Kia Motors should continue to suffer due to sluggish sales in the US and China,model overlap with Hyundai Motor (HMC), and a likely outlay of KRW1t related to acourt ruling on ordinary wages in 3Q.
The company is unlikely to be able to address accelerating drops in demand in theG2 (caused by technological innovations) via a gradual strategy shift or a newproduct cycle that will begin only after 2019. It needs to change on a morefundamental level even at the expense of near-term profitability.
Kia should suffer more from falling demand in the US and China than does HMCconsidering it has the weakest financials among the group’s three key firms, andthe group is focusing its resources on HMC. We downgrade the stock to HOLD.
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