December 04, 2024

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Hyundai Motor Group Executive Chair Chung Euisun delivers his New Year's address at Kia AutoLand Gwangmyeong, Korea's first EV-only car plant, in Gyeonggi Province in January this year. (Hyundai Motor Group)

Hyundai Motor Company and Kia have just secured their place among the world’s most financially sound automakers.

According to industry sources Monday, both companies received A ratings from the world’s three major credit rating agencies -- Moody's, S&P and Fitch. This positions Hyundai and Kia alongside just three other automakers -- Mercedes-Benz, Toyota and Honda -- that have earned A ratings from all three major credit rating agencies.

Credit ratings from these agencies influence trillions of dollars in global financial transactions, reflecting investor confidence in the companies' financial stability and growth potential.

In comparison, Volkswagen, which produces more vehicles annually than Hyundai and Kia, holds a BBB+ rating from S&P, one notch below Hyundai and Kia’s A- rating. Major American automakers General Motors, Ford and Stellantis are rated B by all three agencies.

Hyundai-Kia have seen notable improvement in their international credit ratings over the past year. In August, S&P upgraded the companies’ ratings to A-, following similar upgrades to A- from Moody’s and Fitch in February.

These upgrades are largely driven by the companies’ strong financial performance. Hyundai and Kia achieved double-digit operating margins in the second quarter of this year, with their combined earnings before interest, taxes, depreciation and amortization margins exceeding 10 percent this year.

Another factor bolstering Hyundai-Kia’s ratings is Hyundai Motor Company’s upcoming initial public offering in India, which could raise as much as $3 billion. India is one of the fastest-growing automotive markets globally, and this IPO is expected to enhance Hyundai’s liquidity and growth prospects.

The automakers' ability to produce both electric vehicles and hybrids has also been a significant factor in securing these top ratings. This flexibility sets them apart from competitors like Tesla, which focuses exclusively on EVs, and Toyota, which is known primarily for hybrids.

Hyundai Motor Group plans to begin early production of both electric and hybrid vehicles as early as the fourth quarter of this year at its new Hyundai Motor Group Metaplant America facility in Georgia.

According to US market research firm Motor Intelligence, Hyundai-Kia held a 10 percent share of the US EV market in the first seven months of this year, second only to Tesla's dominant 50.8 percent share. Ford and GM followed with 7.4 percent and 6.3 percent, respectively.

In Europe, Hyundai aims to counter the current slump in EV demand by launching the compact EV Casper Electric, branded as Inster for the European market, later this year.

The recent ratings upgrades for Hyundai-Kia also align with the Korean government’s broader “value-up” initiative aimed at enhancing the global valuation of domestic companies and countering the so-called “Korea Discount” -- the tendency for Korean companies to be undervalued in global markets.

For Hyundai and Kia, these improved credit ratings are expected to translate into lower borrowing costs, giving them more financial flexibility.

To provide further clarity on its strategic direction, Hyundai Motor Company is set to hold a CEO Investor Day on Wednesday this week. The company will outline its key business strategies and financial goals, including detailed production plans for its new Metaplant America facility.

By Moon Joon-hyun (mjh@heraldcorp.com)