, we will continue our efforts to recover profitability by responding to supply and demand fluctuation by implementing flexible and efficient pricing strategy and incentive policy. By actively pursuing these company-wide recovery plans, we believe we can meet the annual guidance announced last January and therefore we'll maintain our guidance for sales growth of three to four percent and operating profit margin of seven to eight percent. Next, let me share a quarterly dividend for Q1. In August 2024, we announced the Value Up program, where we have first introduced a minimum dividend of 10,001 per share and a quarterly dividend of 2,500 won starting from 2025. In line with the Value Up program, we will pay a quarterly dividend of 2,500 Korean won for both common and preferred stocks this quarter. Additionally, we have implemented record date for year-end dividend in 2024 to improve dividend transparency for our investors. Consistently, improvement of quarterly dividend system has been approved at the 57th General Chairholders' Meeting this March, so that record dates for quarterly dividends are determined by the Board resolution. Accordingly, the record date for quarterly dividend for Q1 has been determined as May 30th by the board instead of the last day of March. Payment date will be June 30th. Now, let me share a plan for cancellation of Treasury stock. First, we plan to implement mid to long-term shareholder return policy previously announced in April 2023. We have promised to cancel 1% of the issued stock annually for the three years starting from 2024, and this year's cancellation is the second round. In addition to that, we will cancel Treasury stock which has been bought back from last November to this February for shareholder value enhancement. This accounts for a cancellation of 1.2% of issued stock. Total number of Treasury stock cancelling accounts for roughly 1.1 trillion Korean won. Amid expanding uncertainties and rapidly changing auto environment, we will continue our efforts to implement shareholder return policy for our investors and shareholders as we have promised in the value of program. In times of past challenges such as COVID-19 pandemic and the semiconductor shortage, We have successfully optimized profitability and improved our fundamentals by responding swiftly and flexibly to changes. Likewise, regarding the tariff impact, our management team, led by President Jose Munoz, along with our group, will closely monitor and analyze market conditions and risk to recover profits and overturn the challenges and turn the challenges into opportunities. We sincerely appreciate the continued support of our shareholders and investors. Thank you for your attention. Next, Senior Vice President Hyung-Suk Lee, the Head of Planning and Finance Division of Hyundai Capital. We assess the Q1 results for the finance business and the business outlook for Q2. Hello, this is Hyung-Suk Lee from the Planning and Finance Division of Hyundai Capital. Allow me to share the finance business's performance for the first quarter of 2025 and our outlook for the first half of the year. Despite market uncertainties caused by rapidly changing domestic and global politics in Q1, Hyundai Capital continues stable business operations based on a strong captive asset portfolio while further strengthening collaboration with the group. Although U.S. government's tariff policy raised global stock market volatility significantly, the bond market remained relatively stable, and in Q1, Hyundai Capital successfully issued $500 million in global bonds and HCA $5 billion, continuing active funding activities both domestically and internationally. Next, I'll go over the details for each company. First is Hyundai Capital. Based on strong credit ratings and competitive funding capabilities, we continue to support the group's auto sales financing, maintaining the proportion of auto finance at 83% of total product assets in Q1. With the launch of various financial products specific for eco-friendly models in line with the group's recent electrification strategy, lease assets grew by 3.9% year-over-year. With increasing leasing-based revenue, operating profit per Q1, excluding derivatives effects, rose by 3.8% year-on-year. Due to the minimization of funding costs based on a diversified borrowing portfolio, interest expenses decreased by 3.2% year-on-year. However, despite a delinquency rate in the 0% range, the worsening soundness of the financial sector led to an increase in provisioning for bad debts. Additionally, higher leasing costs drove up operating expenses by 6.4% year-over-year, resulting in a 17.6% decrease in operating profits year-on-year. However, with improved profits from overseas subsidiaries in Europe, including Germany, the UK, and France, equity method income increased by 15.9% year-on-year, resulting in pre-tax profits growing by 3.1% and net income increasing by 8.4% year-on-year. We expect to see high volatility in both domestic and global markets in Q2 of 2025. Hyundai Capital will focus not only on expanding its size, but also on enhancing profitability through cost efficiency and minimize risk through stable business operations and soundness management centered on high-quality auto financing. Moreover, Hyundai Capital Australia, which recently received a An A-minus credit rating from the Global Credit Rating Agency S&P will expand its operations. In the second half of the year, we will begin operations of our Indonesian subsidiary, further strengthening our position as a leader in the global auto finance market. Next is Hyundai Capital America, or HCA. In QA, with strong vehicle sales across the group, the acquisition rate rose to the 70% range, leading to an expansion of asset size across the entire portfolio. In particular, with a significant increase in leasing for eco-friendly vehicles, lease assets grew by 41.6% year-on-year and total product assets grew by 19.9% year-on-year. Not only did the asset size increase, but the profitability of both installment and lease products also improved, leading to a 9% increase in operating income year-over-year. Due to increased borrowings for business expansion, interest expenses rose, but by managing the proportion of prime customers at 88% and minimizing the increase in provisioning for bad debts, operating profit increased by 66.6% and net income grew by 63.5% year-on-year. In Q2, the US market is expected to remain unstable, depending on the scope and impact of the tariff policies. However, based on its strong customer portfolio, HCA is reducing credit risk by maintaining a low delinquency rate and has secured liquidity through large-scale bond issuance in Q1 to proactively prepare for various scenarios. As market volatility is higher than ever, we will closely monitor the market conditions in the first half of the year and minimize uncertainties through effective risk management and continue to provide stable financing support for the group's auto sales. And that's the end of the finance business presentation. Thank you for listening. With that, we will conclude the presentation and take your questions. Please limit your questions to two per person.

Thank you. 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. The first question will be provided by Changho Kim from Korea Investment and Securities. Please go ahead with your question.

Yes, hello. Thank you for the question. I would like to ask two questions. The first is that the customs issue is getting a little more serious. You briefly explained the influence of customs, but I would like to ask a little more detailed I would appreciate it if you could explain how we should look at the influence of interest rates and medium-term response. Currently, the exchange rate is at a very high level. If the exchange rate is at the current level, I think it will be possible even for the upper part, but I would appreciate it if you could explain the sensitivity of our exchange rate once again. And the second is the exchange policy. You also announced your thoughts today. So I have two questions for you. First is regarding tariffs.

It's becoming a big issue right now. So I know you gave us the basics. and how it's going to affect the business, but could you elaborate a bit more? For example, how it's going to impact the profit, and also what is your response in the long term? Furthermore, with the current FX rate, it's pretty high, so I think it is possible to recover some of the losses through the FX rate, but how sensitive and how reliable are you on the FX rate? So that's my first question. My second question is regarding the shareholder return policy. You did give us your plan to do more transformation on the FX stock. But will your TSR of 35% not change? Will this remain as the same? And do you also have, I'm sure you also have additional cancellation plans that will take place in the latter half of this year?

Yes, I will answer the first question first. As you well know, there is a lot of change in tariffs, so they are constantly changing. Thank you for your question. I will answer your first question.

There are so many uncertainties regarding tariffs. There are so many changes going on even now. So, as we have mentioned, it's very difficult to give a clear number at this point in time. So, when these uncertainties are somewhat gone, we will come back with a clear answer.

So, in terms of the medium-term strategy, we would like to explain a little bit more. In order to minimize our financial impact due to the tax burden of the U.S. government,

However, regarding the need for long-term strategy, if I could touch a bit more on that, to respond to the policies and the tariff regulations that the U.S. government is currently announcing and to minimize any of the impact that has on our financial business, we have in mid-March launched a U.S. tariff response TFT. So this TFT will look at not only the short-term impact, but also the mid-to-long-term impact that the tariff will have on our business.

As you can see, the TFT is not only for completion, but also for parts, steel, and aluminum, so comprehensive response is needed in all areas of the supply chain. Therefore, in TFT, we will be able to provide a comprehensive response The tariff not only impacts finished cars, but also auto parts as well as steel and aluminum, so we need to take a comprehensive approach in terms of the supply chain.

Therefore, the TFT will look into not only the car business itself, but also the sourcing, logistics as well, and how we can use localized parts and logistics as well. And as a result, we are looking into how we can further make the production of our HMMA and HCMA more efficient.

First, to make the parts news more present in the U.S., we are reviewing the entire list of sub and end KDs, building a list of local and priority lists, and conducting the discovery of local supply companies. In order to respond to the policy in advance, we have already dispatched local experts from the U.S. to discover and inspect the company. Usually, it takes a certain period of time for the development, quality, and performance test of the new parts company to be delivered, so we will select fast-track items that can be carried out relatively quickly and focus on them first to maximize the cost reduction effect.

As for identifying the localized sourcing for the parts, we have listed out all the KD parts for the subparts as well as the end-use parts, and we have prioritized which of the suppliers are the best in terms of the local suppliers. so that we can identify the best suppliers in the U.S. market. Furthermore, we have sent a specialist already to the U.S. so that they can take a further look into these suppliers because when we want to change suppliers, it's not just looking at the supplier itself. It really takes time to look at how the development is made, what the quality is, what are the functions of these parts. However, to save time, we have come up with a certain items, a list of items that have to go on fast track so that we can pull forward and minimize the impact of tariff that has on our business.

As you know, in March, when we announced the U.S. local investment plan, I think it will be of great help to pay taxes when considering the additional 200,000 units of METAPLANT AMERICA HM-GMA production capacity. In addition, in order to reduce the cost of U.S. local factory production efficiency, Alibaba factory will be able to reduce competition will be strengthened compared to the existing business plan, such as zero cost reduction, idea discovery, cost reduction, and optimization of logistics. In addition, in order to maintain productivity well under uncertain industrial environments, the stability of supply chains, such as supply chains such as supply companies, is important,

Furthermore, as we have announced in mid-March regarding our investment in the U.S., we have made an announcement at that time so that we can increase the production capacity of HMA, the metaprint, and we believe that this investment will further help in minimizing the impact of tariff. and also to ensure efficiency of the U.S. production, we will use the know-how that we have gained with our Alabama plant through work such as tearing down the competitive parts as well as achieving optimization of logistics and also achieving efficiency of logistics And all of this know-how that has been built up in Alabama will be shared and allocated to Asia and the United States. To achieve production efficiency in the industry, it's also very important that the suppliers have an on-time supplying schedule and also quality as well. So all of this will also be surveyed and inspected.

In terms of sales, we will consider competition trends to establish a price strategy and effective incentive policy. Based on profitability, will be built and implemented within a short period of time. Some of them are currently being built and implemented. Regarding the price policy in the U.S. market, as Mr. Hosea Moon told you, the price will be frozen until June 2nd, and the price will be based on the basic principle that the market decides,

As for our sales policy, we will keep an eye on what competitors are doing and adjust our selling price and census accordingly. However, for the fundamentals of our production, we will try to optimize the supply and sales plan by using the regions that we have as well as the segments that we have. Some of these policies are already rolled out. For the U.S. market in particular, as Mr. Munoz has announced, we will be freezing the price until 2nd of June. After that, we will let the market decide on what the pricing is going to be. Whatever the case, we are going to go with a flexible pricing strategy.

In the case of incentives, we will monitor the market closely, such as the supply and demand of competitors, market demand, and so on, and make sure that we will be able to respond accordingly. We are also in the process of optimizing the supply and sales of each car type. In order to minimize the influence of tariffs, we are currently in the process of turning the American Tucson produced at the Kia Mexico factory into HMMA and transferring the Canada sales volume produced at HMMA from Mexico to Canada. As for the incentive, again, we will be monitoring what the competitors are doing, what the demand is, as well as what the supply of the competitors is going to be.

So it's going to be very flexible and also timely at the same time. As for the strategy regarding the production sites and models, we will try to minimize the impact of tariffs as possible. And one of the things that we're doing is the Tucson that is to be exported to the U.S. that is produced in Kia Mexico plant will now be produced in HMMA. And the models that are produced in HMMA to be exported in Canada will be now relocated to Mexico and exported to Canada. For vehicles that are produced in Korea and exported to the U.S., We will try to see which of the models can be transferred so that we can keep the profitability as well as the market share.

In the short term, we are working on a contingency plan for the recovery of the capital and investment budget. We are almost at the final stage. The capital and investment budget will be reduced in terms of profitability within the range that does not affect the operation of the core business. will reduce the cost of low marketing effects and reduce unnecessary budget cuts, and in the case of investment budget, we will set a priority ranking from the perspective of future competitiveness and efficiency and run it flexibly. The company is looking forward to securing business competitiveness through this contingency plan by first absorbing some of the tariffs and preparing a medium-term strategy response time to help secure business competitiveness within the tariff environment.

Now, in the short term, we are almost completed in making plans on how to use the investment as well as the current account. Of course, for the key businesses, investment will be maintained. However, any of unnecessary investments as well as those investments that have low marketing effect will be eliminated as much as possible. As for the investment that will be continued for future businesses, And also, it still will be kept to an efficient level, but we will also try to be as flexible as possible in terms of our investment. With such contingency plan, we will try to minimize the impact of the tariff and also respond to mid- to long-term business plan as well, so that we can secure our business competitiveness as much as possible.

In addition, if we look at the situation in which we have responded in advance to minimize First of all, in order to maximize the supply of finished vehicles and parts, we have promoted the maximum score until the end of March. So, based on the finished vehicle, North Korea has a supply of 3.1 months, and the parts have a longer supply than that. So, we expect that a certain amount of customs tax will be 10,000 times the supply of parts.

Just a little more on what efforts you are making to minimize the tariff impact. We have actually shipped a lot of the parts that is necessary for the finished vehicle. So at this time, we have 3.1 months worth of inventory already shipped over so that the finished car can be made. As for the parts itself, we have a longer month's inventory as well.

You asked about the sensitivity of the exchange rate, but it is difficult for us to tell you exactly about that part. As you know, the sensitivity of the exchange rate is not a small amount. It is quite large. However, in the current situation, we are talking about the exchange rate You also mentioned regarding how sensitive we are in terms of the FX rates.

So I'm afraid we are not able to answer that question as of yet with an accurate number, but I'm sure you are aware that the amount is not that small for us. However, I think it's not an appropriate time for us to mention this now. But when the time comes, we will also share this with you soon.

The second question is whether we will maintain the 35% TSR in the future. As we mentioned at the CEO Investors' Day last year, we will maintain the 35% TSR in the future Now, moving on to your second question, whether we're going to keep the GSR of 35%.

Yes. As we had announced in last year's CID, the quarterly dividend of 2,501 and the minimum dividend payout of 10,001 as well as TSR of 35% will be kept. We will be keeping that promise. How that will be realized, we will find a time when it's most appropriate to communicate with our shareholders and the market as well. Thank you. Next question, please.

The following question will be presented by Yunyang Zhou from UBS. Please go ahead with your question.

Hello. Thank you for the question. I would like to ask two questions. First of all, I don't think it will be easy to make a decision in various uncertain situations. uh uh uh uh uh uh uh uh uh In terms of calculating TSR, we are considering whether or not it is included in the existing ownership price when calculating the small price of the self-serve. Thank you very much for the opportunity. I have two questions for you today.

As the uncertainties remain very high, I can see how the business management is not easy for you. However, are there any updates that you could share with us in terms of the GM partnership? And I heard about, you know, sharing capacity possibly with GM. Can you share any details of that?

And my second question is about the shareholder return that you briefly touched upon. The CSR target has already been set, and the dividend and the cancellation

First, I would like to ask you about the first question. You asked us to update the progress of GM Magoo.

It is true that discussions are being held in various fields. However, it is difficult to tell you in detail about the current policy response and the current discussion. So, what I can clearly tell you is that it is being carried out. The first question about the update on the report for the CM.

Yes, discussions are ongoing on various fronts, and we're thinking about a lot of opportunities. However, and we have some also in connection with the terrorist policy as well. but I would say that it is not appropriate to share any details at this moment, but I can say with certainty that the partnership and discussions are ongoing, and both companies are working very hard to make efforts to create a great outcome going forward, and I expect to be able to share more details with you in a foreseeable future.

The second question is about the standard of payment when calculating TSL. You asked if it is included in the stock market, and we told you that it is included when we announced it. It is scheduled to be calculated including the stock price of the existing stock. If you buy a new stock for the purpose of stock value recovery, it will be included in the TSR calculation.

And your second question was about the calculation of the TSR. And the short answer to that is that, yes, the existing shares that we've previously held will be included as we have already announced.

And also, we can cancel some of the new acquired shares right now to increase the shareholder value to meet the commitment to the TSR.

Then, how can we proceed with this? As I said in the first question, we will be able to communicate with the market at the time of the completion of the tax response plan and how to match the 35% of TSR.

And you also asked about how we're going to return the value to our shareholders. As I mentioned when I answered your first question, we are looking at this in line with our response to the tariff policy. And that plan is almost close to finishing, so we are going to find ways to meet the target of PSR of 35% or higher, and then we're going to be sharing the results with the market very soon.

Due to time constraint, we will now take the last question.

The last question will be presented by Jiwon Yoo from Dale Investment and Securities.

Please go ahead with your question. I'll give you two questions. The first one is Meta Plant. This year, unlike last year, you are guiding the plan with 500,000 cars, including Kia cars. So, I think it would be helpful if you could tell me how the difference from 300,000 cars mentioned last year will be formed in the center of which car types. If the plan to produce electric vehicles continues to go up with Meta Plant and Alabama, in Korea, next year, Ulsan Electric Power Plant will be completed. There will be a lot of electric vehicle production here as well. Even in Korea, I think that even if our company does the electric car capa, it will be over 300,000 in a blink of an eye. I think it will go over 5-600,000 soon. So, I think there will be an oversupply issue with the amount of electric vehicles, but I would like to ask you what you think about this part. And lastly, the Russian side is said to have a lot of sales in March, but I would like to ask you about the recent situation. Thank you.

I also have two questions. First is regarding method plans. So this year, you announced production plans of 500,000 units. And how is this different from last year? Because last year, I understand the capacity was 300,000. So how is this different? This year, how is this 500,000 being composed of? What are the models that are composing of this 500,000 units? And when META plants and Alabama plants start producing EVs, because you announced plans to produce EVs there, and we also have the Ulsan EV plant that is going to be completed next year in Korea. And there also will be production plants for EVs as well. And understand the Korean EV plant, the production capacity is also about 300,000 units. So overall, your production capacity will be about 500,000 to 600,000 units, which could lead to overproduction issues. So what are your thoughts on this possible outcome of overproduction of EVs? And my second question is regarding Russia. I understand that you have the sales number for March. So what is the most recent figure and the business status of the Russian market? Thank you.

The first question you asked We announced the expansion of the KEPA to 500,000 units. The expansion of the KEPA to 200,000 units from the 300,000 units we mentioned last year was originally planned to be extended to 200,000 units based on the situation. We have now announced that we will proceed with it in a more precise manner. As you know, we are planning to import hybrids. From next year, hybrids will be imported to the HMGMA factory, not Ulsan. Then, we can import EVs and hybrids for the increased capacity, so we will replace them with hybrids. Thank you.

So to answer your first question, yes, last year we announced the production capacity to be 300,000, and the reason that, well, not the reason, but we added now 200,000 more to the capacity. And the original plan was to actually announce this 200,000 production increase depending on the situation, what the environment of the business was. And we decided to pull this plan forward, actually. And that's why we announced our plans to increase capacity by 200,000 so that we have a total production capacity of 500,000. And as you understand, we will also be inputting hybrid production in HGMA as of next year. So with the increased capacity, we'll not only be producing EVs, but also hybrid as well. so that we can keep an optimal level of operation and production rate of the plant as well.

Yes. The second question is, if an Ulsan EV plant is built, will the EV be overcapacity? In that regard, we are also reviewing various solutions. There may be a way to buy EV cars scattered in each factory. There may be a way to import hybrids. However, at this point, it is a bit difficult to communicate clearly with the market due to the internal environment. So, the plan is not clearly established yet, but I will be able to tell you how to operate it in any direction in the future.

As for your question regarding the Ulsan EV, you raised concerns on whether there's going to be oversupply of EVs. So we are looking into various possibilities as well, whether we will be collecting all the reproductions globally to be produced in Ulsan or to add hybrid production plan in the Ulsan plant. But right now, it's not possible to communicate our concrete plan with the market as of yet because of internal reasons. And frankly speaking, we don't have a clear plan on how we are going to, what our plan for the U-turn plan is yet. But we will find time soon once the plan is set, so that we can communicate this with the market.

The last question is about the Russian sales volume. As we said, Russia is managed by the Russian government. There are no actual sales in Russia. What we have left in Russia is the service for the cars we have sold. And to answer your final question regarding Russia, when you say sales in Russia, it's not actually the Russian market itself, but actually the Russian region and the surrounding areas.

At this time, we don't have any sales in the Russian market. The only business that we have left there is service and some of after-service businesses. The sales that have been recorded for the area is mostly from Kazakhstan. Other than that, we don't have any business going or sales that is recorded from the Russian market.

Yes, what I just said is that it is being fixed in terms of after-service and dealer. In terms of our company,

The business that is left in the Russian market, for example, the after-sales service, that also is conducted through the dealership.

Hyundai Motor Company is not conducting any business in Russia right now.

If you have any questions, please contact Hyundai Motor Company's IR Group. Thank you very much for your attention.