Hyundai Motors profits slid globally because it didn’t focus much on SUVs

World’s fifth-biggest automaker Hyundai Motors just posted its ninth straight quarterly profit drop. On Tuesday it reported a 12% drop in first-quarter net profit to 1.69 trillion. Its revenue rose 7% to 22.35 trillion for the quarter, but operating profit declined 16% percent.

“Emerging market downturn as a result of low oil price has decreased exports from domestic factories while the value of emerging markets like Russia and Brazil declined, offsetting the impact of the weaker South Korean won,” Hyundai Motor said in a statement.

Here’s the simplest explanation to why Hyundai’s profits are slipping.

Sluggish sales in China and US: Its sales in China and other emerging markets are slipping. The company sold 10% fewer vehicles in China, its largest market in the quarter. It was perceived as being sluggish in tapping into the soaring demand for SUVs. Also, local Chinese rivals like Great Wall Motors offered cheaper SUVs.

The company said in an official statement it aims to improve earnings by launching its Elantra sedans and boosting SUV supply in China and the US.

Slow to shift: Hyundai avoided the worst impact from the global economic downturn back in 2008 by launching fuel-efficient sedans.

Few years on, there’s been a shift in consumer behavior to more fuel-hungry sport utility vehicles (SUVs). Analysts say it’s driven by the slump in the price of oil.

In the U.S., where consumers are currently baying for heavy SUVs and trucks, Hyundai still has a sedan-heavy lineup, and posted a mere 1% sales hike in the first quarter. That’s what enabled U.S. auto-maker General Motors to post higher profits.

Image credit: Indiatimes