Kia shares plunge 12% as Middle East war drives up costs

Strong sales growth fails to protect profits

A stronger South Korean won and higher spending on sales incentives put additional pressure on Kia's financial performance. The company generates a significant share of its sales overseas, meaning that a stronger domestic currency reduces revenue when converted into won.

Korea Investment & Securities analyst Changho Kim also pointed to rising spending on discounts and other customer incentives. Kia had initially based its financial plans on the assumption that the Middle East conflict would end before the third quarter began.

Despite lower profits, Kia continued to record sales growth across nearly all its major markets, except China and Southeast Asia. The company performed particularly well in the hybrid and fully electric vehicle segments.

In the U.S., Kia's hybrid sales more than doubled, helping the company's overall market share reach 5.8%. In Western Europe, sales increased 18%, supported by strong demand for electric vehicles.

Globally, retail sales of electrified models rose 47%. These vehicles now account for more than one-third of Kia's total sales volume.

Kia maintains its commitment to electric vehicles

Despite growing demand, electric vehicles remain less profitable for manufacturers than traditional internal combustion engine vehicles. Intense price competition from Tesla and Chinese automakers, particularly BYD, which are actively expanding into international markets, has made the situation more challenging.

Kia said it plans to maintain high spending on discounts and sales incentives in Europe and other regions at least through next year. At the same time, the company intends to strengthen internal cost-cutting measures to offset rising production expenses.

The automaker expects electric vehicles to reach price parity with gasoline-powered models in 2027–2028.

Kia's chief financial officer stressed that the company has no intention of abandoning its electric vehicle strategy despite declining profitability.

"When asked if pursuing EVs at the expense of profit is the right move, we saw the exact same trajectory with hybrids. We cannot survive in Europe or China without EVs, and we cannot walk away from the markets because of short-term margin erosion," Kim said.

Kia's challenges reflect broader difficulties facing the automotive industry, including rising production costs, geopolitical instability, and intensifying competition. The company's future financial performance will depend not only on vehicle sales but also on its ability to offset higher raw material and logistics costs.

As a reminder, Ford retained its position as the third-largest automaker by sales in the U.S. in the third quarter.

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