Kia's Operating Profit Declines 49% in Q3 as US Tariffs Inflict Loss Despite Record Sales

Kia has reported steep losing streak in its quarterly earnings between July and September, with a large-scale loss stemming from the 25 per cent auto tariff set by the US, the South Korean carmaker announced on Friday during a regulatory filing. The carmaker suffered a bigger earnings shock than Hyundai Motor, which saw its operating profit decline almost 30 per cent from the same US tariff.

Record Sales Offset

Kia reported an operating profit of 1.46 trillion won ($1.02 billion) in the third quarter (Q3), which is down 49.2 per cent from the previous year. Its sales, however, increased 8.2 per cent to 28.68 trillion won during the same period.

The carmaker explained that it achieved record third-quarter sales, thanks to growing demand for its hybrid and electric cars across the globe, but ended up reporting a sharp profit fall due to the aftermath of the US auto tariffs, increased global incentives and an unfavourable macro-economic environment.

EV Sales Surge Globally

Kia, a fast mover in the global electric vehicle (EV) market, achieved solid EV sales growth in the global market. Data from the carmaker showed that its electric vehicle sales jumped 32.3 per cent to 204,000 vehicles during the same period. Wholesales in Korea increased by 10.2 per cent to 138,009 units compared with the third quarter of 2024, supported by solid sales of recreational vehicles (RVs) and EV models.

Kim Seung-jun, senior vice president and chief financial officer at Kia, remained optimistic over its sales growth despite the tariff-sparked profit decline.

"We were exposed to the full-scale U.S. tariff shock in the third quarter," Kim was quoted as saying during a conference call, adding that the carmaker had to pay 1.2 trillion won to cover the tariff.

"However, Kia achieved meaningful sales growth particularly in the US, and our sales figure is on a track for rapid growth globally," Kim added.

Growth Outside Home Turf

Wholesale performance outside of Korea increased by 1.4 per cent to 647,128 units, driven by robust demand for hybrid models in North America, which recorded a 2.3 per cent YoY increase. 

Kia also saw an increase in sales volume in Asia-Pacific region and Central South America.

Q4 Recovery Expected After Korea-US Agreement

Kia is also widely expected to attain a major earnings rebound in the fourth quarter, as Korea and the US recently reached a detailed tariff agreement. This allows Kia to pay a reduced auto tariff of 15 per cent when exporting vehicles to the US.

Even if the US tariff still comes as a major risk factor to the carmaker, it shared plans to tackle the unfavourable trade environment by increasing sales for highly sought-after hybrid cars and value-added SUVs with higher margins.

European Strategy

In Europe, the carmaker said it will keep enhancing its brand identity as a competitive EV maker with diverse lineups ranging from the compact EV3 electric SUV to the midsized EV5 family SUV.

Volume Growth Masks Margin Pressure

The stark contrast between Kia's sales growth and profit decline highlights the severe margin compression caused by the US tariff regime. Whilst the company successfully expanded its market share through strong product appeal -- particularly in the rapidly growing hybrid and electric vehicle segments -- the 1.2 trillion won tariff burden essentially wiped out what would have been a profitable quarter.

The anticipated reduction in US tariffs from 25 per cent to 15 per cent in the fourth quarter brings some relief, though the carmaker will continue facing elevated costs compared to the pre-tariff environment.