Joyce Lee, Heekyong Yang

SEOUL (Reuters). South Korea’s Hyundai Motor Co said Tuesday it would see a rebound in vehicle production during the first half. This is because a worldwide chip shortage will gradually ease from the second quarter.

Seo Gang Hyun, executive vice president of Hyundai, stated that “the normalization of automotive chip supply and demande is expected in quarter three,” when the semiconductor industry’s capacity will increase.”

According to Seo, Omicron will cause a shortage in the second quarter. Seo also stated that the Omicron variant spread to other regions of Southeast Asia. This was due to the ongoing COVID-19 pandemic, which he said caused Hyundai’s sales to drop to below the 4 million units in 2021.

Southeast Asia has a key role to play in the supply chain of basic chips for the motors of smartphones, computers, and homes. Malaysian chip manufacturing accounts for more than one-tenth of global trade valued at over $200 billion. COVID-related lockdowns have caused disruption in many industries across the region since last year.

Hyundai stated that it anticipates an increase of 20% in sales in North America’s largest market in 2022.

After sales of almost 44% less than their target 6.92M vehicles in 2017, Hyundai and Kia Corp are now among the top 10 global automakers.

For the December quarter, Hyundai saw a drop of almost 50% in profit, well below analysts’ estimates. The reason for this was the payment of corporate tax.

The net profit was 547 billion won (or $456 million) compared to 1.1 trillion won one year ago. This is compared to the 1.5 trillion-won average analyst forecast, compiled by Refinitiv SmartEstimate.

OMICRON, HIGHER PRICES

Analysts predict that rising raw material costs, shortages of components and logistical bottlenecks due to the pandemic will drive up current quarter’s cost.

“It is still difficult to forecast how the chip shortage will pan out … also there will be other uncertainties involving the spread of the Omicron variant and potential issues related to Ukraine tensions,” said Lee Jae-il, an analyst at Eugene Investment & Securities.

Japanese automakers Toyota Motor (NYSE:) Corp Honda Motor Co Ltd has stated that they will reduce their production in this month’s due to increasing COVID and supply problems.

According to analysts, Hyundai will raise the price of its vehicles to counter this disruption in supply chain, distribution and manufacturing.

Major automakers and dealers, such as Tesla (NASDAQ:) Inc and Honda Motor Company (NYSE:), have already raised car prices https://www.reuters.com/world/the-great-reboot/inflation-risk-or-profit-engine-high-car-prices-are-both-2021-08-10 over the past year.

Hyundai Motor shares fell 1.5% by 0616 GMT, against the benchmark’s 2.7% drop.

($1 = 1,198.7100 won)