Hyundai And KIA Target Vehicle Production Increase After Chip Problem Is Believed To Get Better

JAKARTA – Troubled chip supplies worldwide have hit the auto industry over the past year. However, in 2022, the problem is believed to be improving. Vehicle manufacturers step on the gas to increase their production.

South Korean automaker Hyundai Motor Co and its affiliate Kia Corp on Monday, December 3, forecast that global sales of their two cars would jump 12.1% in 2022, although their sales last year fell short of their target due to a global chip shortage.

The two automakers sold 6.67 million vehicles in 2021, about 3.7% lower than their combined target of 6.92 million vehicles. This was due, in large part to supply problems, including chip shortages, which resulted in a decline in vehicle deliveries to consumers. This year, they said they would target global sales of 7.47 million.

"In 2022, Hyundai Motor plans to expand its market share and strengthen profitability through efforts to stabilize chip supply and demand, adjust vehicle production schedules, strengthen the electric vehicle lineup and optimize sales profit and loss by region," Hyundai Motor said in a statement quoted by Reuters.

The shortage of chips, due to supply problems and a surge in demand for electrical gadgets from consumers during the pandemic, has hit the auto industry hard. In fact millions of vehicles worldwide are not produced because these important parts are missing.

Auto industry analysts in South Korea said the two companies' targets this year seemed reasonable.

Lee Jae-il, an analyst at Eugene Investment & Securities, expects demand for vehicles to remain strong in 2022. This is supported by pent-up demand from consumers who were unable to buy vehicles last year due to a shortage of chips.

"It appears that the chip shortage has shown some signs of easing... however, rising raw material prices will likely have an impact on their profitability," Lee added, as quoted by Reuters.

The positive statement has also sent Hyundai Motor's shares to close 0.7% higher, compared to a 0.4% gain in the market benchmark KOSPI. This indicates that the market is optimistic about their target.

Last October, Hyundai Motor slashed its 2021 global sales target by around 4 percent to 4 million vehicles from 4.16 million vehicles.