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2Q26 review: Better than feared; focus on robotics momentum

2Q26 results affected by higher quarter-end FX rate and production disruptions

For 2Q26, Hyundai Motor (HMC) posted revenue of W49.2tr (+1.9% YoY; 1% above the consensus of W48.6tr) and operating profit of W2.85tr (-21% YoY; 5% below the consensus of W2.99tr). Although headline operating profit missed the consensus, a closer look at YoY earnings drivers suggests that underlying performance was better than feared.

We estimate that FX had a net impact of +W238bn, with the benefit of a higher average USD/KRW rate (around +W700bn) outweighing the negative quarter-end FX rate impact (roughly -W500bn). The quarter-end FX drag was larger than expected due to an unfavorable comparison with 2Q25, when the quarter-end USD/KRW rate declined 8% QoQ (vs. +2% QoQ in 2Q26). From 3Q26, the base effects for both average and quarter-end rates should turn favorable.

We estimate the mix impact at -W570bn, consisting of incentives (around -W600bn), ASP (around +W300bn), and underlying product mix (around -W200bn). While incentive spending remains elevated, particularly in the US and Europe, the combined contribution from ASP and underlying mix has continued to support earnings since turning positive in 4Q25. We expect the drag from underlying product mix to ease as production of higher-margin models recovers and HEV sales continue to increase.

“Other” factors made a positive contribution (+W17bn), reflecting raw material costs (approximately -W400bn, roughly half of which was offset) and tariffs. According to the company, the tariff impact (included in “other” factors) was -W0.9tr. Tariffs reduced earnings by around W1.8tr in 3Q25 and W1.5tr in 4Q25, implying that tariff-related base effects will become a tailwind from 3Q26. That said, we estimate that more than half of this benefit will be offset by the unwinding of last year''s tariff mitigation measures. We estimate that these measures offset roughly 40% of the tariff impact in 3Q25, whereas the corresponding benefit in 2Q26 was less than W200bn.

The volume impact was -W542bn, reflecting production disruptions at a domestic supplier, weaker sales in the Middle East, parts supply disruptions in India, and sluggish demand in Europe. While the pace of production normalization bears watching, affected production lines have resumed operations, and a series of new model launches are scheduled for 2H26 (e.g., the Grandeur HEV, Tucson, Ioniq 3, Avante, and GV90).