Hyundai Motor Aktie

Good morning. Thank you for joining us today. We'll now begin the Hyundai Motor Company's Q1 2026 Earnings Call. Please note, once again, that the earnings presentation materials are available for download from the Financial Supervisory Services electronic disclosure system or under sales results within the IR resources menu of the HMC website.

For the call, we are joined by Head of Finance Division, EVP Scott Lee, Head of IR, EVP, Zayong Koo; and Head of Finance and Accounting Sub-Division, VP Hyosok Han; Head of IR Group, VP, Michael Yun; and Finance Division -- Head of Finance Division of Hyundai Capital VP Hyungseok Lee. The conference call will begin with earnings announcement followed by a Q&A session with the attending investors. [Operator Instructions]

Now we'll begin the earnings presentation by Head of IR Group VP, Michael Yun.

Hello. I am Michael Yun, Head of IR Group. Welcome, everyone, to HMC's Q1 2026 Business Results Conference Call. Please refer to the presentation HMC 2026 Q1 business results on our IR website. This presentation includes quarterly highlights, sales performance and profit analysis. And for quarterly summarized cash flow statement and detailed regional sales breakdown, please refer to the appendix.

First, Q1 highlights. Despite the global demand slowdown due to the geopolitical risks, our global market share rose by 0.3 percentage points this quarter. Our market share in the U.S. market rose by 0.4 percentage points, maintaining MS of 6% range for fourth consecutive quarters. In response to strong hybrid demand, the global hybrid sales reached 174,000 units and the share of global hybrid sales recorded 17.8%. Also in the U.S. market, the share of hybrid sales recorded 24.8%, continuing the momentum.

Finally, despite unfavorable business conditions with demand slowdown, market share increase in major markets and robust hybrid sales led to the highest first quarter revenue on record.

Next, the sales performance. In the first quarter of 2026, while global demand declined by 7.2%, global wholesale demand -- excuse me, wholesale sales recorded 976,000 units, a decrease of 2.5%. Retail sales recorded 949,000 units, reflecting a 0.7% decrease. Next, I'll go over details about our wholesale by key markets. In the U.S. market, sales increased by 0.3% year-over-year, totaling 244,000 units despite industry demand declining by 0.5%. Sales of eco-friendly vehicles rose 22.7% year-over-year, reaching 69,000 units, thanks to strong eco-friendly vehicle sales.

Hybrid sales accounted for a record high 24.8% of total sales. SUV sales also recorded share of 75.2% in the U.S. market, driven by strong sales performance of SUV models. In Europe, sales decreased by 7.8% year-over-year, totaling 140,000 units. Optimization of product mix drove SUV sales to rise 3.6% year-over-year and hybrid sales increased by 22.7%. Despite challenges, mix improvement was achieved by focusing on high-margin vehicles. Sales of eco-friendly vehicles rose 7.1% year-over-year, reaching 70,000 units, driven by strong hybrid sales in Europe. We expect to sustain this momentum by launching the new IONIQ 3 in the second half of this year.

In the domestic market, sales decreased by 4.4% year-over-year, totaling 159,000 units. However, EV sales rose 65.5% year-over-year, driven by government incentives for eco-friendly vehicles and IONIQ lineups. Hybrid sales grew 5.3%, reaching the share of 24.9%. And sales of eco-friendly vehicles reached 60,000 units, a 21.2% year-over-year increase.

Next, I'll explain the sales analysis by vehicle types. Global SUV sales, including Genesis, totaled 607,000 units accounting for 62.2% of total sales. While EV sales dropped 8.3% year-on-year, hybrid sales continued their strong momentum, growing 26.9% year-on-year. Eco-friendly vehicle sales increased by 14.2% year-over-year, driven by strong hybrid sales. This concludes the discussions on sales.

I'll now move on to the profits and losses. This page summarizes our income statement. Consolidated revenue increased by 3.4% Y-o-Y to KRW 45.9 trillion, and operating income decreased by 30.8% year-on-year to KRW 2.5 trillion. The automotive business' revenue decreased by 0.5% year-on-year due to the global demand slowdown and increase in incentives, which is a revenue deduction item. The operating profit decreased by 36% year-over-year with the tariff impact and one-off temporary external factors. Revenue from finance business increased by 21.5% year-over-year, and operating profit increased by 1.4% due to continuous growth in the U.S. market penetration rate and asset size. Net income decreased by 23.6% Y-o-Y to KRW 2.6 trillion as a result of operating profit decline.

Next is quarterly revenue and operating income analysis. Revenue benefited from favorable exchange rates contributing KRW 997 billion, while decreased global wholesales resulted in negative volume effect of KRW 857 billion. Additionally, general increase in incentives resulted in negative mix effect of KRW 319 billion. Combined with growth in the financial segment, total revenue rose 3.4% year-on-year. Despite the record high first quarter revenue, negative foreign exchange impact on sales warranty provisions due to quarter end exchange rate increase reduced positive ForEx impact to KRW 25 billion.

Sales shortfall caused by the Middle East war and the sales halt of Palisade to negative volume impact of KRW 247 billion. Higher incentives driven by intensified competition in key markets led to negative mix effect of KRW 337 billion, along with tariff impact of KRW 860 billion. As unfavorable business conditions and one-time costs negatively impacted on our profitability, the operating profit decreased by 30.8% year-over-year to KRW 2.5 trillion, resulting in operating profit margin of 5.5% despite contingency plan partially offsetting tariff effects.

The last part is SG&A and net profit. Our Q1 cost of goods sold ratio recorded 82.5%, a 2.7 percentage point increase year-over-year due to the rise in materials cost. SG&A recorded KRW 5.5 trillion, which is a 2.9% increase compared to last year due to increase of sales warranty provisions owing to quarter end exchange rate increase. Finally, our net profit decreased by 23.6% to KRW 2.6 trillion as a result of operating profit decline. That is the end of my presentation. Thank you.

Next, Head of the Finance Division will give us the Q1 business performance.

Good afternoon. I'm Scott Lee, Executive Vice President and Head of Finance Division. I'll now present HMC's Q1 business performance and the Q1 dividend. As previously noted, Q1 results recorded revenue of KRW 45.9 trillion, operating profit of KRW 2.5 trillion and operating margin of 5.5%, which is broadly in line with market consensus. Compared to January, when we announced our annual guidance, the global auto industry environment has become more uncertain than ever. As a result, global auto demand, including major markets declined by approximately 7.2% in the first quarter.

In response to the demand slowdown and uncertainties such as the potential reappeal of the U.S. IRA legislation, incentive costs increased by approximately KRW 300 billion compared to last year. Additionally, sales disruptions caused by the Middle East conflict and the suspension of policy sales resulted in a negative impact on operating profit of around KRW 250 billion. Regarding foreign exchange effects, the average exchange rate against the dollar in Q1 was KRW 1465.2, representing a 0.9% increase compared to the same period last year. However, sharp ForEx volatility toward the end of March led the quarter end exchange rate to close at KRW 1,513, marking a 5.5% increase compared to 2025 year-end.

This result -- this quarter end exchange rate, which was higher, temporarily increased the Korean won denominated valuation of Korean currency-based warranty provisions at the end of the quarter. This resulted in approximately KRW 270 billion negative impact on the operating profit. Regarding the tariff effect, as sales subject to the 15 tariff rate began to materialize, the decline in operating profit was approximately KRW 860 billion, which was material -- which significantly lower, was lower compared to the quarterly tariff impact in the second half.

Despite intensified macroeconomic uncertainty, we still achieved solid sales performance by leveraging hybrid models and maximizing sales mix optimization in key markets such as North America. Our global market share expanded by 0.3 percentage points from 4.6% to 4.9% and the U.S. market share increased by 0.4 percentage points from 5.6% to 6% reflecting continued strong strengthening of our market presence.

In addition, hybrid vehicle sales reached a record high mix of 17.8%, sustaining strong growth momentum. Accordingly, revenue reached KRW 45.9 trillion in Q1, the highest ever first quarter result, underscoring sustained top line growth. To offset profitability pressures stemming from macroeconomic challenges and tariff headwinds, we are actively executing zero-based budgeting-driven contingency plans and mobilizing company-wide efforts to protect margins on a sustained basis. For reference, excluding contemporary external factors such as negative ForEx impact and the Middle East conflict, the suspension of Palisade sales, operating profit is estimated at around KRW 3 trillion with the operating margin of 6.6%.

Next, I would like to address the dividend for the first quarter of this year. In accordance with the value-add program announced in August 2024, we plan to distribute a quarterly dividend of KRW 2,500 per share for both common and preferred stock. The record date for the first quarter dividend is May 31, and the payment date is June 30. As mentioned earlier, the global auto industry is facing unprecedented level of uncertainty driven by macroeconomic headwinds, tariff policies and the ongoing conflict in the Middle East. Despite such challenges with our improved fundamentals, including record high hybrid sales and resilient performance in the North American market, we remain confident in our ability to achieve our annual operating margin guidance of 6.3% to 7.3% through the launch of the new model cycle in the second half of the year and continued execution of contingency measures, including zero-based budgeting initiatives.

Going forward, we'll continue to strengthen profitability to support shareholder return and future investment by leveraging our company-wide capabilities. We deeply appreciate the continued support of our shareholders and investors. Thank you.

Next, the finance business results will be shared by the Head of Hyundai Capital.

Hello, I am Hyungseok Lee. I'd like to tell you about the results of the finance. With the Iranian conflict and uncertainties continued, but Hyundai Capital and Hyundai Capital America strengthened the collaboration with the group. And based on the strong captive asset portfolio, we maintained a stable performance. I'd like to tell you about the details.

First, Hyundai Capital. With our superior financing capabilities, we continue to support the group's car sales business and the auto asset share was maintained at around 82% with the no interest installment program for Grandeur and the new car promotions and with the fourth quarter Genesis specialized financial product, the new car and the lease assets improved by 9.4% [indiscernible], improving the asset by 4.8%.

In case of the retail sales, with the lease growth, the asset grew by 2.1% and the operating expenses was down by 1% compared to the same period last year. By selectively utilizing different lending methods, including overseas receivables and ABS, we were able to reduce the interest rate -- interest expenses down by 0.7% and the total bad debt expenses were down by 23.7%. With the premium captive asset portfolio management and the aggressive risk management led to this result. And so the delinquency rate in Q1 was 0.78%. Therefore, the operating profit improved by 31.8% and the pretax as well.

And the -- we are expecting heightened volatility in the first quarter. Therefore, we'll optimize the operation and manage our profits better and we'll have a solid financial management so that we can continue our stable business. And also, we'll continue to expand globally in the second half. We'll finalize the preparation for the financial entity launch in India. By doing so, we improve the financial support for the auto business of HMG.

Next is Hyundai Capital America HCA. With the solid sales results in Q1, we've maintained a high penetration rate of 67% and the product asset improved by 30.1%. With higher installment and lease profit, the operating profit improved by 17%. And because of the bad debt expenses, the operating expenses rose by 17% with the additional provision and the bad debt provision expense went up as well.

In the U.S. market, the delinquency rose, but still it's below the market average, and we are thoroughly managing our client portfolio with prime customer share over 87%. Therefore, the pretax income, however, declined by 12.6%. In the first half, because of the headwinds from the Iranian conflict and so on, we are expecting some heightened market volatility and challenging market environment. However, based on our solid credit rating, Hyundai Capital America is very well prepared for the impact and the market uncertainties. We'll continue to provide higher finance synergies and support the group's auto business. That is all. Thank you.

That is all for the presentation part. We'll now move on to the Q&A. [Interpreted] [Operator Instructions]

[Interpreted] The first question will be provided by Eun Young Yim from Samsung Securities.

[Interpreted] I am Yunjung Lim from Samsung Securities. So I have 2 questions. First, I understand that there was a fire regarding one of your suppliers for the engines valves. And I think the impact will be reflected as of Q2 in terms of your production. So could you give us an update on the setback of the production and how you're responding to this? And also regarding additional costs with the Middle Eastern war ongoing, how is that going to impact your profitability function as well due to the increase in raw materials?

The second question is regarding the robotics industry. During the Kia CID, there wasn't much additional update regarding the robotics business other than what was provided during the CES. So I understand that as of this year, the production plant as well as the training center will begin. However, what would be the investment structure as well as the share structure regarding these facilities? And when are you planning to open that information to the market?

[Interpreted] Right. Let me answer your first question. I understand your first question regarding the fire of our supplier producing the engines valves. The name was Anjan Industries and how it's going to impact our production. To be frank, yes, it is going to somewhat set off our production to some degree. However, we are currently developing a replacement and testing the durability of that part. And we will probably be able to use -- put that to use in the near future.

[Interpreted] So in the end, we want to normalize the issue as soon as possible. It will differ depending on each engine. However, some engines, it could come back to normal by mid-April, if it as fast as possible. So we are trying to pull forward this timing as much as possible. We cannot give you the exact number. However, our plan is to recover the offset of the production within the second half of the year and also make use of our global production side so that we can recover the entire amount for the global production within the year.

[Interpreted] Now regarding your follow-up question regarding raw materials, even before the war at the end of the previous year, the prices actually have started to hike, resulting in the production shortage. For example, nickel, platinum and calcium. So we did already see hikes in prices.

[Interpreted] So how that impacted our Q1 performance, I believe that we said it was about KRW 200 billion. But at the end of the first quarter, the raw material prices are partially actually going down. And so we are seeing how that is going. But even in Q2, we believe if there is going to be a hike in raw material prices, it's pretty much going to be similar to what it has been in Q1, but the fact is the raw material prices are gradually going down. But despite that, we are working with purchasing to see how we can further save costs to recover the losses that have been made due to the raw materials.

[Interpreted] Another factor that is made due to the increase in raw materials is the impact on the overall OEMs. So we are constantly monitoring the trend of our OEMs -- of other OEMs, how they're responding, what other possibilities there are in the market for us to take opportunity of so that we can be aligned with the market trends.

[Interpreted] As for your second question, it will be answered by Zayong Koo.

So regarding Boston Dynamics robotics business, to be frank, there is no specific update since our CES presentation in January. We did announce that we will be running the RMAC, the Robotics Meta Application Center in Q2. And in Q3 2023, we said that we will be building a factory in Savannah with the capacity of 30,000 units. So I think for that to be commercialized or anything to actually get see the action, you still have to wait until the end of the year or for the latter half of this year. So we still do need time to give you any update. Just an additional note, the CEO of BD has resigned and the Board is currently undergoing the process to select a new CEO. And if there's any update regarding that, we also let you know.

[Interpreted] The following question will be presented by Dohyoung Kim from Goldman Sachs Securities.

[Interpreted] I am Kim Dohyoung from Goldman Sachs. My question is simple. First, what is the update on the SUV development of the company?

And second, what is the status of the development of the SDV phased car?

[Interpreted] Thank you for the question. I believe this is the topic that the market, including many analysts and investors are taking great interest in. Yes, as you mentioned, with the appointment of the new Head of the AVP division and 42dot, our President Minwoo Park, even with the new leadership at the hand, we still keep our direction that with the hardware capability of HMG and the software capability of 42dot, we will be the basis for building the SDV platform's foundation. So what's most critical for the SDV development is to accumulate our as much driving data as possible in a consistent format to utilize this data for training so that we can consistently train the model and improve the performance as quickly as possible in this data flywheel framework.

So with our -- Park, the President of the HAM to build this positive feedback loop, we are managing the collected data in the same format so that we can also seek the sensor standardization to be to use this data for training.

[Interpreted] In addition to train our models in as much autonomous driving data as possible, we are working together with NVIDIA so that we can get our hands on the data collected from their other partners that were collected from the global ecosystem as well. So in the short run, we'll utilize this global partnership like the one with NVIDIA to swiftly commercialize the competitive autonomous driving solutions and find our place in the market and get as much data as possible early on so that we can expedite the development of our own autonomous driving models.

[Interpreted] So we believe that the working with external partners does not contradict our goal of growing our own technologies in-house. We need to build a positive feedback loop or data flywheel where we deliver state-of-the-art advanced technologies early on to the market and receive data and feedback from the market for continuous development of our products. Thank you.

[Interpreted] And the second part of your question regarding the development status of SDV Pace car. According to our original plan, the SDV Pace car will undergo the test driving on actual roads from the second half of this year for the demonstration and verification of the technology. So with our President, Minwoo Park, we've established the basic direction for SDV development, and we are currently also still doing our internal discussions on the direction. So -- and this will be communicated with the market when the time is right. Thank you.

Before we move on to the second question, we would like to correct the answer regarding the first question for the robotics. It was previously mentioned that RMAC is going to open in Q2, but the correct timing is in Q3. We apologize for the correction. And now next question please.

[Interpreted] The following question will be presented by Gwi-yeon Kim from Daishin Securities.

[Interpreted] So my question is regarding incentives. So by each country and market, we -- for example, in the U.S., we're able to check and see the official incentive data based on order date. However, for Europe and India, we are not able to find the official detailed information. So would it be possible for you to share with us the detailed figures regarding this? Because since you don't have the numbers for Europe and India, we understand that the incentive is having a negative impact on the mix and the profitability. So maybe it's coming from these areas where the official number is not disclosed.

[Interpreted] Thank you for your question. So regarding Europe, the incentive level for Q1 is similar to the previous quarter. In particular, in the U.K., we have to meet the 33% level for zero-emission vehicles, which means that we have to expand our EV sales. And also the CO2 regulation in Europe is also getting more stringent. So we are faced with the challenge to expand the sales in EU. And as a result, the incentive payout in Europe is actually bigger than the U.S.

[Interpreted] As for India, it's not really an incentive-centric market. We provide less than 2% of our overall revenue. So it's very minimal.

[Interpreted] If I could elaborate on the Indian market, we made sales of a historic high -- all-time high in Q1. And despite the overall volume going down due to Middle Eastern war, the sales in India actually went beyond our business plan, and we met 13,000 units. So actually, we are seeing an increase in sales in India.

[Interpreted] The last question will be presented by Ji-Woong Yoo from DAOL Investment & Securities.

[Interpreted] I'm Ji-Woong Yoo from DAOL Investment & Securities. My question is regarding the Chinese market. So you mentioned by 2030, the sales target for the Chinese market is around 500,000 units, which is higher than what's been announced by the previous CID. But when I look at the market status in China now, we've launched the ELEXIO, which is a new EV and the volume is not really up there yet. And also, the thing is according to your sales target by 2030, we have to sell 100,000 units of ELEXIO this year, and we have to achieve the sales volume of 500,000 in 4 to 5 years from now? And how is that going to be possible?

And also regarding the localized IONIQ -- and also regarding another model launch, which is the localized IONIQ. And with all those EVs, what are the differentiating factors for your lineup for the Chinese market? And how -- what kind of roles will they play to boost the sales volume in the Chinese market? And also last year, you mentioned the collaboration with Momenta and also there has been a mentioning of equity stake or governance stake. So what are your expectations regarding the Momenta collaboration?

[Interpreted] So regarding your question, how we are going to achieve the 500,000 sales target by 2030 when we have to sell around 100,000 a year. And actually, for the sales figure -- sales number target of 500,000, the export numbers are included in those 500,000 target. So for the -- from the Chinese market, we're making some exports to the Middle East, Africa and CSA Central and South American markets and the volume is higher than what we sell in the Chinese domestic market.

[Interpreted] For your information, the share of export from China takes up around 40% of the total sales in the first quarter of 2026.

[Interpreted] So for the mid- to long term, our policy in China stays the same in China to China for global. So you mentioned the IONIQ brand, and we have a plan to launch a new IONIQ brand in the Chinese market in the second half. And that model will be -- will have the platform that we've developed together with BAIC APEC and we'll have the CATL LFP battery, and we'll have the autonomous driving solution provided by Momenta.

[Interpreted] And also from the second half, starting with the first IONIQ model, the localized IONIQ model for the Chinese market, we have upcoming model launches to be made in the Chinese market, including new ERV models, smaller models, including [indiscernible] SUV, [indiscernible] sedan and [indiscernible] SUV. So we do have the plans for the launches of the Chinese-specific models.

[Interpreted] So working with Chinese partner, BAIC means that we'll be able to also do the joint procurement or joint sourcing. So we'll be able to utilize the suppliers for BAIC, which will be able to allow us to bring down the cost significantly.

[Interpreted] Thank you. This is the end of the first quarter earnings call of Hyundai Motor Company. Thank you for joining us.

[Interpreted] If you have any questions, please contact Hyundai Motor Company's IR group. Thank you very much for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Interpreted] Ladies and gentlemen, thank you for attending this conference call. We will now begin Hyundai Motor Company's Business Results Conference Call for the fourth quarter of 2025. Once again, the presentation material can be downloaded from the Financial Supervisory Services electronic disclosure system at dart.fss.or.kr or the IR website at www.hyundai.com.

Joining us are EVP Seung Jo Lee, Head of Planning and Finance Division; EVP Zayong Koo, Head of IR Division; [ Harry Hyun ], Head of Finance Accounting Subdivision; Michael Yun, Head of IR Group; VP Hyungseok Lee, Head of Planning and Finance Division of Hyundai Capital.

We will first have HMC's presentation on the business results followed by a Q&A session with the attending investors. [Operator Instructions]

Now we'll proceed with the presentation by Michael Yun, Head of IR Group at HMC.

[Interpreted] Hello. This is Michael Yun, Head of IR Group. Welcome, everyone, to Hyundai Motor Company 2025 Q4 Business Results Conference Call. On behalf of Hyundai Motor Company, I appreciate your time for joining today's call. And please refer to the presentation, HMC 2025 Q4 business results on the IR website. The presentation includes quarterly key messages, sales performance and profit analysis. And for quarterly summarized cash flow statement and detailed regional sales breakdown, please refer to the appendix.

First, Q4 key messages. Despite concerns over tariff impact and the resulting slowdown in demand, strong sales performance led to the highest fourth quarter revenue on record. Particularly in the U.S. market, we have achieved annual wholesale sales of 1 million units for the first time, driven by strong hybrid sales and a diversified SUV lineup. Finally, thanks to the robust hybrid sales in the U.S. market, the share of global hybrid sales recorded 16.3%.

Next, the sales performance. In the fourth quarter of 2025, global wholesale sales recorded 1.03 million units, a decrease of 3.1% compared to the previous year. Retail sales recorded 1.07 million units, reflecting 0.2% decrease Y-o-Y. The annual wholesale decreased by 0.1% to 4.13 million units, while retail sales decreased by 1.6% to 4.1 million units.

Next, I'll go over details about the increase or decrease in wholesale sales through key market summaries. In the U.S. market, sales increased 0.8% Y-o-Y, totaling 244,133 units. We continue to see strong sales performance of high-margin vehicles as hybrid sales accounted for a record high 22.6% of total sales, driven by new model effect of the Palisade hybrid and Genesis recorded the highest share of 8.9%. Sales of eco-friendly vehicles rose 29.2% Y-o-Y, reaching 70,503 units, driven by strong hybrid sales. In Europe, sales decreased 11.6%, totaling 138,152 units, revised EV incentive in key countries like Italy and France led to EV wholesale sales increase of 54.1% compared to the previous year. As we continue to expand our key EV lineup such as INSTER and IONIQ 9, our EV sales accounted for 18.4%. Sales of eco-friendly vehicles rose 12.1% Y-o-Y, reaching 62,078 units. In the domestic market, sales decreased by 6.3% Y-o-Y, totaling 177,496 units. Despite the reduced business days in the fourth quarter due to a holiday break, the new model effect of the Palisade, IONIQ 9 and NEXO led to a higher proportion of SUV sales. Sales of eco-friendly vehicles reached 62,189 units, a 1% Y-o-Y increase. Despite intensified competition from rival hybrid model launches, the new model effect of hybrid drove hybrid sales to grow 8.9%, reaching the share of 29%.

Next, I will explain the sales analysis by vehicle type. Global SUV sales, including Genesis, totaled 638,149 units, accounting for 61.8% of total sales. Eco-friendly vehicle sales increased by 12.1% Y-o-Y, driven by hybrid sales growth in the U.S. market and expansion of EV sales in Europe. Despite the termination of EV subsidy programs in the U.S., EV sales rose 6.8% Y-o-Y, while hybrid sales continued to show strong momentum, growing 15.3% Y-o-Y.

This concludes the discussion on sales, and now I will explain P&L. This page summarizes our income statement. Consolidated revenue increased by 0.5% Y-o-Y to KRW 46.8 trillion and operating income decreased by 39.9% Y-o-Y to KRW 1.7 trillion. The Automotive division's revenue increased by 2.4% Y-o-Y due to favorable FX environment and improved mix driven by hybrid and EV sales. The OP decreased by 49.7% Y-o-Y with tariff impact and increase in incentives. Revenue from finance division increased by 9.2% Y-o-Y due to interest rate cuts and FX fluctuations, while OP decreased by 2.7%. Net income decreased by 52.1% Y-o-Y to KRW 1.2 trillion.

Next is quarterly revenue and operating income analysis. Revenue benefited from favorable FX rate contributing KRW 1.7 trillion, while decreased global wholesales resulted in negative volume effect of KRW 2 trillion. Additionally, regional mix improvement and sales expansion of hybrid and EV contributed to KRW 1.25 trillion. Despite the decline in the financial segment, total revenue rose 0.5% Y-o-Y. Despite the record high fourth quarter revenue, unfavorable business conditions negatively impacted our profitability, including the tariff impact and higher incentives driven by intensified competition in key markets. Although contingency plan partially offset tariff impact, OP decreased by 39.9% Y-o-Y. Our Q4 cost of goods sold ratio recorded 83.3%, a 2.8 percentage point increase Y-o-Y. SG&A recorded KRW 6.1 trillion, which is a 1.9% decrease compared to last year due to decrease of sales warranty provisions owing to quarter end exchange rate decrease. Finally, our net profit decreased by 52.1% to KRW 1.2 trillion.

This concludes the presentation of the 2025 Q4 business results. Thank you.

Next, EVP Seung Jo Lee, the Head of Planning and Finance Division, will assess the company's business results in Q4 and the annual guidance.

[Interpreted] Good afternoon. This is EVP Seung Jo Lee, Head of the Finance Division. I will now present Hyundai Motor Company Q4 2025 business performance and Q4 dividend and shareholder return policies.

First, revenue reached -- sorry, I'm going to share with you the performance of the fourth quarter and guidance status. Revenue reached KRW 46.8 trillion, marking a slight Y-o-Y increase, which was driven by an improved regional mix from increased North American exposure and higher EV and HEV sales. Although a weaker one offered favorable FX effect, operating profit declined by KRW 1.1 trillion Y-o-Y to around KRW 1.7 trillion due to ongoing U.S. tariff impact, lower sales volume resulting from fewer working days and increased incentives driven by intensifying regional competition.

With the 15 tariff rate applied retroactively from November 1, tariff costs declined by KRW 360 billion Q-o-Q to KRW 1.46 trillion. However, the benefit of the tariff rate costs were limited due to the sales of inventory subject to a 25% tariff in Q4. Nevertheless, the company actively executed contingency measures, mitigating the negative tariff impact by around 60%. Additionally, shutdowns at European and Jeonju plants to accommodate new model launches led to an increase in fixed cost per unit, resulting in about KRW 200 billion. However, the sales momentum from upcoming new model launches is expected to enhance future business results.

Next is 2025 guidance. This guidance was first announced at the fourth quarter 2024 earnings call, and this outlined wholesale of 4.17 million units, revenue growth of 3% to 4% and OPM of 7% to 8%. However, following the unforeseen U.S. tariff issue, the guidance was revised at the 2025 CEO Investor Day with the OPM target lowered by 1 percentage point to 6% to 7%.

Despite an unfavorable external conditions, we presented an upward revision of the revenue growth, which was raised by 2 percentage points to 5% to 6%, driven by aggressive and flexible production and sales strategies. Due to geopolitical challenges and intensified market competition, total sales reached 4.138 million units, falling short of the target by 36,000 units. However, we achieved a history milestone by surpassing 1 million wholesale units in the U.S. market for the first time, driven by growing global demand and our diversified lineup, hybrid sales continued their strong momentum, rising about 28% Y-o-Y to 635,000 units, accounting for 15.3% of total sales.

Despite the difficult environment as a result of our commitment to meeting the market communicated guidance with a higher sales mix in North America and strong performance in hybrid and EV models, revenue grew 6.3% Y-o-Y, reaching KRW 186.3 trillion, exceeding our revenue growth target. OP declined Y-o-Y due to about KRW 4.1 trillion in annual tariff impact, but the OP margin reached 6.2%, falling within the guidance range that we have provided.

Next, I'd like to discuss our year-end dividend and shareholder return policy. We enhanced dividend visibility and ensured the continuity of shareholder returns. Even in periods of earnings volatility, the company introduced a minimum annual DPS of KRW 10,000 based on common share from 2024. Despite a 25% Y-o-Y decline in consolidated net income attributable to controlling shareholders in 2025, we remain committed to this pledge to our shareholders. Accordingly, we declared a year-end DPS of KRW 2,500 based on common share, thereby fully delivering the minimum annual DPS of KRW 10,000. As a result, our dividend payout ratio exceeded 25%, reaching 27.7%. In addition, in line with the three-year mid- to long-term shareholder return policy announced in 2023, we completed the retirement of 1% treasury shares in April to achieve our target of TSR ratio of at least 35% in 2025 and to execute the plan to repurchase up to KRW 4 trillion of treasury shares over three years, we plan to conduct a treasury share buyback amounting to KRW 400.7 billion. Of this amount, around KRW 200.2 billion will be included in the calculation of the 2025 TSR ratio. The remaining around KRW 200.5 billion corresponds to our previously announced policy of retiring 1% of treasury shares per year over three years and is intended for the final 1% retirement schedule for 2026.

As such, this portion will be reflected in the 2026 TSR calculation upon requirement. The treasury shares to be repurchased under this program are solely intended to enhance shareholder value and will be fully retired during '26. The share repurchase program will commence on January 30 and will be conducted over a three-month period. This year, the automotive industry is expected to face a challenging environment marked by stagnant growth in key markets and intensifying competition, while continuous investment remains necessary to secure leadership in the future technology amid rapid changes. Despite these challenges, we will actively implement continuous measures to reduce cost and optimize volume and profitability by region with the aim of delivering solid results and fulfilling our commitment to shareholder return policy.

Finally, we'd like to express our sincere appreciation for your continued support and interest in our long-term investment and efforts in future business, including robotics, autonomous driving and the hydrogen ecosystem. Going forward, we'll continue to strive for sustainable growth as a smart mobility solution provider and provide regular updates on matters of importance to our shareholders. Thank you for listening.

[Interpreted] I'd like to present our 2026 annual guidance. Let me begin with our wholesale plan. Our sales target for 2026 has been set at 4.158 million units, representing an increase of around 20,000 units Y-o-Y. This target reflects our assessment of industry demand by regional segment. And please refer to Page 2 for a detailed breakdown of regional ad sales targets.

Turning to our consolidated financial outlook. We expect 2026 consolidated revenue to grow by around 1% to 2% Y-o-Y. Supported by continued ASP improvement, and this outlook is driven by increased sales volume in North America and further expansion of hybrid vehicle sales. And we expect that there will be no temporary cost increase in 2026. So with respect to profitability, despite a challenging external environment, based on our fundamentals and competitiveness and cost innovation, we are targeting a consolidated OPM of 6.3% to 7.3% for 2026.

Moving on to our investment plan. Total investment for 2026 is planned at KRW 17.8 trillion, representing a 23.2% increase compared to 2025 actual of KRW 14.5 trillion. By category, R&D investment is planned at KRW 7.4 trillion, up 21% year-over-year, driven by efforts to strengthen the Genesis and eco-friendly vehicle lineup, including Genesis SUV. CapEx is planned at KRW 9.0 trillion, 32% increase Y-o-Y for U.S. localization related to investment in response to U.S. tariffs and for electrification to gain future growth momentum. Strategic investment planned at KRW 1.4 trillion, representing a 7% decrease Y-o-Y. Regarding free cash flow, taking into account our profitability outlook and continued investment expansion in 2026, we expect free cash flow to be in the range of negative KRW 1 trillion to positive KRW 0.5 trillion. With respect to shareholder returns, in line with the value program announced on August 28, 2024, we intend to continue our shareholder return policy in 2026 targeting a shareholder return of at least 35% on a TSR basis.

In closing, even amid heightened internal, external uncertainties in 2026, we remain committed to achieving our annual guidance through sustained profit generation and management activities that prioritize shareholder value grounded in strengthened product competitiveness and improved fundamentals. For further details, please refer to the 2026 guidance materials available on our website. This concludes our 2026 annual guidance presentation. Thank you.

Next, Vice President, Hyungseok Lee, the Head of Planning and Finance Division of Hyundai Capital, will assess the Q4 results for the finance business.

[Interpreted] Good afternoon. I am Hyungseok Lee, Head of Finance at Hyundai Capital. Let me now present the finance sectors Q4 2025 performance and 2026 outlook.

In Q4, Hyundai Capital and Hyundai Capital America delivered solid results by continuously expanding their roles as the group's captive finance companies. I will now touch upon the detailed performance by company. First is Hyundai Capital. In Q4, under strengthened sales finance collaboration with the group by introducing specialized programs such as Genesis Finance, Hyundai Capital actively supported vehicle sales. As a result, installments and lease volume increased by 14.7% and 10.1%, respectively, Y-o-Y. Total product assets grew 3.6%.

Lease income rose on the back of expanding high-value model-based lease assets. However, due to declining market interest rates and regulatory impact, Installment and loan interest income decreased, leading to a slight Y-o-Y decline in operating revenue, excluding FX and derivative effects. On the funding side, 14% of domestic bond issuance in 2025 was ESG bonds by standing a foundation for lower cost funding with diverse borrowing offerings such as offshore bonds and ABS, interest expense in Q4 decreased 2.7% Y-o-Y.

In January this year, we were the first to issue public bonds in the amount of EUR 500 million as a credit finance company, further demonstrating strong global funding competitiveness despite continued downward pressure on soundness in the industry, driven by real estate stress in the regional areas and rising household debt and others, Hyundai Capital maintained solid performance through a high-quality captive portfolio and active NPL disposal recording a delinquency rate of 0.82%. In spite of decline in lease costs, we rather increased provisioning for preemptive risk management. As a result, total operating expenses rose slightly Y-o-Y, driving a decline in operating profit in Q4. However, with equity method gains from overseas subsidiaries increasing profit before tax rose 13.6%.

In 2026, Hyundai Capital intends to strengthen liquidity to navigate heightened market volatility and defend profitability through funding cost management and OpEx optimization. The company will further enhance digital capabilities through data collaboration at the group level and adoption of AI in core operations. Globally, Hyundai Capital is preparing to launch its finance subsidiary in India and further advance capabilities across overseas subsidiaries to reinforce position as a leading global mobility finance provider.

Next is Hyundai Capital America. Despite macro uncertainty in Q4, thanks to strong vehicle sales trends at the group level since the beginning of the year, a high 72% P rate, we recorded growing trend across the overall portfolio. In particular, prior to the IRA subsidy expiration, the lease volume of eco-friendly vehicles increased rapidly, driving a 32.2% Y-o-Y rise in leased assets and a 16% growth in total product assets. On the back of robust asset growth, installment and lease income grew in Q4 Y-o-Y, keeping operating revenue at a similar level to last year.

For funding, HCA issued a total of USD 11.9 billion in public bond in 2025 and successfully debuted in the euro bond market in June, impacted by an increase in total borrowings, interest expense in Q4 rose 14.3% Y-o-Y. In terms of asset, above 85% of the customers were rated prime with those subprime rated recording less than 1%. Although the bad debt expense went down with the increased provisioning for residual value risk management. However, as total operating expenses declined slightly, OP in Q4 grew 48.4% Y-o-Y.

In 2026, tariff impact, interest rate volatility and inflation are expected to create a challenging environment. Nevertheless, HCA like to maintain sufficient liquidity based on strong credit ratings to navigate this uncertainty. The company will continue to support the auto sale financing to sustain asset growth and secure outstanding financial soundness through disciplined risk management. Added to that by diversifying business such as financing for the group's new businesses, the company will broaden its role as the HMG as global mobility finance company.

This concludes my presentation. Thank you for listening. With that, we will conclude the presentation and take your questions. Please limit your questions to two.

[Foreign Language] [Interpreted] Now Q&A session will begin. [Operator Instructions] The first question will be provided by Ji-Woong Yoo from DAOL Investment & Securities.

[Foreign Language] [Interpreted] I'm Ji-Woong Yoo from DAOL Investment & Securities. So I have two questions regarding cost. First, you mentioned about the fixed cost for 4Q being close to KRW 200 billion. And the tariff in Q4 was KRW 1.5 trillion, which is lower than the amount for Q3. However, the operating profit for Q4 has gone down by KRW 1 trillion versus Q3. So, all in all, although the tariff cost has gone down, the expectations high that the cost would also get better. So I was wondering if there were any other costs that ought to be occurred in Q4 for this result? Or are there any other costs that are expected for Q1?

My second question is based on the CID announcement, you said that you are planning for the five years, KRW 77 trillion investment. So if you divide that on an annual average, that comes to close to about KRW 14 trillion. And this year, you announced that the investment will be around KRW 17.8 trillion. So, for the past four months, have there been any drastic measures to make new investment decisions or maybe end of last year or earlier this year or for the year of 2026, do you have any new investment decisions that to be executed?

[Foreign Language] [Interpreted] Before answering your question, I think during my presentation, I made some numerical error. So, the buyback of treasury shares, I said it was KRW 470 billion, but in fact, it is going to be KRW 400.7 billion.

Right. So, to answer your first question, I mentioned that there's going to be an increase in fixed cost of about KRW 200 billion due to new cars being input in Jeonju and Turkey plant. And you asked if there are any other costs due to -- that results in this increase in fixed cost. So there were temporary increase in fixed costs. At the end of last year, we had to reflect the increase in labor cost, which came to about KRW 140 billion. And also, there was a quality cost that occurred for [ CapCo ], which came to about KRW 100 billion. So that was just our temporary cost that was a onetime happening for the end of the year. And also with HCA, during the auditing process of its fiscal orders, it was found that usually for lease cars, we set the time to 36 months for the incentives, but it was found that on average, the use of the lease was 31 months. So we were adjusting the cost and profit, and that was altogether reflected in the financial sheet. So that resulted in KRW 130 billion at the end of the year.

So, I think, I pretty much explained if any further costs were going to be created in Q1 of 2026 compared to Q4. But if I'm to give you a bit more of elaboration on the performance regarding Q1, with IRA being abolished in Q4 last year, the EV inventory of our dealers is now piling up. So we are really trying to decrease this inventory amount. And that's why we have made a strategic approach so that we can lower the inventory in Q4, and we believe that this will help with our Q1 performance.

Now moving on to your second question. You said that CID announced a total KRW 77 trillion investment for five years. And on an annual average, it comes to KRW 14 trillion. And this year, we announced an investment of KRW 17.8 trillion and whether there is a new investment plan that is coming ahead. However, that is not the case. It's just that our investments are mostly focused on 2026 and 2027. So I think this year will probably the peak our investment size. So, overall, the total investment size or pie has not grown. It's still the same.

And just to elaborate further regarding our investment, we will continue our investment for our future businesses. We have been doing this from four years ago. And I think most recently, this value is now represented through our share prices. However, we are still trying to make sure that our investment is effective and efficient. And within that decision, we'll be making our priorities so that with the same high investment that we have, the same budget that we have, we make the most effective and efficient investment. Overall, we will not be reducing our investment for our future.

[Foreign Language] [Interpreted] The following question will be presented by Eun Young Yim from Samsung Securities.

[Foreign Language] [Interpreted] This is Eun Young Yim from Samsung Securities. I have two questions. My first question is related to tariff. You've mentioned during your presentation that the annual tariff impact is estimated to be KRW 4.1 trillion in 2025. And you've said that the mitigation impact was around 60%. So if I interpret your presentation, the net burden coming from the tariff impact will be around KRW 1.2 trillion or KRW 1.5 trillion. So if the tariff rate is going down to 15%, how can we estimate or forecast the impact for the year 2026 coming from the tariff? And I'm wondering if you are going to continue to make contingency efforts to reduce the impact from tariffs.

My second question is related to your shareholder return policy. As if I look at the plan that you announced during the disclosure for the purchase of treasury shares, we believe that the portion of preferred share will be around 8% to 9%. But if I remember your presentation, you said that during your presentation, you are going to close the gap between the preferred stock and the common stock. So if you look at the current price trend of the common stock, actually, the price of the common stock went up dramatically. So that widen the gap between preferred stock and common stock. So I think the level of the preferred stock repurchase is not really enough. So I'm wondering you're going to increase the portion of repurchase of the preferred stock in late mid next year or two years later.

[Foreign Language] [Interpreted] If I answer your first question, we've explained that the impact from tariff was around KRW 4.1 trillion. And what we are forecasting for the impact for this year, 2026, the level of the impact will be flattish, similar. As you all know, the tariff took effect as of 3rd of April, but well, the tariff actually applied to the inventory from mid-May. So when we are -- when we were calculating the tariff impact when we set up the business plan, we realized that the impact from tariff will be similar between 2025 and 2026. And we had the mitigation impact of 60%. So you asked about if the contingent plan will be continued in the next year. So I can say for sure that the mitigation plan for the tariff impact will be maintained in this year. And with the limited budget and the cost that was reduced this year was applied to the establishment of the business plan for 2026.

Your second question was related to our repurchase plan for the treasury stock. So you mentioned that the gap between preferred stock and common stock is getting wider and wider. And you asked about if there will be any plan or direction that we can share with you in regard to how to close the gap between two different types of stock -- treasury stocks. So in order to meet the TSR ratio of 35%, we said that we are going to repurchase KRW 200.4 billion of treasury stock, and we said we were going to retire around 1%. So, for that to happen, we are going to spend around KRW 200.7 billion for -- and 0.2% for the common stock.

So, as we disclosed before, so when we're dealing with KRW 200.4 billion, 0.16% will be composed of the common stock, whereas the preferred stock will account for 0.2%. That means if you look at translated into the proportion that preferred stock will account for 25%. Of course, the number of the purchase won't be really big, but you can understand from our plan that how we are going to proceed with our shareholder return policy. So in order to close the gap between preferred stock and common stock, we are going to give a lot of thoughts to it. And once ready, we're going to communicate more with the market.

[Foreign Language] [Interpreted] The last question will be presented by Jinsuk Kim from Mirae Securities.

[Foreign Language] [Interpreted] I actually had a question about tariff. I think that was answered in the previous question. So, I only have one question. I think the most significant event that HMC has done in terms of bringing change to our society and our value was the Kkanbu Chicken meeting last year and signing the contract in sourcing 50,000 units of GPU. And if you look at your presentations made during the Investor Day or the Mobis CID as well as this CES Media Day, you announced plans to distribute and also present smart cars as well as the demo cars as well. And based on my own prediction, we believe that this will be possible maybe by fall at the latest.

So -- and I think we also have a look at Atlas and maybe the input of humanoid in the meth plant could be done by September and October. So, to do that, you will have to start securing data for movement and control as well. So is it safe to think that the GPU installment and the actual operation will also be done at that time as well?

[Foreign Language] [Interpreted] Yes. So, as we had mentioned during the CES, we are planning to conduct a POC for the humanoid metaplant at the end of this year. And also the demo cars for smart cars, R&D is currently working on this, and it is expected to be launched in the latter half of this year. And we already have made a project code for this. And of course, the demo car launch, there will be a small number of models, but it will come to -- it will be launched by the end of the year.

Regarding the contract for 50,000 units of GPU, we are currently working on the plan of when and how to use these chips. However -- and it's probably likely that they may be used with the utilization of humanoids and smart cars as well, but we haven't come out with a concrete plan as of yet. So, when that is done, we will communicate with the markets regarding this.

[Foreign Language] [Interpreted] If you have any questions, please contact Hyundai Motor Company's IR group. Thank you very much for your attention.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

Hello. This is Michael Yun, Head of IR Group. Welcome, everyone, to Hyundai Motor Company's 2025 Q3 Business Results Conference Call. On behalf of Hyundai Motor Company, I appreciate your time for participating in today's call. Please refer to the presentation HMC 2025 Q3 business results on our IR website. This presentation includes quarterly key messages, sales performance and profit analysis and for quarterly summarized cash flow statement and detailed regional sales breakdowns, please refer to the appendix.

First, Q3 key messages. Despite concerns over tariff impact and the resulting slowdown in demand, strong sales performance led to the highest third quarter revenue on record. Particularly in the U.S. market, we reached a record high quarterly market share of 6.3% post-COVID, driven by strong sales of volume models and hybrids such as the Palisade. This led to an all-time high hybrid sales mix of 20.4%. Finally, following the previous quarter in which the combined share of hybrid and Genesis sales surpassed 20% for the first time ever, this third quarter also recorded 29%.

Next, the sales performance. In the third quarter of 2025, global wholesale records recorded 1.04 million units, an increase of 2.6% compared to the previous year, while retail sales also reached 1.04 million units, reflecting a 4.8% increase year-over-year.

Next, I will go over details about the increase or decrease in the wholesale sales through key market summaries. In the U.S. market, sales increased by 2.4% year-over-year, totaling 257,446 units. We continue to see strong growth led by SUV and hybrid sales and especially hybrids accounted for a record high 20.4% of total sales. Sales of eco-friendly vehicles, including EVs and hybrids, rose 16.4% year-over-year, reaching 70,680 units. Due to concentrated demand ahead of the termination of EV subsidy programs, EV retail sales surged 90.3% year-over-year. Going forward, we will leverage the launch of the new Palisade hybrid to drive incremental growth and strengthen our market share.

In Europe, sales increased 8.3% year-over-year, totaling 150,123 units. Growth in key markets such as the U.K. during the September peak season as well as Turkiye and Spain contributed to the overall sales expansion in the region. Sales of eco-friendly vehicles rose 41.6% year-over-year, reaching 73,990 units, driven by a strategic increase in the share of electrified models. Despite reductions in EV subsidies across major markets, we continue to expand our EV sales mix, reaching 49.3%, driven by the strong performance of the in-store. We will pursue our annual sales targets through strategic allocation of new models such as the Inster and IONIQ 9 alongside optimized sales strategies tailored to each market.

In the domestic market, sales increased by 6.3% year-over-year, totaling 180,558 units. Driven by the new model effects of the Palisade and IONIQ 9, we maintained a high proportion of the SUV sales. Sales of eco-friendly vehicles reached 69,259 units, a 28.7% year-over-year increase, supported by the strengthening of our EV lineup. Despite intensified competition from rival hybrid model launches, strong sales of the Palisade Hybrid drove hybrid sales to grow 22.6% year-on-year.

Next, I will explain the sales analysis by vehicle types. Global SUV sales, including Genesis, totaled 659,024 units, accounting for 63.5% of total sales. Global passenger vehicle sales reached 327,099 units, representing 31.5% of total sales. The trend of a high proportion of SUVs continues, supported by the enhancement of our key SUV lineup, including the new Palisade. Eco-friendly vehicle sales increased by 24.8% year-on-year, driven by a shift towards eco-friendly models in Europe to meet emission regulations and strong sales in the U.S. market. EV sales rose 24.6% year-on-year, supported by robust EV growth in Europe, while hybrid sales continued their strong momentum, growing 22.9% year-on-year.

This concludes the discussion on sales, and I will now provide an explanation regarding profits and losses. This page first summarizes our income statement. Consolidated revenue increased by 8.8% year-over-year to KRW 46.7 trillion, and operating income decreased by 29.2% year-over-year to KRW 2.5 trillion. The Automotive Division's revenue increased by 7.9% year-over-year due to favorable FX environment and expansion in high-value segment, especially hybrid vehicles. The operating profit decreased by 48.7% year-over-year with tariff impact in the U.S. market and general increase in incentives.

Revenue from finance division increased by 10.7% year-over-year due to continuous growth in the U.S. market penetration rate and asset size. Operating profit increased by 32.4%. Net income decreased by 20.5% year-over-year to KRW 2.5 trillion.

Next is quarterly revenue and operating income analysis. Revenue benefited from favorable exchange rates contributing KRW 849.3 billion and increased global wholesale sales added a volume effect of KRW 617.8 billion. Additionally, an improved mix driven by higher hybrid and Genesis sales contributed KRW 1.23 trillion.

Combined with growth in the Financial segment, total revenue rose 8.8% year-on-year. Despite a record high third quarter revenue, unfavorable business conditions negatively impacted our profitability, including the full effect of tariffs, negative foreign exchange impact on sales warranty provisions due to quarter end exchange rate increase and higher incentives driven by intensified competition in key markets. Although contingency plan partially offset tariff effects, the operating profit decreased by 29.2% year-over-year.

Our Q3 cost of goods sold ratio recorded 82.3%, a 2.1 percentage point increase year-over-year. SG&A recorded KRW 5.7 trillion, which is a 16.9% increase compared to last year due to the increase of marketing-related expenses and warranty. Finally, our net profit decreased by 20.5% to KRW 2.5 trillion.

That concludes the end of the presentation of the 2025 Q3 business results. Thank you.

Next, Executive Vice President, Seung Jo Lee, the Head of Planning and Finance Division, will assess the company's business results in Q3.

Good afternoon. This is Executive Vice President, Seung Jo Lee, Head of the Finance Division. I will now present Hyundai Motor Company Q3 2025 business performance and Q3 dividend and shareholder return policies.

Sales revenue reached KRW 46.7 trillion, an increase of KRW 3.8 trillion compared to the same quarter last year. This was driven by strong sales in the North American market and an overall increase in sales volume. Additionally, the rising proportion of hybrid vehicle sales contributed to the growth along with increased sales of high-value models.

Operating profit saw a KRW 1.8 trillion decline due to the full impact of tariffs. However, the tariff impact was partially offset by the proactive implementation of contingency plans. Moreover, due to the rising trends in average market incentives across major regions, incentives increased by KRW 212.1 billion compared to the same quarter last year. Despite a KRW 26 increase in the average won-dollar exchange rate compared to the same period last year, a sharp rise in the exchange rate at the end of the quarter resulted in a negative FX effect of KRW 280.7 billion. Nonetheless, the combined share of hybrid and Genesis vehicle sales based on wholesale volume reached 21%, surpassing the 20% mark for the second consecutive quarter of first in history. This improvement in fundamentals, along with active efforts to mitigate tariff impacts enabled the company to achieve operating profit of approximately KRW 2.5 trillion and an operating margin of 5.4%, in line with market consensus.

For the full year 2025 performance, in line with the updated annual guidance shared during the recent CEO Investor Day, we expect to achieve a sales growth rate of 5% to 6% and an operating margin of 6% to 7%.

Next, let me address the dividend for the third quarter of 2025. In accordance with the value of program announced in August 2024, we plan to distribute a quarterly dividend of KRW 2,500 per share for both common and preferred stocks. The record date for the Q3 dividend is November 30, and the payment date is December 31st.

Next, I would like to elaborate on our approach for our shareholders' return policy, which targets a TSR of at least 35%. This shareholder return policy or TSR also reflects a dividend policy with a minimum payout ratio of 25%. And the basis for calculating TSR similar to the payout ratio is annual net income attributable to controlling shareholders.

Accordingly, at the time of Q4 earnings call in January 2026, we plan to disclose the final dividend amount that meets the minimum TSR of 35%, along with plans for share repurchases or cancellations. Considering the timing required to calculate TSR based on final net income after the annual closing, we will provide further details then. We intend to maintain the same approach going forward.

While share purchases and cancellations may be executed at any time during the year through Board resolutions, given the nature of our shareholder return policy, which is based on profit, the portion of share repurchases and cancellations required to meet the TSR target of 35% will be finalized at the time of annual results announcement. Despite an increasingly uncertain business environment driven by tariff impacts and other factors, we have been making every effort as an individual company to maximize profitability and strengthen fundamentals. This includes implementing contingency plan to actively offset the tariff impact.

Additionally, the final agreement on a 15% tariff will reduce the burden compared to previous levels. In the mid to long term, we anticipate that this will contribute to achieving the annual operating profit target ranges outlined during the CEO Investor Day in September. We will provide additional communication to the market as soon as possible. We sincerely appreciate the continued support of our shareholders and investors. Thank you for listening.

Next, Vice President, Hyungseok Lee, the Head of Planning and Finance Division of Hyundai Capital, will assess the Q3 results for the finance business.

Good afternoon. I'm Hyungseok Lee, Head of Finance at Hyundai Capital. Let me now present the finance sector's Q3 2025 performance and Q4 outlook.

In the first quarter, Hyundai Capital and Hyundai Capital America continued to support vehicle sales as the group's captive finance companies, delivering solid results. I will now continue with the detailed performance by company. First is Hyundai Capital. Despite sluggish domestic demand and weakened consumer sentiment, we expanded collaboration with the group and launched specialized financing products for SUVs and Genesis models, driving active sales efforts. As a result, new car installment volume rose 40.1% year-over-year, leading to a 2.7% increase in product assets. The share of auto finance within total assets rose to 83%. Although loan interest income declined due to regulatory impact, lease interest income and gains on sales of loans receivable increased, resulting in a slight year-over-year growth in operating revenue, excluding FX effect and derivatives. We have achieved 75% of our annual funding target and including Green bonds in April, sustainability-linked bonds in July and social bonds in September, 21% of our domestic bonds were issued as ESG bonds. We also continued efforts to reduce funding costs through a diversified portfolio, including overseas bonds and ABS, leading to a 2.8% year-over-year decrease in interest expenses.

In terms of asset soundness, while the capital industry overall saw deterioration due to real estate PF and unsecured loans, Hyundai Capital maintained a sound portfolio centered in auto finance and actively sold distressed debt. As a result, our delinquency rate hit a record low of 0.77% in Q3 and credit loss expenses also declined.

Operating expenses fell 2.1% year-over-year and operating profit rose 34.7%. And including equity method gains from overseas subsidiaries, pretax profit increased 44.6% year-over-year. In the fourth quarter, we will continue our efforts to defend profitability through cost and funding efficiency, while proactively securing liquidity to strengthen financial stability amid rising market volatility.

We also plan to ramp up operations at our newly launched Indonesian subsidiary in September and diversify our auto finance offerings to further support the group's global vehicle sales.

Next is Hyundai Capital America or HCA. In the third quarter, supported by strong vehicle sales across the group, HCA's acquisition rate rose to 75.1%. Combined with expansion of EV lease volumes, total product assets grew 18.6% year-over-year. Driven by growth in eco-friendly vehicle leases and rising product interest rate, operating revenue increased 7.3% compared to the same period last year.

On the funding side, HCA successfully issued USD 2 billion in bonds in September, achieving 88% of its annual funding target. Despite volatility in the U.S. financial market, cumulative bond issuance reached $11.3 billion this year. As a result, total borrowings increased and interest expenses rose 16.9% year-over-year in Q3.

In terms of asset soundness, over 85% of customers are prime rated and less than 1% are subprime, reflecting our strict credit management. This contributed to a decline in delinquency rate. However, additional provisions were made in response to macroeconomic uncertainty and asset growth led to a 6.3% increase in operating expenses. Reflecting this, our operating profit rose 28% year-over-year.

Looking ahead to Q4, we expect a challenging environment due to continued inflation, reduced consumer purchasing power, the termination of IRI subsidies and slowing demand. However, HCA has secured $19 billion in liquidity as of the end of September and is actively managing residual value risk through remarketing efforts. We will continue to strengthen business synergies with this group through sales finance collaboration, closely monitor market conditions and respond flexibly.

This concludes my presentation. Thank you for listening.

With that, we will conclude the presentation and take your questions.

[Operator Instructions] The first question will be provided by Paul Hwang from Citi Securities.

[Interpreted] I am Hwang Paul from Citi Securities. I have two questions. First regarding tariffs, next regarding performance. So going on to my first question, so just today, to confirm that tariff will be 15%. You might not be able to give us much details, but what would be the overall direction now that you know that the tariff is set to 15%? For example, what would be the mid- to long-term strategy, and what will be the direction that Hyundai Motors will be taking? So if there's anything concrete or details that you could share, that would be appreciated.

My second question is regarding performance. You did mention in Q3 that the effective tariff, what that was. But what are the non-tariff effects that will take into -- that you need to take into account? You said that you were able to buck off tariff by 40% in Q3 and mitigated by 5%. But is there any more room to further mitigate the impact of tariffs? And how can you quantify that effect by what? So is there an example that you give us?

And finally, the effect of the mix -- the product mix, what do you see the changes in that in terms of Q4 and for the next year?

[Interpreted] Thank you for your question. To answer your first question regarding tariffs, yes, we did see a good news regarding the 15% agreement on tariff. So that's very good news for us. But regarding specific numbers, the detailed numbers for the future, we still are in the process of calculating these numbers because the government has recently announced that it will be retrospectively reflected as of 1st of November. But the specific date and what direction the government is going to take has not been announced. So -- and I think the government is still in the process of trying to see how we can maximize the benefits on this. So my answer to your question would be that the numbers are still being calculated.

So with the government's efforts making fruitful results, right? I think the biggest win for us was that the unclearness, the uncertainties regarding tariff is now cleared. We now know what the conclusion is. So that would -- we know -- we now know how to operate in the future, and we now have a clearer direction on which way we need to operate. So that will be the biggest benefit impact for us regarding non-price factors.

Regarding what we can share in terms of any specific number strategies or our response, we have been emphasizing from the very beginning of the year that with the cost going up due to tariffs, this will be taken as an opportunity for us to re-diagnose what our core competitiveness is, what our capacity is and also an opportunity for us to change our fundamentals so that we can secure our future competitiveness.

And as part of that process to improve our fundamentals, we are looking into identifying various collaborative projects that are out there, and we are regularly checking what performance are being made through these projects. So I will give you a couple of examples. I mean we do have plans for all of these projects, but we cannot share everything. So just to point out some of the key examples. In the past, we focus our cost saving efforts on new models. Of course, some efforts are being made for models that are already being produced. However, as of this year, we will be making same efforts for cost reductions, for not just the new cars, but also the cars that are already in production by improving the R&D competitiveness.

And also with hybrid becoming ever more important, and we're also expanding sales of our hybrid models, and we are able to, through this effort, secure profitability that is pretty much on par with ICE vehicles as well. So we believe that improving and securing the cost competitiveness of hybrid systems are extremely important. And now we have made this opportunity where we can review the mid- to long-term cost structure of our hybrid model.

Another example would be in the past, we were emphasizing how we are going to expand the commonization of parts, common use of parts. And now that is just a given. That is something that we need to do. But from now on, we're also trying to expand the common use and commonalities for manufacturing itself, how we can share the manufacturing cost and competitiveness is something that we're focusing on.

So all the efforts that are currently in progress regarding these projects, we believe that the outcome and the actual performance will be seen as of next year. And you all know that during COVID-19, we were one of the key OEMs that were able to continue growth and take the prices as an opportunity for opportunity. So we do have that experience. And even right now, we believe that it will be a big chance for us to reflect on our key competitiveness and also to continue strengthening our competitiveness.

Now to address your second question, what were some of the non-price efforts that were made to offset the tariff. Actually, we've already offset the tariff impact by 60% and a majority of the efforts that we have made are -- were non-price efforts rather than price, for example, saving the material costs and also regarding the current account. I think, we saved over KRW 700 billion in terms of the final effect. We also are looking to all other areas, for example, the product mix as well as the service areas. So I cannot really pinpoint out a specific area that we are looking into because we are covering everything in all areas regarding how we can save cost. As for the price area, like we said that we are trying to take the fast follower strategy, so we are closely monitoring the market to see what actions we can take and the decision will be made later on with that kind of monitoring result is seen. However, our key fundamental is not to hurt the customer value.

And you also asked regarding what will be the mix impact for Q4 in next year. You already know that we are continuously trying to expand our sales proportion for hybrid and Genesis. So that effort will continue. And next year, we will be aggressively launching new cars, which will allow us to go into a golden model cycle. And with the launch of new cars, the incentive will obviously go down. So next year, we will continue to improve our mix.

[Interpreted] The following question will be presented by Ji-Woong Yoo from DAOL Investment & Securities.

[Interpreted] I'm Yoo Ji-Woong from DAOL Securities. I have two questions. My first question is regarding the EV strategy in the U.S. market. As we see the fourth quarter, the sales volume will go down and then the incentives will go up, which will obviously help you to improve your profitability. However, someday when the subsidies are gone, then there should be a new strategy for you to make a reentry into this market. So I was wondering what kind of short term and also the long-term strategy in the coming years in 2027 and 2028.

My next question is regarding our key models such as Palisade. So I know that you are currently making export to the U.S. market for our key models like Palisade and other SUVs. And like you said, the current situation of tariff rate going down from 25% to 15% is indeed favorable to HMC. However, if you see our competitors -- your competitors that in the mid-SUV segment, a lot of them are locally producing vehicles in the U.S. So I was wondering what kind of response strategy you have for the key models that you are not producing in the U.S. market?

Let me answer your first question about profitability and the third -- when we look at the profitability in the third quarter performance, of course, with the IRA subsidy gone in September, in order to retain our inventory level in the U.S., we have increased our promotional activities, which has resulted in EV sales going up. So like you said, in fourth quarter, the incentive level will go down. In the coming years, in 2027 and 2028 in the EU, obviously, we need to ramp up our EV sales in order to respond to the emissions regulations. And in the U.S., we have originally designed the HMGMA plant as an EV dedicated plant. However, we are trying to produce all the different kinds of model, not just the EV models. So therefore, when we think about the U.S., the EV will not make up a significant growth in the short period of time. But in the long term, from 2030 or so on, the EV volume will likely recover. That may be a little bit slower than the two years that have been initially expected with the EV chasm going up, but we are expecting EV volume to recover in the long run.

And I'm not pretty sure I understood your question regarding the incentive improvement and reentry into the market, but you said in the fourth quarter, if there will be a decrease in the volume, then the incentive will likely improve, and you may think about the reentry into the U.S. market. And I'd like to clarify that we have never backed off from the market. So we will continue to increase our sales volume going forward.

And about the competitiveness enhancement activities, although I have not shared you all the details due to time constraints such as PE parts, but we are actually engaging in various activities to enhance competitiveness and PE part is one of them. And for PE parts activities, we can say that batteries and motors and other EV dedicated parts are included. And previously, we only focused on reducing the raw material cost of these parts, such as battery and motors. But now we are examining all the different types of parts because irrelevant of how costly or non-costly it is, I think in the long run, all the parts are important for the competitiveness of our [ SUVs. ] So that is why we are reviewing all the different activities.

So regarding your second question, like you said, we are not currently locally producing our mid SUV segment, but we are locally producing Tucson. And like we have mentioned at our CID, we are increasing our proportion of U.S. local production. And from the fourth quarter, the new Palisade hybrid model will be launched, and we'll start selling that model. And thanks to the good news of yesterday of rate decrease from 25% to 15%. Since Palisade is a very profitable model, we will likely to improve our profit on this model as well. And regarding the local production of Palisade hybrid model in the U.S., we are internally reviewing this matter. And although nothing has been confirmed as of yet, we will likely increase the production incrementally of this model like we said in -- at the CID.

[Interpreted] The last question will be presented by Theo Hadiwidjaja from JPMorgan Asset Management.

I have two questions. So the first one is, I think, following up on earlier question about your U.S. EV strategy. You mentioned that you are not planning to break down on your original plan. So can you confirm that it is the plan for you to continue with your EV strategy in the U.S.? And also, I guess, in relation to this, I understand that you also have a number of JVs in the U.S. producing batteries. What are your general plans on those JVs producing batteries for EVs in the U.S.?

[Interpreted] Hi, Theo, this is Zayong Koo. Basically, on your first question, I think our CFO has actually answered many of that before. Basically, our EV strategy will continue. As we earlier mentioned, I think the timing is a bit pushed back, but nevertheless, we do believe that the EV will continue to grow. In the past, we had anticipated that will be maybe in the next 2 or 3 years. However, as we had pointed out in the CEO Investor Day, we are looking more at hybrids at least for the short to medium term, but EV from a longer term is on schedule basically from that perspective. Again, although it is a bit delayed.

And your second question was on the battery JV. Yes, as you know, we do have two battery JVs, one with LG and the other is SK. That is actually continuing -- we don't have an exact timetable, but it will hopefully be in the next -- in the short term. Basically, I cannot give you an exact timing, but nevertheless, we are -- we will be working with LG and SK in acquiring or getting the batteries for the U.S. market.

And again, this is a little bit more related to the timing of the EVs in general. So I mean, we are definitely moving along -- moving ahead with the joint venture. But nevertheless, the exact timing, I cannot give you, as I mentioned earlier.

[Interpreted] That ends the Q3 2025 earnings call for Hyundai Motor Company. Thank you for your time.

[Interpreted] If you have any questions, please contact Hyundai Motor Company's IR group. Thank you very much for your attention.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Ladies and gentlemen, please welcome Hyundai Motor Company President and Chief Executive Officer, [indiscernible].

Good morning. Welcome to New York, and welcome to our 2025 CEO Investor Day. Also, welcome to those watching online from Korea. [indiscernible] it is such an honor to host you today as CEO of Hyundai Motor Company. I often say it is a great time to be at Hyundai, and it's truer than ever. I'm very proud of the success our team has been able to achieve and couldn't be more energized about the future.

Together with my colleagues, we're going to talk about our 2030 plans and our strategy to continue expanding around the world. We'll give an update on product segments where we see opportunity for greater margin as well as some advances in battery and fuel cell technology. Finally, we'll talk about our financial forecast. Before we get started, I want to address the recent situation at our Georgia facility. I want to express our sincere empathy for the workers from our supplier partner companies who were detained. We understand the stress and hardship this has caused for them and their families, and we are relieved that they return to Korea safely.

Many of those colleagues were working on the final calibration and testing of advanced battery production technology and a battery plant supporting our operations in Georgia. As our executive chair said last week, we hope the U.S. and Korea can work on mutually beneficial solutions for short-term business travel, especially for specialized technical expertise.

Hyundai has been part of the fabric of the U.S. for nearly 40 years and has operated in Georgia for more than 15 years. Our new facility there represents the largest economic development project in Georgia's history and it's helping transform the region with long-term economic benefits for thousands of families. HMGMA will play an important part of Hyundai's future, which is what we are very pleased to be talking about today.

When I look around this room and consider our global stakeholders listening in, I'm reminded that we are not just presenting numbers and strategies. We are sharing our vision for the future of mobility. A future where Hyundai will continue to lead through innovation, adaptability and our unwavering commitment to treating every customer like an honor guest.

[indiscernible], our global teams, it doesn't matter if you speak English or Korean as long as you can communicate in the universal language of data. With that in mind, let's start with Hyundai's performance. In 2024, we achieved an all-time annual revenue record, KRW 175.2 trillion in sales revenue, along with KRW 14.2 trillion in operating profit, with an impressive 8% operating margin.

Our strong performance continued into 2025. In the first half, we posted record revenues of KRW 92.7 trillion and an operating profit of KRW 7.2 trillion. This is sustainable profitable growth driven by disciplined execution and strategic focus. These results show that our fundamentals are strong. We are not just weathering industry challenges. We are thriving by staying focused on what we can control, delivering beautifully designed, high-quality safety-focused vehicles with technology that customers value. Here in the U.S., we have delivered 1.5 million eco-friendly vehicles and our products are achieving broad industry recognition, 7 Hyundai and 4 Genesis models earned IIHS top safety Big Plus awards. The Ionic 9 was named Top gears, Best 7-seat EV. The palisad1cars.com best 3-row SUV. And globally, the Instar was recognized as the world Electric Vehicle of the Year. But awards don't drive business results, customers do. And these accolades reflect what our customers already know. We are delivering vehicles that exceed expectations across every segment we compete in.

Our world-class marketing has a strong presence in live sports, where our brand builds powerful connections with passionate funds. In 2026, Hyundai will deepen its connection with the sports fans across the globe when the World Cup comes to North America. Hyundai is proud to be the official automotive partner of FIFA. And we are excited to have our brands front and center as the world watches the final right here in New York.

I hope to be able to watch the beautiful game with you. I'll be rooting for the U.S. and Korea, except when they place pain. This is Hyundai's first CEO Investor Day outside of Korea. We picked the U.S. because it is the engine of growth for our company. We entered the market almost 40 years ago. Along the way, we built 2 U.S. factories and launched a luxury brand, investing $20.5 billion. It has been quite a journey. We delivered our first vehicle in 1986. By '25, we opened a factory in Alabama and sold 520,000 units. In 2017, we delivered 860,000 vehicles, while also unveiling our flagship Genesis SUV. In 2022, we began manufacturing electrified vehicles here and sold 940,000 units. And this year, with the grand opening of Hyundai Motor Group Meta plant America, we are targeting 1.2 million vehicle sales, 1 million of which will be in the U.S. This isn't just growth. It is a strategic sustainable expansion in the world's most important automotive market. But there is an even bigger story to tell.

One of Hyundai's greatest strengths is our balanced and diversified global portfolio. With a strong operations in Korea, Europe, India and emerging markets, we built a resilient foundation that helps us navigate volatility and seize opportunities. Among all regions, North America stands out as our largest and most strategically important. It is where our brand continues to gain momentum and where our products and marketing resonates most deeply. But our global footprint demonstrates our true diversified strengths. As first half of 2025, North America represents 30% of our sales volume and 38% of our sales revenue. Europe accounts for 15% volume and 14% revenue. Korea maintained 17% volume and 19% revenue, while the remaining 38% volume and 29% revenue come from other markets worldwide. This geographic diversification provides resilience and reduces our dependence on any single market, a critical advantage in today's uncertain geopolitical environment.

From product development to manufacturing, our brand to technology, our capabilities are being recognized across markets. So what's driving this? Our 4 key strengths. First, our global scale. We are one of the top 3 OEMs with a worldwide manufacturing footprint. This is enormously valuable when it comes to global vehicle platforms, technological innovations and supplier relationships.

Second, we have a diverse portfolio across regions, product segments and powertrains. We are one of the few global OEMs with products ranging from small cars to big SUVs, commercial vans to semi trucks and buses and even vehicles with fewer than 4 wheels. Third, our localized operations help us stay agile and deliver what each market truly wants. We have embedded key functions like sales, design and supply chains in the heart of each region. And fourth, the power of the group, we are able to leverage more than 50 affiliates in our value chain to give us unprecedented efficiency and scale, enabling us to make strategic bets on the future of mobility. Hyundai Motor Group, our parent company ranks #3 in global sales behind only Toyota and Volkswagen. And in the first half of 2025, we ranked number 2 in operating profit, outpacing Volkswagen and underscoring the strength of our business fundamentals. We are now a top 5 brand in 26 countries and a 12 key markets like the U.S., Canada, Brazil and India, we are in the top 3.

A key contributor to this remarkable performance is the 20,000 engineers, 5400 dealers and 17 production plants we have worldwide and the thousands of men and women who built our vehicles with such care. I'm so proud of our global team. They are helping us deliver mobility solutions to customers across regions and with consistently strong performance.

Our common platform strategy enables both variety and efficiency. Today 84% of our vehicles are built on just 3 core platforms, allowing us to scale globally while staying responsive to local needs. Models like the Ionic series Tucson, Palisade and Kona are great examples of how this approach delivers high-quality market-relevant products worldwide across a broad range of vehicle segments.

One of the things I'm most proud of is how deeply Hyundai is embedded in markets around the world. Our localized operational hubs integrate manufacturing, R&D, sales and support functions allowing us to stay close to our customers and understand what they truly need. This structure is a key driver of our ability to win globally. As you can see, the majority of the vehicles we sell are produced locally. This enable us to nimble in our production mix and minimizes the time between a car rolling off the manufacturing line and getting into the hands of our customers.

Moving forward, we see the largest opportunity for increased localization here in the U.S. I'll share more about this later. The Power [indiscernible] Group's affiliates cannot be understated. These companies drive cost efficiencies and enhanced agility and resilience through 4 key areas: one, innovating new business models through robotics, autonomous driving, software-defined vehicles and advanced air mobility via affiliates like Boston Dynamics Superna, emotional and other technology companies; two, driving customer experience and sales excellence through finance, marketing and advertising and technology solutions that enhance every customer touch point. Three, delivering speed and coordination via infrastructure construction and engineering capabilities that allow us to build facilities and enter markets faster than competitors; four, driving cost efficiencies, agility and resilience through our end-to-end vehicle supply chain from steel and parts to engines and logistics. No other automaker has this integrated ecosystem advantage. Despite regulatory and market challenges, we are keeping our 2030 sales target at 5.55 million units.

Every region is making significant contributions, especially emerging markets in Asia, plus China. We are targeting 4.17 million this year, growing to 4.64 million in 2027, and we expect to reach 5.55 million by 2030. This isn't a wishful thinking. It is based on approved product launches, planned capacity expansions and market engineering strategies already emotional. This of you or those of you who know me know that I think we can do more. But this is our guidance today. You may notice that our dependence on North America will decrease over time. But this is a strategic choice to ensure we are well diversified globally.

As you can see here, North America remains our largest market and continues to grow. But each market is contributing meaningfully to our performance. In Korea, we expect the total industry demand to shrink over the next few years, but we will hold volumes steady and we are better insulated since our commercial vehicles offset decline in passenger vehicle sales.

In China, our turnaround strategy showing success, and we are well positioned to be both competitive and profitable. This growth is creating powerful regional synergies, allowing us to scale faster, respond smarter and build a truly agile global business. Our electrification strategy is comprehensive and realistic. Most importantly, it is designed to meet customer demand. We are targeting 1 million electrified vehicle sales in 2025, reaching 3.3 million by 2030. This includes hybrid, battery electric and fuel cell vehicles, recognizing that customers' adoption varies by region and segment. Hybrid sales will increase significantly as we meet customers where they are in their electrification journey. We are not taking a one-size-fits-all approach. Originally, sales of electrified vehicles will more than double in North America driven primarily by hybrids.

Europe will see similar growth, though hybrids will be a smaller share of the market. Korea and EV sales will grow significantly and other markets will, of course, contribute significantly to our global electrification goals. Manufacturing excellence is not just the foundation for all this. It is a strategic enabler of everything we aim to achieve. From quality to scalability, our plans are evolving to meet the demands of a fast-changing market. This is how we turn ambition into reality.

Our manufacturing strategy is exemplified by Hyundai Motor Group's Landmark $26 billion investment plan for the U.S. between 2026 and 2028, creating 25,000 new direct jobs. This includes our new low carbon steel mill in Louisiana, expanding U.S. production capacity, a state-of-the-art robotics innovation hub and many additional investments to be announced. This isn't just about tariff mitigation. It is about building the most advanced efficient manufacturing ecosystem in the automotive industry. We are proud to announce Phase 2 of HMGMA, this is a major step forward in our U.S. manufacturing strategy, and they will expand production capacity by 200,000 units by 2028 with a clear focus on hybrids and battery EVs. This $2.7 billion investment over the next 3 years is not just about scale. It is about building the right mix for the U.S. market, investing in our suppliers and partners in the state of Georgia.

With 3,000 new jobs created, we are reaffirming our commitment to the community and the region and to the future of mobility. Our investments in North America are not reactive. They are part of a long-term strategy. Back in 2019, we began shifting our U.S. production mix towards high demand SUVs laying the foundation for profitability. Since then, we've increased SUV production to 100% of our regional capacity with steadily expanded capacity most notably with HMGMA focus on high-margin hybrids and EVs.

Alongside this, we work closely with group affiliates like our production partners, Mobis and Glovis and our battery partners to localize operations building a robust integrated ecosystem. Now we are entering the next phase. By 2030, over 80% of our U.S. sales will be produced locally. We are increasing local supply chain content from 60% to 80% and maintaining over 95% plant utilization across our facilities. This is how we mitigate tariff impact enhanced pricing and increase efficiency and secure long-term competitiveness through consistent and strategic investment. Alongside our expansion in the U.S., we are accelerating global production capacity across key regions.

By 2030, we plan to add up to 1.2 million units of additional capacity, this is 200,000 more than announced at last year's Investor Day with new plants and upgraded in Korea, India, Vietnam, Saudi Arabia, North Africa and more. This isn't just about meeting demand. It is about building a resilient, regionally optimized production network that supports our long-term growth.

Let me introduce the key plans driving our global manufacturing expansion. First, in India, our Pune plant will open later this year and grow to produce 250,000 units. This will bring our total production in India to over 1 million units. It will serve as a strategic [indiscernible] for both domestic demand and exports to emerging markets. Pune has flexible multi-model production in a smart factory that showcases our [ eForex ] vision for the future of manufacturing.

Next, in Korea, the Ulsan EV plant will come online in Q1 2026, adding 200,000 units. It is designed as a next-generation facility with advanced automation robotics and AI-based inspection for our new lineup of EVs. It will be a core base for both domestic and global supply.

Finally, in Saudi Arabia, we are adding production in Q4 2026 that will grow to 50,000 units. This plant will strengthen our presence in the Middle East with localization CKD production and the gradual integration of next-generation robotics. Together, these plants form the backbone of our originally optimized future ready production network.

Our manufacturing strategy goes beyond increasing volume. We are increasing quality, efficiency, flexibility and safety in how we produce our vehicles. We are automating production, integrating data and evolving towards a software-defined factory. Today, we are focused on hardware-centric automation and real-time data analysis to optimize production. In the next year or so, we will merge hardware and software as we get ready for software-defined vehicles. You'll hear more about this later. And by 2030, we expect to have a fully built manufacturing environment. At the heart of this is our innovation center in Singapore, HMGICS, where next-generation manufacturing technologies are born and tested.

Since its opening in 2023, we've been cascading these innovations first to HMGMA, than to Ulsan and ultimately, across our other global operations. from automated assembly and real-time connected manufacturing to software-defined factory standardization, each innovation brings us closer to autonomous intelligent production. By 2030, we aim to realize HMGICS 3.0, a fully virtual and autonomous manufacturing model. This isn't just about 1 plant. It is about transforming our entire global network. To be clear, our production colleagues are essential to our success. The robot to human ratio will continue evolving as we optimize our processes, but always in service of 3 goals; enhancing working safety and economics, improving quality, consistency and increasing efficiency.

We are not trying to minimize human involvement. We are trying to maximize human potential by letting robots handle the dangerous repetitive and physically demanding task while our operations focus on higher value work like quality oversight, process improvement and complex problem solving. The cascading of new technologies from HMGICS to our global plants is already delivering measurable results.

We've significantly improved production flexibility. I'm happy to announce will now have the ability to produce 10 different kinds of vehicles, including both HEV and EV models simultaneously, which requires meticulous planning and advanced processes. At our Ulsan EV plant, where we only produce EVs, this number goes up to 12%.

Our robot-based automation systems are advancing rapidly enabling predictive maintenance, digital simulation and self-diagnostics across multiple sites. These innovations are not just theoretical. They are being deployed as scaled and are delivering real impact. This is how we build smarter factories capable of adapting to diverse product mixes and future mobility demands. Robotics will be at the center of our innovation journey. Through Boston Dynamics, we are advancing core technologies that enhance operational excellence from intelligent automation to human robot collaboration. These capabilities go far beyond manufacturing, that's shaping the future of mobility, logistics and smart infrastructure. We believe robotics will be a key growth engine for Hyundai driving both performance and transformation across industries.

Boston Dynamics will play a key role in our manufacturing capabilities in the future. Have a sneak peak and what will show at CES.

[Presentation]

Innovation is a core Hyundai value, and Boston Dynamics truly delivers for us. Now I'd like to walk you through some of our future product plans. Product is the lifeblood of our industry. These products are not only aligned with our electrification strategy, they are designed to lead the market with innovation, performance and customer value. They are also designed to provide the greatest return on our investments. We are focusing on high-profit product segments and looking for opportunities in new segments. Here, you can see the global automotive profit pools in each region and segment as well as our performance today.

In North America, we have an established brand in SUVs and see further opportunity to go larger with full-size SUVs. We also have ambitions to strengthen our presence in pickup trucks and light commercial vehicles. This is not only true for the U.S., but as you can see, pickups and LCVs are opportunities we are excited about globally.

In Europe, we are investing in entry EVs that are purpose-built with European customers in mind. And finally, we recognize that China is leading in EV production and technology, and we cannot afford to miss out. have personally spent significant [indiscernible] time in China. And I know firsthand how competitive it can be. We have a new product strategy, which is to develop in China for China. Each region will take a different path. You can see here that hybrids and EVs are more important. And you can also see a more balanced powertrain portfolio in the future.

We are prioritizing large SUVs, pickup trucks and light commercial vehicles as well as high-performance vehicles, all of which provide high margins. I will offer a full spectrum from hybrids and battery EVs to fuel cell vehicles to meet the diverse needs of our customers. This multidimensional strategy ensures we stay competitive, relevant and profitable wherever the market moves. One opportunity we clearly see is expanding our hybrid lineup in response to growing consumer demand. By 2030, we plan to offer more than 18 hybrids for vehicles ranging from entry level to large luxury. This will include Genesis starting in 2026. We are more than doubling the number of hybrid vehicles that we are offering from now to 2030.

We'll prioritize hybrid-driven markets like the U.S. We want to ensure we can offer everything our customers are looking for. One of our most important and most profitable vehicles is the Palisade hybrid. We are excited to introduce the all-new Palisade hybrid to the North American market, the first model to feature our largest and most powerful 2.5 turbo hybrid system. This isn't just about adding another option. It is about delivering superior performance and efficiency compared to the ICE model. Not only does it deliver great horse power and torque. But with 34 MPG fuel efficiency, it is 48% more efficient than the ICE variant, giving customers a smarter, more sustainable choice. This launch expands our hybrid portfolio and gives customers more options without compromising on power or driving experience.

Pickup trucks represent a white space opportunity, we are ready to capture. The midsized truck segment is 1 of the largest and most profitable in the industry. Since launching Santa Cruz back in 2021, we've gained valuable experience and brand presence in this segment. Now we are preparing to launch a new body-on-frame model before 2030 to build out our truck portfolio with the potential for an HUB variant. This expansion allows us to broaden our reach and connect directly with customers at the heart of the U.S. market. We've also built a strong momentum with our global EV lineup from the Ionic 5 to the Ionic 6, which gets a facelift for 2026 to our flagship Ionic 9.

Now we're taking the next step, delivering EVs tailored to each region. In Europe, we just showed the Ionic 3 as a true mass market EV equipped with our next-generation infotainment system. In India, we're proud to launch the country's first EV design, specifically for Indian drivers with a localized supply chain. And in China, we are introducing our first locally produced EV, the Alexion, a C segment vehicle with up to 700 kilometers range, marking a major milestone in our commitment to the Chinese market. We will introduce another C segment EV in China next year as well. Some of our most exciting products are hands and high-performance models. These are born at our Naming R&D center and refined at the Nobel green in Germany, one of the world's most grueling race tracks. This lineup provides an exciting performance halo for our brand. By 2030, we will have more than 7 end models available. We have started this with our ICE and HEV models and then our EVs. We expect and sales by 2030 of over 100,000 vehicles, primarily in the U.S., Europe and Korea, but also in growing markets in Australia, the United Kingdom and Canada.

We'll explore the possibilities in China and Japan and continue to expand globally. Earlier this year, we showed the all-new IONIQ 6N at the iconic Goodwood Festival of Speed in England. This vehicle will set the standard for high-performance EVs and embody Hyundai's end core principles, Corner Raskal racetrack capability and everyday sports car. IONIQ 6 will have explosive power with 478 kilowatt dual motor system that delivers 770 newton meter of torque and will go from 0 to 60 in just 3.1 seconds. It is its end battery management system features 3 models or 3 modes to optimize temperature for maximum performance. And it will have all the standard and features that engage the sensors and build an intuitive connection between the driver and the vehicle. The IONIQ 6N is a welcome addition to the end family. As I mentioned, Hyundai N provides a great halo for the brand. It starts with N-performance parts, which enable owners to enhance the regular Hyundai models. Then they are the end models themselves delivering an exceptional level of performance and excitement. Beyond that is our rolling lap with new parts and technologies are road tested. But it is motor sports that truly cement our reputation for advanced technology and performance. And all that delivers enhanced profits.

You can see here how significant the end brand premium is and what the value of N parts and services to our bottom line. We are excited about the commercial vehicle business as well. Hyundai is a leader in this market globally. We have production hubs in Korea, China, Vietnam and Mexico delivering more than 14 products through 89 distributors and 474 dealers. We're going to ramp up our presence in the North American commercial vehicle market as well, leveraging our global expertise in R&D and distribution. We already have 56 [indiscernible] fuel cell trucks on the road here, and that number will grow quickly.

Hyundai translate already has 29% of the U.S. market for van trailers and we will start production of electric LCVs as early as 2028. You'll see us on the road everywhere. We have great confidence in our product strategy because its vehicle in every category will showcase our commitment to customer value, performance and innovation. And it is Hyundai's ability to innovate with technologies that are changing the very nature of mobility that will ensure our continued success.

So here to tell you more is our Executive Vice President and Head of Electrification Strategy, Solutions, Tech unique, my friend, Chang Hwan Kim.

Thank you, Jose. Good morning. Hyundai Motor Company holds the most diverse electrification portfolio among all global OEMs. We have established all relevant technologies so we can maximize customer safety and value. The journey began in 2009 when Hyundai became the first automaker to apply lithium-ion batteries in automotive application. Two years later, in 2011, we introduced a new kind of hybrid system, so-called TMED, which achieved the world-leading performance within this class, featuring key enabling technologies such as battery, power electric systems and contra algorithms became the cornerstone of our leadership in both battery EVs and hydrogen fuel cell EVs.

Since its introduction in 2021, our EGM EV platform has been a masterpiece, earning numerous awards from leading global organizations. Earlier this year, we introduced the Hyundai's most advanced hybrid and enhanced fuels systems in PALISADE and Nexon. Our innovation is unstoppable, starting next year, we will introduce a series of groundbreaking innovations, including extended range EVs, luxury hybrids, our next-generation EV platform and for the new fuel cell systems, continuing our relentless pursuit of customer value.

In the next few slides, I would like to take you deeper into Hyundai's advanced technology and share how we are shaping the future of EVs. When Hyundai introduced the first version of the TMED hybrid systems in 2011 Sonata, it delivered more than 60% improvement in fuel economy and over 20% increase in power compared with the conventional [indiscernible] is vehicle, making it 1 of the most competitive hybrid systems in the compact and midsized segments.

At the core of Hyundai's hybrid technology are high-performance batteries, high-efficiency systems and advanced controls that maximize vehicle performance. More than 250 patents in hybrid positioned Hyundai as a leader in electrification. In 2025, we advanced even further with the launch of next-generation TMED 2 systems, featuring the state-of-the-art battery and motor technologies. This system applied in large vehicle segments delivers 4.3% greater fuel economy along with a significant performance compared to the current TMED 1. It will be the foundation for rear-wheel-drive luxury hybrids, offering the customer broader options in the future. Hyundai's innovation in electrification not only elevates vehicle performance, but also unlocks the new possibilities in the real-world customer experience.

By integrating EV technologies, hands next-generation hybrids offer the customers to enjoy EV-like convenience. For example, to control of the front and rear motors improved both safety and handling creating a driving dynamic comparable to EVs. Additionally, advanced battery technology enables stay mode and vehicle to load, which is now available in hybrids. The hybrid and EV technologies positively creates synergies and accelerate each other's evolution and the evolution of our electrification technology will continue to produce more innovation on the horizon.

Our innovation over the years, have enabled us design an alternative platform that offers new values to our customers, extended range EV. The new system delivers an EV-like driving experience and performance while eliminating range anxiety through extra miles generated by engine motor. Most notably, it achieves a driving range of over 600 miles, a defining feature that truly leaves up to its name. Unlike existing ERAs, the Hyundai's unique system takes advantage of 15 years of hybrid and EV development experience.

The ultra high-performance battery designed by Hyundai engineers produces the same power with less than half the battery capacity compared to conventional EVs. This optimized balance of battery and motor will reduce the cost without losing EV performance. Among all electrification components, I would like to emphasize that the battery is the most significant factor in determining the vehicle price, driving range, charging speed and safety. When it comes to the battery, the quality matters above all. Because safe and long-lasting battery performance preserves customer value and peace of mind.

Here on the left-hand side, we have the durability data from over 50,000 IONIQ 5 vehicles on the road. The result shows that the vehicle retain over 90% of battery performance and life even after 250,000 miles. This is a clear proof that Hyundai EVs deliver enduring value and reliability through advanced battery management as well as the robust battery design with our battery partners. And this technology will not only create the benefits for our customers but also reduce the warranty costs for Hyundai. And looking ahead, Hyundai is preparing for another leap forward.

Starting in 2027, our next-generation EVs will feature highly optimized batteries at 30% lower cost with a 15% higher energy density and 15% shorter charging time, dramatically strengthening our EV competitiveness. And this will help accelerate mass adoption of EVs worldwide, bringing us closer to a future where electrification becomes more accessible to all. And safety is the quality that we can never compromise.

Our goal is to prioritize technologies that protect our customers in any situation and Hyundai batteries are equipped with an industry-leading battery management system that performs real-time predictive diagnostics, rapid detection of normally, it enables proactive responses even before on any unexpected condition. And starting next year, we will take this quarter with a cloud-based BMS.

With this advanced feature, we will be able to deliver even faster and more precise predictive diagnostics for the high safety. In addition, our battery pack features multiple layers of exclusive safety technologies such as separation barriers, ultra site release, refractory shields and safety events. Altogether, they prevent the thermal runaway by mitigating temperaturized, releasing accumulative gas and cutting off the relays when necessary.

I believe Diane will remain committed to advancing battery technology to meet the high standards of safety. Now let me switch gears to the fuel cell. Another area where Hyundai is a true front runner. We are the undisputed leader in the fuel cell EV market. We hold more than half of the world's passenger FCEV sales a position where we have sustained through our unwavering dedication to hydrogen. Beyond sales, we have accumulated over 1.1 billion miles of rearward driving data, which is a powerful foundation for technical innovation and quality improvement. Also, 1 of the key measures in fuel set performance is hydrogen fuel economy, and Hyundai achieved a maximum efficiency of the 62% and well above the industry average. And this enables our customers to drive more than 440 miles on a single charge making Hyundai vehicles the longest range FCEVs in the world.

More importantly, it provides the customers with a sense of freedom from range anxiety as well as lower hydrogen consumption relating to reduce the total cost of ownership. Hyundai's FCVs have been and will continue to evolve. We're now channeling our capabilities into our next-generation fuel cell systems for commercial vehicles.

Our goal is to double the power and durability while drastically lowering cost, by achieving high performance, durability and cost competitiveness on par with ICE vehicles. We believe Hyundai will refine the future of the commercial vehicle market. Hyundai has market proven leadership, breakthrough technology and bold future vision for commercial applications. And this is why we will remain the true frontrunner in the fuel cell. The journey of electrification began with hybrids and Hyundai Motor Company is creating mobility solutions that are safer, smarter and more efficient and our vision will go beyond personal mobility, delivering customer-centered solutions for a sustainable future.

Now Softer will play another big part in their development. And here to tell you more is the Senior Vice President, Head of Autonomous Driving Development Center, [indiscernible] up to the stage.

Thank you, Chang Hwan. Good morning, everyone. For decades, automotive industry was defined by 1 simple goal: build and sell quality vehicles. Today, that paradigm is fundamentally shifting. The power of flexible and scalable software has unlocked the potential for vehicles to continuously evolve long after they leave the factory. This is not just an industry trend. Customers are rapidly embracing these changes as well. They are now expecting smarter, more personalized experience from the vehicles that constantly improve over time to lead this new era.

Hyundai has developed a clear software-centric strategy. We are convinced that the future industry leader will be defined by the ability to harness the full value of software, not just to advance the vehicle but to entice the entire customer experience. The environment of this strategy is our new global mobility brand, players.

Today, I will outline the 4 key pillars of our plan to lead the transition into software-defined vehicle or SDV era. This transformation begins with the radical simplification of the vehicle hardware architecture on new platform we call KODA. KODA consolidated dozens of individual controls into unified system that is standard across our entire vehicle lineup. Instead of oriented system by individual functions, we structure them into computing domain and I/O domains. We developed high-performance vehicle computer, HVC, to build a shared computing environment and place done controls near the sensor and actuator to reduce widen complexity. This is the breakthrough. Instead of developing new physical hardware for every new feature, we can now deploy software updates on [indiscernible] and Jon controller. This dramatically reduces complexity, cut costs and accelerate our development time line.

However, this simplified hardware is only half the equation to unlock its true potential, we need an equally revolutionary [indiscernible] layer to run on top of it. That layer is our proprietary operating system vehicle OS. We recognized [indiscernible] that owning the core OS is a nonnegotiable computer leadership. It is the key to controlling the customer experience and unlocking future value.

Unlike treasure vehicle software, which is lock to specific hardware, players vehicle always create a clean separation between the vehicle software and its physical components. It introduces hardware abstraction layer that decouple software from its hardware components and resolve structural limitations. This allows our developers to innovate at the speed of software, not a speed of hardware manufacturing.

Additionally, this fundamental shift enabled us to rapidly deploy new features, critical security updates and performance update over the year, delivering a safer, smarter and constantly improving experience directly to our customers. With this powerful OS in place we can now revolutionalize the most visible part of the software experience, the infotainment system.

We call it [indiscernible], our next-generation infotainment platform -- it's more than just a screen. It's a dynamic connected or proposes digital life, featuring multi-window functionality deep personalization and vibrant end market open to the third-party developers. Players Connect will begin rolling out our new models in the second quarter next year. More importantly, this platform is our gateway to a recurring service-based revenue model, allowing us to offer constantly expanding set of digital products and experiences to our customers.

Finally, we layer on the most critical components that ties everything together, artificial intelligence. Our AR is built on 3 powerful synergistic engines. First, Atria AI delivers advanced autonomous driving based on [indiscernible] deep learning models without relying on high depiction [indiscernible]. This breakthrough enhances both cost efficiency and scalability, making autonomy more critical and deployable. To accelerate this future, we are actively working with [indiscernible] and emotional leveraging their deep expertise to deploy the next generation of autonomous driving. We are executing a clear plan from initial validation to mass production.

One pace -- our pace car goes on road next year. In 2027, we launched [indiscernible] system followed by urban develops system in 2028. Secondly, gaAI,,defines, how driver interact with their vehicles, delivering more into personalized experience through natural language interface. Third, Capra AI analyzes large-scale vehicle data to improve fleet operation efficiency. It offers a powerful competitiveness as a fleet AI solution in the B2B market. These 3 AE engine forms a comprehensive intelligence layer that long and improve with every mile driven. This is how we move beyond simply build costs to creating intelligent mobility solution that will shape the future. As you have seen today, these 4 pillars caught KODA, Plus Connect and our AI engines are more than just the strategy. They are our blueprint for leadership in the software-defined area. They walk together achieved on cargo transform our relationship with our vehicles and customers. We are moving beyond onetime sales to building liveshone connections, delivering continuous value through intelligent software better and services.

This is how we lead the next generation of mobility, thank you. Now it's time to take a closer look at our luxury brand.

[Presentation]

Nearly 10 years ago, Hyundai announced a bold new ambition to launch Genesis as an independent global luxury brand. We are confident in the brand's bright future, but humbled by the challenges we face as a newcomer in a very competitive market. We've reached 1 million cumulative unit sales in 8 years, faster than any of our competitors.

Genesis is contributing double-digit profits and adding tremendous value to the business in the 20 markets where we are present. One of the keys to the brand's early success has been its award-winning product lineup, impressing consumers and industry experts alike. Our complete portfolio of 6 model lines has won numerous cycle late for its bold designs refined driving experiences, advanced technologies and leading safety. You can see the Genesis profit pools in each region and segment as well as our performance today. We see opportunities across all regions and segments to maximize profitability. As we approach our 10-year anniversary, we look back funnily on all we have achieved but are keenly focused on the next chapter for Genesis and how we can meet consumers' needs in each and every market. In the next decade, we will be very intentional in how we grow the brand profitability by targeting the right segments, the right technology and the right markets.

Our brand ambition is to strengthen our luxury lineup with high-end SUVs, performance vehicles, hybrids and ERVs and continue expanding into global markets. To ensure our success, we continue to ask ourselves how can Genesis truly redefine automotive luxury. Our answer, Genesis will focus on 4 pillars for future products. First, offering vehicles in all luxury segments that provide a truly elevated experience for high net worth customers.

Second, deepening our emotional connection with customers, through refi luxury and [indiscernible] ship intended to appeal to a select few. Third, offering a bespoke program that enables the customer to fully customize the vehicle and fourth, infusion relentless performance and emotional connection into the brand's DNA. So here is how we'll do that. We'll go be joined the brand's existing model lineup to create new flagship vehicles. For example, an off-roader infused with the spirit of adventure, just like the X Grand equator concept in the back of the room and also a full-size flagship SUV of majestic presence. We are also evaluating an elegant convertible with an emotional look and feel that reinforces Genesis reputation for design leadership. And we are working on a concept that expresses the emotional thrill of the racetrack while on the road.

These vehicles, which are currently concepts exemplify our ambition to offer leading products that deliver exceptional experiences. Our one-on-one bespoke program developed in the Middle East will connect with customers by ensuring that every detail material and color is tailored to bring the personal story to life. So the vehicle expresses their own unique identity. We're looking forward to introducing these bespoke offerings in global markets. And we will infuse high-performance emotional fund to drive characteristics into the brand's DNA by channeling the spirit of a racing team.

Genesis MAGMA stands for more than just an accelerating driving experience. It will feature both comfort and the excitement of electrified high-performance engineered for the role. We will introduce the all-new GV60 Magma in Q4. But our high-performance ambitions don't stop there. Late last year, we announced Genesis Magma racing, establishing a new chapter in the brand's history that will bring on track technological breakthroughs and a halo effect to the Genesis product portfolio.

Genesis Magma racing will compete in the global for Endurance Championship, hypercar series starting in 2026 and in the U.S. inside sports car championship from 2027. Development of our race car is well underway with a successful engine fire up and on track testing taking place earlier this year and our world-class driver lineup has already seen success in the 2025 European Liman series winning on their debut.

As we expand our global presence we must meet the diverse needs of customers around the world. So we are also broadening our electrification strategy to include our 3 distinct production systems, battery EVs, hybrids, and ERVs. This diversity ensures that we can navigate market conditions successfully and help customers find the best fit for their lifestyle. Genesis is investing heavily in a future product lineup that will drive our customer journeys. We are customizing a global platform that will allow Genesis to maintain its strong design and performance identity, while leveraging the scale of the group. The new platform come into 2028 will have the flexibility to apply our 3 powertrains, BEV, ERV and hybrid. And our next generation of products will, of course, have software at their core, with SDB intelligence to support enhanced personalization and offer a greater variety of services.

This year, Genesis sales will reach 225,000 units globally. We are targeting 350,000 annual sales globally by 2030. This includes a strategic core market growth in the U.S., where we expect sales to increase by 55% with U.S.-based production and EREV launch. In Europe, Genesis will expand in up to 20 markets. In China, we are developing dedicated vehicles based on local technologies for enhanced growth. In the Middle East, we are promoting one-of-one exclusivity and localized vehicles, and we are looking for new markets such as Asia Pacific and other emerging regions. We know that it's not only where we meet our customers, but how we meet them that builds loyalty and retention.

With that in mind, we will sharpen our retail competitiveness at all our brand spaces. In North America, we have already opened more than 90 dedicated Genesis facilities in collaboration with local retail partners. And we plan to complete our fully dedicated retail network in a couple of years. You can see how the thoughtfulness of Genesis luxury manifests in the Genesis house just down the street. Genesis House combines Korean luxury and culture in a unique space that embodies our philosophy of some NIM, treating customers like honored guests. I invite you all to come to Genesis House for a Michelin Inspire mill.

In Korea, we are expanding our dedicated Genesis space portfolio and providing an exclusive launch delivering private experiences to select VIP customers. We've had great success with VIP customers as the official mobility partner and first official vehicle of the PGA tour. Genesis is also giving back to our communities through philanthropic and art initiatives. Genesis has achieved so much in just 10 years. Now we are embracing the challenge to elevate the customer experience and strengthen our profitability as a refined luxury brand. We have an opportunity to deepen the emotional connection with our customers and nurture their passions in a way that moves us beyond being just a luxury automaker. This will be an exciting and rewarding journey.

Now I'd like to shift gears and talk about how we are investing to strengthen the broader Hyundai ecosystem. From purchase to ownership across dealers, after sales and finance, we are building a more connected and resilient customer experience. These investments are not just about today. they're about securing long-term competitiveness and sustainable growth. Our FBB strategy fewer bigger, better is a key success factor in building a more focused and high-performing dealer network. We are consolidating partners efficiently while improving sales effectiveness and driving brand exclusivity. This isn't just operational optimization. It is about turning our dealers into true growth partners.

Together, we are creating a network that's leaner, stronger and better equipped to deliver value across the entire customer journey. We are continuing to streamline our dealer network, not just for efficiency, but to elevate the customer experience. By investing in modern customer-centric facilities, we are creating spaces that reflect our brand and build lasting trust. And through our global brand ambassador program, we are deepening dealer engagement ensuring every partner is aligned with our values and equipped to deliver excellence. This is how we turn our dealer network into a true extension of the Hyundai and Genesis brands. Sales finance is a strategic growth engine for Hyundai. It enables us to meet customer needs more effectively, support dealers more competitively and strengthen our business fundamentals. Throughout handing capital and key financing partners, we are delivering an end-to-end experience from purchase to ownership that enhances satisfaction for customers, dealers and the company alike.

Our sales finance engine helps us improve residual value, retain customers and grow our brand value. Markets with a strong sales finance coverage show 50% stronger brand loyalty, clear proof that financial innovation drives performance. Looking ahead, we plan to expand our finance coverage from 11 countries to 15 by 2030, increasing our global reach from 62% to 80% of sales. This is how we turn the financial capability into customer loyalty and long-term growth. We are also looking at opportunities beyond automotive finance and Capital overseas KRW 182 trillion of financial assets across a broad portfolio of financial products. The scale of the group allows us to offer a more comprehensive range of products and services.

We will continue to grow Hyundai Capital as a leading global mobility finance solutions provider. There are a number of areas where our financial strength can be put to good use, like rentals, commercial vehicles and fleets robotics, robotaxis and hydrogen, even personal loans and corporate finance. Our global scale, our approach to profitability management, our data management and AI integration experience and even our global sales support network make this a natural development.

Hyundai's global strength is certainly impressive, but it doesn't mean we have to stand alone. The strategic collaborations are becoming a new growth driver for us. We are leveraging external innovation to accelerate transformation across mobility, technology and customer experience. These partnerships allow us to share core competencies, enter new markets and scale faster. From autonomous fleets to digital retail, each alliance is designed to create synergy and unlock long-term value. For example, we are proud to supply the IONIQ 5 for way more power autonomous fleets, equipped with Waymo's sixth generation fully autonomous driver technology, just like the 1 on display here. We have already inspected and delivered a small fleet and we are preparing for public road testing in the U.S. starting this year. These vehicles will be produced at HMBMA, reinforcing our commitment to U.S.-based innovation and manufacturing. This collaboration is a strategic move that positions Hyundai at the forefront of autonomous mobility while opening doors to new fleet customer opportunities in a rapidly evolving market. We are also proud of our partnership with Motional, who is also a leader in autonomous technology. We are excited to share progress on our strategic alliance with General Motors.

Our partnership builds on mutual strengths and shared ambition. One of our first initiatives is to codevelop the 5 vehicle types targeting over 800,000 units by 2028 across North Central and South America. Under this partnership, we are entering the electric commercial van segment in North America with localized production in the U.S. In Central South America, we are expanding into compact cars, SUVs and trucks, leveraging Hyundai's product leadership and GM's deep expertise in pickups.

Beyond product, we are exploring collaboration in joint sourcing no carbon steel, propulsion systems, batteries and fuel cells, creating synergy by sharing core competencies across the value chain. This alliance is a powerful example of how we scale faster smarter and more sustainably together. Our partnership with Amazon is transforming how customers discover and engage with Hyundai, creating a new digital purchase journey that complements our existing retail network. This isn't just about online visibility. It is about connecting dealers with new opportunities. We have 80% market coverage via dealer enrollment -- the results speak for themselves. 90% of visitors are new to Hyundai. There is a 39% increase in brand consideration and 27% of buyers are first-time 100 customers. The Amazon partnership is also making clear contributions to dealer profitability through new financing options, accessories and better off-line sales visibility.

With Amazon's Net Promoter Score 40 points above the industry average. This partnership is helping us elevate brand perception, reach new customers and drive incremental sales, all while keeping our dealers at the center of the experience. These partnerships are another biggest step in the journey, Hyundai Motor Group has embarked on one of innovation and adaptability, always focused on our unwavering commitment to treating every customer like an honored guest, an anchor in a strong business fundamentals.

What does all mean for bottom line I'm happy to introduce Scott Lee, our Chief Financial Officer, to talk more about our financials.

Good morning. How did you find our CEO's presentation earlier I hope it gave you a better understanding of our company's vision and strategy. Now let me begin the financial part, let me start with our revised guidance for 2025. Then I'll provide our future investment plan and mid- to long-term financial target, followed by our shareholders' return policy.

At the start of the year, we announced revenue growth of 3% to 4%, OP margin of 7% to 8% on investment plan of KRW 16.9 trillion, and free cash flow of KRW 0.5 trillion to KRW 2.0 trillion. And since that alot has happened, the auto industry is facing many headwinds such as tariffs and the increased competition around its continued macro uncertainty. But I strongly believe that difficult times bring out the best in Hyundai Motor Company.

We are even raising our revenue growth target to 5% to 6% thanks to strong sales in North America, higher sales of hybrid and Genesis and better-than-expected ASP growth despite strong time line growth -- we are adjusting our OP margin target to range 6% to 7%. As we face the challengeable tariffs, this target is a rather challenged goal. We believe attaining this target along stands as a meaningful achievement under these challenges by actively implementing contingency plan, we'll minimize the tariff impact on our margin. We have also reviewed and revised our investment plan to KRW 16.1 trillion, accordingly. Our free cash flow is also lower to KRW 0.5 trillion to KRW 1.5 trillion. The industry is facing new challenges more complex than able. However, we will strive to achieve our new guidance -- let's move on to our future investment plan. On your left, our 5-year investment plan for 2026 to 2030. Although we have lowered investment plan for this year, we are committed to increase our future investment. Even in uncertain times, we strongly believe that investment is what makes our future.

Therefore, we are increasing our 5-year investment from KRW 70 trillion to KRW 77 trillion. CapEx will increase by KRW 5 trillion due to an increase in product development projects and expansion of capacity in line with our localization strategy. R&D will increase by KRW 1.9 trillion in order to enhance SDV and software technology. In August Hyundai Motor Group announced the U.S. investment of $26 billion, which is a $5 billion increase from March.

To your right, you can see our personal investment in the U.S. market. We plan to expand our U.S. investment from $8.8 billion to $11.6 billion. which is an increase of $2.8 billion. The increase of investment will focus on expansion of U.S. product capacity and establishment of robotics ecosystem. We aim to accelerate localization and improve profitability with these investments.

Next, I will explain our new mid- to long-term financial target, which reflect the current business environment. Throughout the recent years, we have significantly improved our fundamentals through diversified product and enhanced brand power. However, on with our global OEMs, we are facing a challenging environment shaped by new U.S. tariff pilots and new EV competitors. They become the new Nomar.

Despite these headwinds, we would strive to sustain an OP margin of 8% to 9% by 2030. In the short term, we will focus on the continuous mix improvement through higher hybrid and generate sales. We aim to achieve on ex EV sales portion of 38% by 2027.

In addition, localization of key product is another priority. We are also entering a strong new motor site with key volume models ready to be launched from next year. Last, but not least, we send the cost competitiveness of our high-bleed system to support mainstream of hybrid. In the long term, we are targeting ex EV sales portion to rise to 60% by 2030. By then, the second page ramp-up of HMGMA will be completed with an annual capacity of 500,000 units. In order to achieve a sustainable 8% to 9% OP margin in the future, cost reduction in manufacturing, EV and STB are key driving factors our mid to long-term profitability. By implementing automation and smart factories, we aim to reduce manufacturing costs and drive global cost innovation through localization of parts and raw materials. For EV we broadened the coverage of vehicle models by diversifying battery cell chemistry and form factor.

By applying sale vehicle and utilizing our 161 integrated power module will actively pursue cost reduction for EV. For SBB, we are pushing for caused innovation by decovling hardware and software, integrating software across different vehicle models and establishing cost reduction target for each vehicle segment. For my last topic, I would like to elaborate on our shareholders' return policy.

Last year, we announced our value program, which received a positive feedback from the market. And rest here was also the first year that we achieved a TSR of 30% for the first time. Despite heightened macroeconomic uncertainties and rapidly change business environment, we will stay committed to our TSR policy of 35% plus and deliver minimum dividend of 10,000. We continuously deliver shareholders return and enhance corporate value. This marks the end of the financial part of our presentation.

Next, our CEO will give us a wrap-up on our Investor Day. Thank you.

Thank you, Scott. Hyundai Motor Company is well positioned to grow as a top 3 brand through our innovative partnerships, dynamic capabilities, manufacturing excellence, new product innovation, Genesis refined luxury and advanced technology acceleration all supported by our global advantage. Plus, we have another asset, our long history of adaptability -- in periods of uncertainty, we have a strong track record of gaining share and improving our business. We expect to do the same this time around. To achieve our goals, we are focusing on synergies within the group, expanding profit opportunities, developing common sourcing, expanding partnerships creating sales finance mobility platforms, sourcing locally, strengthening organizational capabilities through new global functions and utilizing automation to maximize productivity, quality and efficiency.

We are not just adapting to change. We are leading it. Through our commitment to electrification, our investment in software-defined vehicles, our focus on manufacturing excellence and our dedication to treating every customer like an on or guest, we're building the mobility company of the future. Ladies and gentlemen, our fundamentals are strong, and our road map is robust. The group is #3 globally in sales and the second most profitable. We have all-time record revenues. We are a top 5 brand in 26 markets. We will sell 5.55 million vehicles by 2030, including 3.3 million in electrified sales. We are adding 1.2 million unit capacity.

On the product side, we are entering new segments with midsized trucks and electric vans. We are expanding Genesis and the end performance brand, and we are doubling down on our investments in America, with a $26 billion investment from the group. And we are building it on a strong foundation, Hyundai's commitment to progress for humanity. We remain relentlessly focused on the customer and our employees and committed to shareholder value creation. And more than that, we're doing all we can for the health and welfare of our planet and human kind.

Our strategy is clear -- our team is energized. And with your continued support, I'm confident and excited about the future. Thank you for your time, your trust and your partnership in this incredible journey. It is a great time to be with Hyundai and Genesis. Thank you very much.

This marks the end of the presentation. We will now move directly into the Q&A session. [Operator Instructions].

Good morning. I hope you've often enjoy the presentation. My name is Cayan. I'm the CIO at Hyundai Hounde Motor. I will be the moderator for today. So basically, we will open up the Q&A for now. And if you raise your hand, I will definitely use the person. And then if you can actually state your name and the company you're with, and hopefully, we'll try to keep to 1 or 2 questions per person so that we can actually give a lot of opportunities to others. And also if you can actually appreciate. We would appreciate it if you can stay within the scope of the presentation today in terms of question.

Okay. So we can maybe start Yes, maybe -- can somebody bring the mic?

Great. Thank you for a great presentation. I think you seem to be quite uniquely positioned in terms of region and powertrain balance and facing less competition challenges from the Chinese EV makers. Especially compared to some of your OEMs peers, right? But I'm just curious, Jose and other senior management. What keeps you up at night? What worries you the most for Hyundai Motors long-term outlook?

Well, let me tell you that everything keeps me up at night. So I sleep very fast and very little. So I think the strategy is what gives us the robustness, as mentioned in all the different missions and elements that we have put together. So the best we lay out that foundation -- we have a thorough execution throughout the group with all the functions with our partners, with our dealers, with our employees, the less things, keep you at night, but there's always something going on, right? But very detailed. I have good quality of sleep.

Thanks Okay. Do we have any other okay Mr. Shin in the back you.

So thank you for the opportunity. My name is Jon Zukin from Morgan Stanley. First and foremost, I wanted to thank the company for hosting a series of event this week. All the hospitality and care provided by the company has been phenomenal. So thank you for that. One question I have is, I believe Hyundai's positioning and strength to capture potential opportunity in the U.S. are pretty well documented and understood by the market. But it's a little bit of a follow-up. But 1 question that we continue to receive from investors is obviously the China competition risk in key markets like Europe, South America and parts of Asia. So -- if you could please elaborate further on your strategy for these markets in order to achieve your mid- to long-term volume targets. And also your expectation of profitability outlook for these markets would be very helpful.

Very good. Well, obviously, this is the first time -- thank you for your comments, and thank you for attending -- and I'm glad the team has done a good job hosting you all in this event and the other events before this. So obviously, we are in the U.S. This is the first time that we are having this CEO Investor Day meeting outside of Korea, and we're very, very happy to do it here. And we've put more of the foundation here. Also, given the current geopolitical and current business environment, this is obviously a very specific moment. But we have also laid out other elements. We could be here a few more hours to explain all the strategies.

So you mentioned a few. I will give you some elements. I'm sure we can have other opportunities on one-to-one to elaborate on this. But China, for us, is an opportunity. China for us is all opportunity. And then after a number of years with a lot of struggles we have put, and we are putting together a stronger strategy for the Chinese market very simple. So to be successful in China, we need to utilize and capitalize our Chinese partners. So our strategy passed by strengthening the collaboration that we have with BeiGene Auto is an extremely good partner who have a lot of ideas and a good -- a lot of good capabilities that we're going to see together step by step.

That's on the 1 side. Also, we have decided to develop in China for China. And then a company that is fully vertically integrated as I am sure it comes across very clearly in the presentation. It takes a really good courage and the determination to know that for the next phase in China, we're going to localize more. So the intention is to be more local with local technologies with local cost with local partners with local type of products on the 1 side, but also capitalize on existing capacity that we have in China to be able to export to markets, which are very, let's say, China friendly to maximize the existing investment there. So when you look into some of the very obvious opportunities, you would wonder why, for example, Ionic is not in China, right? We are second best selling of EV cars as a group in the United States, and we are very, very top in most markets. And I think we didn't launch IONIQ in China. So that's a very clear opportunity.

So also, we're trying to set up good innovation in terms of distribution. So we have set up special FT, which is the internal technology for cross-functional and cross external partners strategy. which we actually will revise on Sunday, Monday, this coming week, where we are addressing every single pillar of this market. I've got to tell you that some of the fundamentals that we've done in other regions have not been deployed in China yet. So I'm very confident that China for us is going to be a big opportunity. Now when you mentioned in Europe, we've also mentioned during this presentation, in Europe, we are developing product portfolio by being more competitive in the entry of the market with ibis. We just announced last week at IAA in Munich. The launch of the IONIQ 3 I have revealed that this is the IONIQ 3. And then this is giving us a very specific competitive advantage. I'm sure you know the market very well, but then you will see that only those who are able to fulfill the European regulation can take advantage in terms of profit with other segments.

We are, at the moment, one of the most profitable brands in Europe and still maintaining and growing the business and high share in an environment where most of our direct competitors are losing because of the Chinese. So we have also launched a specific strategies to be able to not only maintain but to grow that. And in the growth plan, we are expecting Europe to step up to the already good work that they've done and continue with that road map.

You mentioned other regions. Well, I'm not going to be here all morning and give you all the details. But for example, in Asia Pacific, a very important market for us. we are now deploying a new strategy with a new structure of the group and focusing on markets which are very similar to the European or American markets like Australia, where we have opportunity to be on the group in that market. How well on -- simple 1 is the introduction of pickups that we don't have in most markets, right? So if you compare ourselves to other big OEMs, 1 of the biggest difference comes from lack of pickup presence. So the pickup is going to have an impact on North America, in Central South America, in Southeast Asia, mainly. So that's very important. Also, in Asia Pacific, we have our major hub in terms of manufacturing technology.

I mentioned about HMGICS, which is exporting the capabilities of improving automation, quality and cost control. in our factories across the globe. Not to mention the already existing investments that we made in Indonesia with both assembly plant and battery plan with the latest technology, which is going to give us the opportunity to scale up, et cetera.

So I think these are some of the key elements, happy, obviously, to meet up with your company to provide you with more India. In India, most OEMs struggle because it's an extremely competitive market. We are 1 of the most profitable companies in India, much better profitability than the leaders. And we remain #2, and we are increasing our capacity India, not only important for domestic market, what we call about 15% share. But very important for export markets, all regions, all the heads of the regional 1 to get product from India because it's high quality is very competitive, right? So with the new Pune plant, by the end of this year, we'll be able to capitalize on that. As you know, we have been the first OEM to go public very successfully in the Indian market and so forth.

So I don't want you to come across or just think -- this is just a U.S.-centric strategy, not at all. It is a much broader strategy, not to mention about Genesis brand, whilst the company is going to grow volume by more than 30% globally to the $5.55 million increasing the margin despite the challenges. We are expecting Genesis to grow by 50%, so to contribute even more. And then Genesis is a double-digit profit margin, so it should bring more profitability to the group.

So well, those are some of the key ingredients in parallel with the EV, ERV, hybrid, plugging hybrid and fuel LB technologies that are going to be the foundation of the group. So I hope this clarifies a little bit. Thanks for your question.

I hope that answers your question. Okay. Anybody else Okay, we have the gentleman with -- in the back, the third row.

It's Jose Asumendi from JPMorgan. I'm heading up the auto team. Thank you, Jose, for the presentation. Very interesting discussions today. Three questions, please. On the first one, you've done a fantastic job in the U.S., taking market share in the past years. The product portfolio is very strong. Where do you see your market share in the next 3 to 5 years in the U.S.? Do you expect to continue to take share.

Second, coming back to the growth by region. Again, coming back to the market share discussion, where do you see, again, the biggest opportunity to gain share with the strong portfolio and that [indiscernible] mix that seems to be very flexible -- and then three, autonomous driving, I would love to understand a bit better, Level 2++ level 3 automomous driving. How do you incorporate this technology into the vehicles and how can you price up the content of the cars and safety into your cars, especially when we think about Level 2 and Level 2++. I know it's a big question as will be different by region, but maybe we can focus on some of the regions like Korea, Europe and U.S.

Very good. So I will tell you. So -- in the U.S., we've deployed a lot of strategies that -- because we've been here with the feet on the ground with a very well trained and then with a lot of in-person interaction with our dealer partners, our external partners, et cetera. I think we've seen the impact. Now we are deploying similar strategies in other markets, adapting to different market potential. In the presentation that I made, there is no 1 region that is going backwards.

The only region that is expected to be flat in terms of volume is Korea because the expectation is that the market is going to go down. And we are going with the commercial vehicles trying to offset the market deterioration. But in all regions, we have plans for growth. In the U.S., we have opportunity to grow. So we have significant opportunity to grow. As I mentioned, we are today not competing in the large SUV segment. We are not competing in the pickup segment, okay? Those are mechanical opportunities that are going to give us a big opportunity. We are not pushing for like achieving 1 number. We're doing a good thorough systematic profitable growth. So I don't want to tell you, hey, I want to achieve this number. And then we are 1/10 or 2/10 below. I think we have considerable opportunities to grow in the U.S. without a doubt. And it's today the most profitable market, it will continue to be the most profitable market. But we cannot only depend on the U.S., as you just said.

So we are expecting in the profit distribution that other regions like Europe, like the Middle East, et cetera, would grow. So let me give you some other elements. Europe, as mentioned, we have opportunities to grow. Today, we are the first non-European OEM ahead of other Asian competitors doing very well in very competitive and tough markets like Germany with high profitability. But for example, we haven't launched Genesis really in Europe.

Now we're in the process to launch it. we needed hybrid to ensure growth. We're going to have it next year. So we are very confident that this is going to give us an advantage. I mentioned also sales finance. So in most markets in Europe, we don't have sales finance. We're going to have in key markets, sales finance, so we'll be able to have platform to be able to create mobility and again, capitalize on profit contribution on those segments where we can continue to grow. Today, we're 1 of the few companies that is not constrained in the growth of hybrid, plug-in hybrid and ice because we have sold enough EVs to be able to sell also the other portfolio. A lot of brands they didn't arrive in a market with the proper EV portfolio, they are not compliant and they are limited on how much they can grow. So I've already mentioned, in India, we are not expecting to grow share.

We're #2. We are very solid. But we have more opportunities. This market has opportunity to grow. We want to export no problem there, perhaps an opportunity to launch our luxury brand, okay? So because we have strong credibility. So Central South America and then Asia Pacific, Southeast Asia is a very important pickup market, okay? So we have huge opportunity to enter in that market. We have a strong credibility there. We have good profitability despite the competition, and we are strongly localized.

So very good 1 of the most important profitable markets for us, Middle East, we're #2 in the Middle East. So Saudi, but we have opportunity in the Gulf countries. Again, pick up market we don't have. So I think we have very good opportunities organically. And then we are investing to do that, while the 1.2 million capacity investment that we have in the region is going to allow us to capitalize on that. So as you know, I presented here the 50,000 CKD plant in Saudi okay? So this could be the door opener for even more innovation, more sales.

Genesis brand is doing well. So we have a specific plan, and I already mentioned about China. And then our share is going to continue to grow. It's going to continue to grow without a doubt. So if you look, for example, Canada, similar market to the United States, right, very, very competitive. We are running more than -- so we could do the same in other markets, right? Canada, also important pickup market, et cetera.

So those are some of the elements that have been presented. Again, happy to have more one-on-one discussion so that we don't broadcast to the competition too much the details on how we get things done.

I think there was a third question on the autonomous driving -- maybe Mr.

Yes. Autonomous driving, so let me tell you 2 things there. or the -- and how we can capitalize on the pricing, safety, et cetera. So we are so convinced that the autonomous driving is relevant for the future, that we have a number of strategies that are working in parallel. First, we have created capabilities in-house and also with partnerships like Motional and with external partnerships like Waymo. You can see the IONIQ 5 that is in the back with the Waymo system right behind that. that by next year, we expect to put in the market is a significant volume opportunity for robotaxi.

While this partnership can be extended both with our manufacturing operations in the U.S. or with others. So for example, Southeast Asia, we have capacity to be able to do that. But we not only believe in robo taxi -- we also believe in the personal autonomous driving technology. We recently made an acquisition -- partial acquisition of 1 Chinese leading company momentum to be able to have capability in China for China. To your point, you were already kind of making the point that this cannot be just in about our strategy, it needs to be different. So for the U.S. We have emotional, we have Waymo for China will have Momenta and others. We have our group companies like 42. also who are in that domain, coordinating the technology. So -- and then we believe that also, in the long run, this is going to be more standardized and then perhaps there will be more opportunities to synergize. But in the meanwhile, we want to develop in-house. We want to have the capability with our company emotional and then with a third-party partnership in U.S. Waymo, China maybe Momenta and others. So we have been able to increase our net revenue in the last 6 years by about 10 points.

So believe me that when we will introduce new technologies, so mobility and others, we try to also capitalize all that, right? So we have grown our net revenue more than our sales growth, which means we are optimizing the mix the pricing, the incentives, et cetera.

Thank you.

Okay. I hope that answered your questions. Any other questions? Okay. Over here on the left side.

My name is Jon Yu from Tao Securities. I have 2 questions today. One is about the tariff and the other is about shareholder return policy. So the question is about next year. What if the 25% tariff stays there throughout the entire 2026 -- can you -- or are you still able to defend your profit margin next year? Or maybe you can clarify a little bit on that? And Second question is, do you have share buyback plan this year?

Okay. So let me take the first question, and then I will turn it over to Scott Lee for the second one. So on the tariffs. So the financial projection that we have presented here is predicated upon the 25%. This is what we know today. We thought it wouldn't be appropriate to present to you a forecast, hoping that things are going to change for good with the information that we have today, and everything that happened today, the current situation for us, unfortunately, is 25%.

So the margin deterioration is due to that. And I think we were very, very close to maybe if the tariffs would have come down to 15% to be able to maintain our guidance. So just to make it clear, our guidance -- revised guidance provided by Scott Lee today is based on 25%. So for next year, we all hope that both governments will be able to achieve an agreement sooner rather than later, and that would pose an opportunity for this year and then, hopefully, the opportunity to plan ahead next year on a strong performance of the company, even if on the 15%. But I've got to tell you that at the end of the day, on the way we operate, the focus is always on the customer and then on the shareholders.

So all we can do is to try to maximize our revenue and try to sell a better mix try to get a better net revenue, which is the reason why also Scott Lee presented the fact that despite higher tariffs our revenue is expected to grow.

So -- and that's our plan moving forward. So maybe on the shareholder policy, Scott, you can clarify.

We are discussing how can we make the TSR 35% over. So there is 2 ways to hit the 35% of TSR. The 1 is dividend. And another ways, the buyback treasury stock. So we are discussing internally but we are not finalized yet. So anyhow, we promised this year's TSR should be -- really be over 35%. And -- if I can add a little bit. I mean, basically, what we announced last year in terms of our 3-year share buyback plan that stands basically. So in terms of the exact timing, we cannot really give out the exact timing. But nevertheless, we will hold to the up to KRW 4 trillion share buyback over the next 3 years.

Okay. Maybe 1 or 2 more questions, Mr. Hung Paul.

This is [indiscernible]. I got 3 questions. One is about the U.S. pricing outlook, [indiscernible] Russia.

So number one, in terms of U.S. pricing, I understand that there's bore-facing or notable pushback from its price hike done in the U.S., it seems like most of the OEMs engaged in the U.S. so far has been pretty quiet in terms of implementing our price hike. They said, we do understand that some of the Hyundai profitability or free cash flow of the U.S. business is not really viable even before the tariff. And so eventually, some of the guys got to do a price hike. So kind of wondering your perspective, what the expectation when we should start see some of your competitors actually doing our some price hike in the U.S. where you expect that to happen sometime in the end of this year or sometime in next year. So that will be my first question.

The second question is about the GM [indiscernible] related codeveloping the 5 models with the GM and kind of curious about -- in terms of actual creation of the sales volume done between the Hyundai and GM, respectively, kind curious how things will be coordinated in terms of many different things, including the timing of the launch pricing, manufacturing site and so on, just given the fact that this model is going to be codeveloped.

So should we be thinking that the things should be done in a similar way to how things are done between the Hyundai and Kia right now where you guys share the platform, a should things being done somewhat differently when you and the GM does could develop the 5 models for the North America and South America. And the last quick question is about the Russia to understand that buyback of your previous Roche factory, as 6 prior by end of this year, and there seems to some of the talk that Hyundai Motor potentially looking for the opportunity to reach reenter into the Russia. So how you are thinking about that would be my third question.

Very good. So let me try to address those questions. So number one, in U.S. pricing strategy. So let me tell you that as a company, we have been rising prices consistently before tariffs, during tariffs, after tariffs. Always, that's the name of the game. So we cannot just simply wait and see. But we have not taken an approach of just saying, okay, because of time, we're going to go and do this. Why? Because we understand the business and we understand the customers, and we always say that we need to focus on the customers, right? So that's what we've been doing. So our position has been very clear. The cost is the cost and the revenue is the revenue. And we need to address them separately.

So in terms of cost, we're taking all actions that we can, commonizing platforms, increasing the volume, and maximizing utilization of our plants, commonizing the technology and working on some cost reduction opportunities. But the most important is that in terms of the revenue phasing opportunities, we take it when we have it. So for example, every year when we launch a new model year, there are new features for the cars and the new pricing, okay? This is what we've been doing. We've noticed some competitors are doing the same thing. Others are doing differently. We're not going to change the strategy and we are constantly evaluating what's happening in the market.

So when you have more capacity of 1 car, than the potential that you have in the market. Normally, you need to be more competitive, you need to have more affordable prices. You have to have a little bit more incentives. When you have more demand than capacity, then it's the other way around. So that's how we operate. And I think so far, so I want to give credit to the teams that are in charge of that because it's a very technical data-driven job. But the most important, again, customer oriented. We've seen in the market during the last few months how affordability was so important.

So we've been trying to put in the market versions which are more affordable. We've been working with our sales finance company to be able to afford the financing to our consumers through more competitive leasing, APR, et cetera. So that's the situation there. And then, again, for every new car, any new model year, et cetera, we will evaluate. And constantly, we evaluate the situation, for example, delivery and handling, logistics costs, et cetera, et cetera. The competitors, we don't know their strategy, but we monitor every day.

Every day, I received a report on what's happening in the market every day. So very, very important. So number two, you mentioned about GM and then [indiscernible] Models coordination timing. So the GM project, I think is a very important one. And the most important is the alignment at the very top, right? I think both the Executive Chair, Mr. Chang and [indiscernible] are aligned on the fact that 1 of the opportunities for both companies to be more competitive is to take advantage of the size, on the synergies, et cetera.p

So when it comes to the product development, the policy is very simple. There is a door and is a receiver of that particular product. So -- you're not going to make everything to try to do a hybrid that is not going to work. So the donor takes the initiative and take the lead. And then the receiver is taking advantage of that particular platform or model. But there is an opportunity to start in a way, continuously improve by commonizing suppliers commonizing logistics, et cetera, et cetera. We work, for example, we provide services to GM with Glovis, our logistics partner. So it's a good opportunity for us. is very, very simple, right? So we mainly have been bringing cars from Asia to America. But then American corporations like GM, they need to export also cars outside of America. And in the future, with our investments, we will plan potentially to do so as well.

So coordination is done on different dimensions. We have project -- we have products, we have management and top management and is working really well. I'm sure you saw that last week, we were in Detroit honoring the fact that the 100 Centennial awards to our Executive Chair and Hyundai Company was given to Usan Chang. And then also Marmara happened to be the receiver of the Centennial award, and then we could touch base together and is going very well. I think we're just crushing the surface. I think we can do much more together.

Already, in my presentation, I mentioned 800,000 cars opportunity once all these projects have been launched, we are studying, as we speak, more opportunities. There are many more opportunities areas for both companies. On Russia, I will tell you that we left the country, and that's the current status. So nothing has changed. So so far, none of these projections are counting on Russia.

Okay. Thank you. [indiscernible].

My first question is robotics. Well, actually, this is currently investor is highly interested in the Hyundai robotics business. Yesterday, we visit the Meta plant. So we are very impressive that your collaborative robotics and industrial robotics and a lot of AGV. So high automation there. So at the same time, it's a questionable with the [indiscernible] robotics are required restore for the Meta plant. So in the context, my question is -- what is the ultimate goal of your robotics business? Is -- what kind of the technology you are focusing to reach the goal. And Well, actually, you announced the invested USD 27 billion for the next 4 years in the U.S. market. So that budget is how big portion is allocated to robotics business, and that area, does that areas include data center impotstructure and was the kind of effort when we can see the invisible outcome, the kind of the -- your export -- and second question is on the slide, so you are trying to reach 80% local production in U.S. factory -- U.S. country. Well, currently, as far as I know, you have the 300,000 capacity in Alabama. And so another 300,000 capacities coming from Meta plant. So combined to capacity is weak at 670,000 units. It means if the own 80% local production light your sales volume would be 850 or 880, something like that. It's far behind over 100 million in sales target.

So what is the difference is your sales target and the local production target?

Well, thank you very much. So Robotics is very important and you tell me I'm in charge of Hyundai Motor Company, which is the automotive company. And for us, robotics is the opportunity to increase productivity, to improve quality and to reduce costs. That's how we do it. If you go -- you went to metaplant, you see the AGVs are very precise they allow you to minimize the investment because you don't have conveyors, you don't have all these type of all production systems. And then as you noticed, they are autonomous.

So the moment they need to be charged. They know they got the chart themselves. And when they are charged, they come back in line, et cetera, et cetera. So the robotics, we also utilize to avoid some of the tasks that are painful or hard for the humans. So these are not meant to substitute humans. It's not like you want to do a one-on-one, et cetera. But again, to improve the profitability of the operation, increasing productivity, improving quality reducing cost. That is the most important.

So we have not made announcement yet. We have obviously a plan, but I'm not going to reveal here that plan today. on how much money is going to be allocated to the different projects. But obviously, every time we make an investment, we do our net present value, the return on investment calculations and we try to be wise for the group to be able to maintain our commitments with the market and with yourself. So still not announced, we will at some point, but we have not announced yet the final investment breakdown. And on the production, let me just clarify a little bit.

So today, we have a full capacity in Alabama of 400,000, not 300. So this year, we're going to do 358,000 units. And then because we have a very complex portfolio in the plant, and it's a plant, which is 20 years old. We celebrated this year, the 20 years anniversary of this plant. As this plant gets a little bit more modernized and the product portfolio gets a little bit more rationalized, having a second plan for us. I think this plant can get to close to 400,000, which has been the capacity they had in the past. And then also in HMGMA, the Phase I was 300,000, but the day of the grand opening in March, we already announced the expansion to an extra 200,000. Since we already saw because of the localization factor that we had before tariffs that we needed to have more production capacity in the U.S. So again, the 80% is very important because we believe is a percentage that is going to allow us to be self-contained to depend on us for the growth and then potentially take opportunities, but in particular, for the Genesis brand.

At the moment, we are only producing 1 car, the GB70 in Alabama and then we, given the importance of the U.S., which is meant to grow the most in the Genesis brand with the highest profitability, we want that more Genesis vehicles are produced in the United States. So we have not announced yet where this will happen, but that's our intention. And then definitely, as answered to some of your colleagues, we have aspirations to grow more in the U.S. market.

So this year, we're planning to do about EUR 1 million. We see more opportunity in the U.S. market in the years to come.

Also, we have Mr. Hyungseok Lee here with the EVP of Global Strategy Office, you can maybe add a little bit on the robotics.

Yes. So if I add some more words to what Jose just mentioned, our robotic strategy is to utilize both the leading technology of Boston Dynamics and the business presence in robotics area and also our world-leading manufacturing technology together. So we recently announced the dedicated robotic manufacturing plant. And along with this, we will also build a dedicated pilot center in between robotics and the manufacturing facilities so that we can apply properly our world-leading robotics products on tower manufacturing facility. And then this will be a huge impact for both our robotic strategy and also to fulfill our vision for the next-generation manufacturing technology.

So it's not about just showing off. We will utilize the real-world application onto our manufacturing lines. fully utilizing the real data coming from our manufacturing lines. So with this is -- we will be in the leading position to pursue to capture a lot of opportunities arising in this robotics area. For example, with this dedicated manufacturing plant, we will have a cost-efficient robotics product in the future. And also, we will invest on the ecosystem of robotics industry. So we will come up with a lot of solution with the component and the system provider for robotics. And for that, Hyundai Motor [indiscernible] is being made to make that kind of ecosystem and also already Boston dynamics is a leading position in terms of robotics business.

So we know the business and what kind of service should be associated to these initiatives. So we will also invest in that area. So Hyundai Motor Group's approach for robotics will be ended from development, pilot manufacturing and service. So with this, we will also propel our vision for robotics and also we will enhance our manufacturing facility technology to another level.

Okay. Thank you very much. I think we only have time for 1 more question. Okay. I see 1 hand.

This is James from Macquarie. So I have 2 follow-up questions on the previous ones. One is on your U.S. business. What would be the pain point or bottleneck for you to reach like 100% localization in the U.S. operation? Obviously, given the tariff impact, there will be larger lot more needs for us to localize in the U.S.? And what will be the issue when we basically have 100% location or higher localized in the U.S. what be the volume that previously came from Korea to U.S., what would this volume will be heading into? I mean, is there other geographical market that we are under consideration for those volumes that are being currently produced in Korea.

And the second one is on GM collaboration. So wholesale in previous answers, talk about this will be just some early-stage idea that we currently have. And based on the media report previously, we were thinking about having more hybrid platform sharing or powertrain sharing with the company or you also talked about hybrid foundry business modeling like previous CIDs. So just wondering, would that be also a consideration area of our collaboration with the GM or potential further discussion.

Thank you very much for your questions. On the U.S. business pain point, well, I think -- if you look at the localization level regardless of tariffs, our strategy globally in the markets where we succeed has been to be localized. And then definitely, we needed to localize. So I was congratulated so many times in March, the data we had the grand opening of the meta plant in Savannah.

I believe it was March 25. It was the liberation Day. The same day, President Trump announced the tariffs. So people told me, well, you're so a smart, right? So you so fast. Well, let me tell you that building a factory takes 2-plus years. So we saw it coming before. So this is to say our strategy, as I mentioned during this presentation, is not driven by political events and things like that, it has to consider all elements. But a company like ours that has been in the market for almost 40 years, in this market, you cannot just plan on 1 policy or the other.

So localization was fundamental, and we needed to do so. And in fact, at that time, we knew we needed to expand even more, and we made that announcement of the additional 200 more. So concerning the Korean volume, your question is very important. And this is what I've been explaining to all our colleagues. So to me, this is not a transfer I'm not aiming to transfer production from Korea to the United States. That's why I keep saying we need to grow in the United States and we need to produce what we sell in the United States.

So Korea shouldn't be concerned. And then we are having plans to grow in other regions, which are very important for Korea. So for example, I saw very happily that the Fed lowered the interest rates right? And the expectation, perhaps they will continue to lower. Well, experience tells you when the interest rates go down, the demand goes up. And then there is more opportunity in North America and then other markets want more production from Korea.

So what we're going to do now is very simple. We will produce more in the U.S., for the U.S. and get the other markets to utilize Korean production. I want to make it clear. I also announced during the presentation that we are growing our production capacity in Ulsan by 200,000. So we are not reducing. And I'm very happy. I'm sure you've seen the news that we recently achieved a good agreement with the unions, which means they are confident of the policy of the company. So again, this is not a transfer, this is a growth strategy, 30% total and then 50% for Genesis.

So this is the, I think, a very positive message that I want to convey. And concerning the GM collaboration, so we go step by step. Sometimes really good agreements and good cooperations get broken because of some rumors or leaks, et cetera. We have very transworthy relationship with our partners. And as mentioned, we have made formal announcements, which are very concrete, very clear on platform, on synergies, on volume and timing. And now I've also made the announcement that we are working on other opportunities but we have not finalized the moment we finalize this, we will announce. But we are considering a much broader cooperation because it's going quite well. And the impact is going to be seen in the balance sheet as the years come by.

So very, very positive. And then it all comes from the top. So we have a strategy established by the head of our company, the Executive Chair, Mr. Chang, and [indiscernible] on GM. So very soon, we will announce more.

Okay. Thank you very much, Jose. Thank you to the presenters. We'd like to now conclude the Q&A session for this time. Again, our IR team is open, our hotline for IR team is open all the time. So any time you have other questions, please do not hesitate to contact us. So again, thank you very much for coming to our first overseas CEO Investor Day. We hope to see you some time next year. Thank you very much. Thank you.

Good afternoon. Thank you for joining us for HMC's 2025 Q2 Earnings Conference Call. The presentation materials can be downloaded on [indiscernible].fss.or.kr; or HMC's website, www.hyundai.com IR page.

For today's conference call joining us today are Lee, Seung Jo, Executive Vice President and Head of Finance Division; Koo, Zayong, EVP and Head of IR Division; Kim, Soo Heung, VP of Finance Accounting Division; and Michael Yun, Head of IR Group; and Lee, Hyungseok, CFO of Hyundai Capital.

second quarter earnings results first and have a Q&A session with the investors. [Operator Instructions]. Now Michael Yun, Head of IR Group will present the second quarter business results.

Good afternoon. I am in Yun [indiscernible] of IR. Welcome, everyone, to HMC's Second Quarter Business Results Conference Call. On behalf of the Hyundai Motor Group, I -- Hyundai Motor Company, I appreciate your time. And please refer to the presentation HMC 2025 Q2 business results on our IR website.

The presentation includes quarterly key events, sales performance and profit analysis. And for quarterly summarized cash flow statement and detailed regional sales breakdown, please refer to the appendix.

First, second quarter key messages. Starting from this quarter, we'll briefly introduce the key messages of our quarterly performance. Sales has continuously stabilized post-COVID with second quarter sales reaching 1,066,000 units, the highest level since 2020, up 0.8% compared to the previous year.

The favorable exchange rate environment has persisted, recording an average exchange rate of KRW 1,404 to $1 and a quarter-end rate of KRW 1,356 to $1. Quarter-end rate being lower than the average rate had a favorable impact on debt evaluation.

Lastly, the Palisade hybrid to successfully address the demand for HUV -- SUV HEVs in Q2, achieving a wholesale sales volume of around 15,000 units. We plan to continue expanding sales to increase our market share in the hybrid market.

Next, the sales performance. In the second quarter 2025, HMC recorded global wholesale of 1.07 million units, up 0.8% from the year before and retail sales reached 1.04 million units, reflecting a 0.9% increase year-over-year.

Next, I'll go over details about factors suppressing wholesale sales performance in our key markets. In the U.S., sales increased by 6 -- excuse me, 3.3% year-over-year to 262,305 units. The growth in ICE and hybrid sales have continued to show a strong trend. Sales of eco-friendly vehicles recording a significant increase of 32.5% compared to the previous year, reaching 78,713 units due to the expansion of EV and HEV sales.

Notably, the Tucson, Elantra and Santa Fe models contributed to strong sales performance in the U.S. Despite increasing uncertainty regarding EV sales targets due to policy changes in the second half, solid sales growth is expected to continue in the latter half.

In the European market, sales increased by 2.6% year-over-year to 161,000 units. Growth in key markets such as Turkey, U.K. and Spain contributed to the overall increase in European sales. There also eco-friendly vehicles recorded a strategic increase of 27.3% compared to the previous year, reaching 72,064 units.

Strong sales of the Santa Fe hybrid and Tucson/Santa Fe PHEV drove the overall sales growth in the U.S. -- in the European market. In the second half of the year, we aim to achieve growth in EV sales volume alongside of the successful launch of Inster and IONIQ 9.

In Korea, sales increased by 1.5% year-over-year, totaling 188,540 units. The successful launch of the Palisade HEV effectively captured the SUV demand and continue the upward sales trend. Sales of eco-friendly vehicles significantly increased by 45.6% compared to previous year, reaching 68,550 units due to the line of enhancement.

Additionally, the new IONIQ 9 had a positive impact resulting in a 55.8% growth in EV sales. In the second half of the year, we plan to expand the sales through production optimization to effectively meet customers' demand models and improve the competitiveness of key models with through various initiatives.

Next, let me explain the sales analysis by vehicle types. Global SUV sales in totaled 644,935 units accounting for 60.5% of total sales. Global passenger vehicle sales reached 366,287 units, representing a 34.4% of total sales. The trend of SUV portion of total sales continued, supported by the enhancement of our key SUV line, including the new Palisade.

Sales of eco-friendly vehicles increased by 36.4% compared to the previous year, driven by a shift towards still efficient eco-friendly vehicle mixes, mainly in the European market and strong sales in the U.S. market. EV sales also saw significant growth, increasing by 33.9% year-over-year due to the robust growth of EV sales in the European market.

Additionally, hybrid sales have continued to show strong growth of 38.5%. Now I'll move on to covenant losses. First, our income statement. In Q2, consolidated revenue rose by 7.3% year-over-year to KRW 48.3 trillion and operating income fell by 15.8% year-over-year to KRW 3.6 trillion.

The Automotive business revenue increased by 5.1% year-over-year due to favorable ForEx impact and expansion in high-value segments, especially HEV vehicles. The operating profit decreased by 39.5% year-over-year with tariff impact from the U.S. market and general increase in incentives.

Revenue from finance business increased by 16.4% year-over-year due to continuous growth in the U.S. market penetration rate and asset side. Operating profit increased by 16.4%. Net income decreased by 22.1% year-over-year to KRW 3.3 trillion.

Next is quarterly revenue and operating income analysis. For revenue, favorable ForEx had a KRW 878 billion impact and a slight decrease in consolidated volume yielded negative volume impact of KRW 99.6 billion.

Despite increase in incentive spending, hybrid model sales growth led to a positive mix effect of KRW 1.6 trillion. Additionally, increased finance revenue contributed to overall revenue growth of 7.3% year-over-year. In case of the operating profit, favorable ForEx rate resulted in positive ForEx impact of KRW 632.1 billion, the rising incentives combined with the sales mix led to a negative KRW 740 billion impact.

The recovery in finance performance contributed to KRW 92 billion. The tariff impact began to show this quarter, resulting in a negative impact of KRW 828.2 billion. All those factors contributed to the operating profit decrease by 15.8% year-over-year. The Q2 cost of goods sold ratio recorded 81.1%, up 2.7 percentage points.

In case of SG&A, SG&A recorded KRW 5.5 trillion, which is a 0.9% increase compared to last year due to an increase of marketing related expenses in R&D.

Finally, our net profit decreased by 22.1% to KRW 3.3 trillion. This concludes the end of the presentation for the second quarter business results. Thank you.

And Lee, Seung Jo, Head of Finance Division will explain the Q2 business performance and tariff impacts as well as counter measures.

Good afternoon. I am EVP, Seung Jo Lee, Head of Finance Division. I will now present HMC's Q2 2025 business performance and U.S. tariffs impact and and the second quarter dividend.

In the second quarter 2025, the operating profit declined by KRW 828 billion due to tariff impact and the average incentives in our major markets increased resulting in an incentive increase of KRW 535.6 billion compared to the same quarter last year.

Still, HMC posted record high sales of hybrid models at 170,000, which is 15.8% of total sales. brand also showed a solid performance, taking up 5.5% of the total sales, continuously enhancing the company's fundamentals. The sales of hybrid models and achieved 21.3% of the total global sales, surpassing the 20% mark for the first time.

Moreover, thanks to the FX impact with the average of KRW 1,404 to $1 in this quarter, leading to the positive impact KRW 632.1 billion combined with the implementation of the proactive contingency plan announced in the first quarter offset the tariff impact allowing HMC to achieve KRW 3.6 trillion in operating profit above market consensus.

If they exclude the tariff and FX impact, operating profit would have been approximately KRW 3.8 trillion with an operating profit margin of 7.9%.

Now I'll elaborate on our measures to mitigate the U.S. tariff impact. As you are already aware, in the current situation of global uncertainty, it is very difficult for a single company to predict how the care situation unfolds in the future. Therefore, I'll share with you HMC's countermetures to mitigate the impact from tariffs, assuming that the current tariff policy remains in place.

As short-term measures, the company will first closely monitor competitors and market situation and implement a flexible incentive policy and pricing strategy; second, adopt fundamental solutions such as reducing material and manufacturing costs as well as pursuing changes in part sourcing to achieve efficiency in manufacturing; and third, proactively implement the contingency plan by prioritizing the investment without disrupting our core businesses.

From mid to long term, the company will first seek to localize sourcing of key parts through a company-wide collaborative efforts from R&D, production and quality. And second, thoroughly review expanding local vehicle production based on different scenarios to flexibly address different market changes. By implementing our short- and mid- to long-term strategies, we'll continue our efforts to not only mitigate tariff impacts but also improve the company's fundamentals.

Now let me share our second quarter 2025 dividend plan. In August 2024, HMC announced a value-up program, promising a minimum dividend of KRW 10,000 per share and a quarterly dividend of KRW 2,500. In accordance with the program, a quarterly dividend of KRW 2,500 for both common and preferred stocks will be provided this quarter.

Additionally, as explained in the last quarter, the dividend record date has been fixed at August 31. So for the second quarter, the dividend record date is August 31 and the payment date is September 30. At this very moment, the tariff impact and market uncertainties persist. While maintaining the 2025 annual guidance explained in the beginning of the year for now, HMC will communicate updated guidance with the market as soon as we gain more clarity on tariff policy after August 1st.

Furthermore, President Jose Munoz and our management at Hyundai Motor Group will employ all measures available to recover profit and thoroughly prepare plans to deal with the tariff impact as well as market uncertainties. We sincerely appreciate the continued support from shareholders and investors.

Thank you for listening.

Next is the presentation from Hyungseok, CFO of Hyundai Capital on finance business second quarter results and the third quarter outlook.

Good afternoon. I am VP Lee, Hyungseok, Head of Finance Division, Hyundai Capital. I will now report the second quarter business result and the outlook for the second half of the business -- for the finance business.

In the second quarter, Hyundai Capital and Hyundai Capital America as the group's capital financial companies continue to provide finance for car sales. I'll now elaborate on the details.

First is Hyundai Capital. In the second quarter, despite slow domestic economic growth and heightened competition, we expanded group collaboration by releasing financial products aligned with new model launch and utilizing subvention for SUVs, Genesis and EVs. As a result, total financing volume, including installment and lease, increased 9.8% year-over-year.

The auto financing portion in our asset portfolio is maintained at a high level of 82%. With lease profit increased by 13.7% in the sequential quarter from a year ago, operating income went up by 3.7%, excluding and derivative effect.

As for financing, we have achieved 44.67% of our annual target. It includes a green bond issued in April and the sustainability-linked bond issued in July. Within our domestic bonds, around 25.8% were financed through ESG bonds. In the meantime, supported by the decrease in market interest rate and our efforts to reduce financing costs by repaying high interest loans, second quarter interest rate expenses went down by 2.9% with the delinquency rate -- while the delinquency rates are rising financial market, we maintained a rate below 1%.

However, as we preemptively manage risks by expanding provision reserves and increasing release bonds, that debt expenses rose which led to increase in operating expense by 3.8% year-over-year. As a result, operating income declined by 4.6%.

However, pretax income nonoperating income such equity gain of our subsidiaries by 3.5%. In the second quarter, Hyundai Capital will continue to reduce OpEx and financing costs, sell NPLs to secure profits. We also will continuously provide financial for the car sales of the group, while prepare for the business start of the Indonesian HQ and review establishment of overseas corporations and strategic regions for the group's auto sales. These activities will enable us to keep increasing the coverage of the global auto financing.

Next Phase is HCA. In the second quarter, led by strong order sales. Our customers' penetration rates continue to surge. Both installment and lease showed solid growth and overall product assets grew 20% from last year. Not only the asset side but also product interest rates went up, leading to second quarter operating income to hike by 4.3%.

We achieved 60.3% of the annual financing target by successfully issuing $3.5 billion bond in June and EUR 1.2 billion bond in the EU market first time ever. As such, we could secure liquidity and diversified financing portfolio based on the effective financing activities, the size of loans expanded and the second quarter interest expenses increased 22.3% year-over-year.

From the perspective of asset on my market concerns are prime customers taking up more than 85% of total customers contributed to a continuous decline in delinquency rate from the year end of 2024. Due to the rise of used car prices and active remarketing activities, the risk of residual value is also limited.

As asset soundness improved, bad debt expenses decreased by 17.3% year-over-year, and the total operating expenses slightly increased by 3.0% year-over-year and operating income went up by 26.9% year-over-year. In the second half, market uncertainties are expected to grow mainly due to the Paris policy.

However, Hyundai Capital America will launch financing programs aligned with the group sales and pricing strategies so that it can expand its role of providing auto financing and will respond to market changes flexibly by costly monitoring the market with Hyundai Motor company.

That is all for the presentation of finance segment. Thank you for your attention.

That is all for the presentation.

[Operator Instructions]. The first question will be provided by [ Hejian Lin ] from Citi Securities.

[Interpreted] I have 2 questions about the tariff impact. If today there was an announcement of the Japanese shares, which is 16% and going forward, for our company into U.S. tariff policy, is it going to be changed in terms of our pricing policy? Let's say, if we have our scenario for tariff at 25% versus 15% or lower, will there be any changes in our pricing in the U.S.?

Or rather regardless of the -- regardless of the tariffs changes based on incentives or the pricing, our pricing will be maintained, would that be on that is my first question.

And is it going to be changed your decision making? And how is that going to be going forward for your thought process?

And my second question is regarding impact by [indiscernible] impacted by the fourth quarter. So we assume that the current risk is maintained at the current number, then what is it going to be for the fourth quarter impact? And if -- can you give us the breakdown between the exports volume and also the component as well regarding the tariff impact?

[Interpreted] So there was an announcement yesterday that the tariff negotiation between Japan and the U.S. has concluded for the time being, and it was at the rate of 15%. And as an individual company, I understand the [indiscernible] it will be premature to comment on the 15% rate impact. So we could possibly expect -- we did possibly expect that the to be lower than 25%. But as the 2 countries negotiations are currently underway, it will be too premature.

And for your second question about the pricing impact, I would like to answer after the interpretation. Let me answer your second question about pricing policy. As we mentioned in the first quarter earnings results, we will take the stance of the best follower because we are not going to meet the pricing in the market. Rather, we will monitor the market situation closely and we will try our best to meet our customer's value. And as such, we are going to flexibly respond to the market.

Again, on your second question, we are not fully [indiscernible] in the second quarter. And you asked about the second half outlook for our impact by the tariff policy. And as you mentioned, we were impacted by the tariffs policy at about KRW 828 billion for the second quarter, and it is not of the full quarter results.

Again, in the second half compared to the second quarter and the third quarter and fourth quarter, we expect of course there will be bigger impact on our outlook. And it is premature again to precisely comment on the figures.

Also regarding the tariffs impact on components of our impact, there is a credit related policy on completed vehicles in the U.S. So if that is being considered that is going to be about 20% out of our total impact by the tariffs.

The following question will be presented by Eun Young Yim from Samsung Securities.

[Interpreted]. I'm Eun Young Yim of Samsung Securities. My first question is [indiscernible] explained our plan, the mitigation plan for the tariffs in its presentation. And when I look at the I see that Hyundai Motor Company is not going to have a price increases in the third quarter, meaning in September and October.

So I was wondering about the company's priority with it? Is it going to be the market share increase or the company's profitability in the U.S. market? That's my second part of the question -- sorry, it's my first part of the question.

And my second part of the question is that from the third quarter, if the tariffs of 25% remain in place, I believe the impact will be over KRW 1 trillion. I believe the company has satisfied a provision quite excessively. I was wondering in this transitional period is the provision going to be used as the buffer in this uncertain situation?

[Interpreted] To first answer your first part of the question. By September and October, you said we are not going to increase prices, but it's hard for us to tell you, definitely, they are going to increase prices or not at this point because we are going to take the fast follower approach.

And when or if ever we are going to increase prices as soon as something that we cannot tell you at the moment. But again, we are monitoring the market situations, and we'll adopt the right pricing strategies depending on different scenarios. And we -- at the same time, we are reviewing many ways to generate more revenue, including port installed options and freight prices. So we are looking into different options to improve our opportunities.

And also, on your question on our priority in the U.S. market whether our priority be the MS or profit. So our strategy is to achieve both targets of the MS as well as profitability. We'd like to defend our market share in the U.S. market at the same time, maintain the current level of profitability, which is, of course, challenging, but with the right strategy, we'll be able to achieve both.

And on the second part of your question regarding if the tariffs impact -- tariffs of 25% continues to remain in place, in the second half, there is going to be the impact over KRW 1 trillion, so your question regarding the sales warranty provision and in this transition, is it going to be used as a buffer.

So we set aside our provision reasonably according to our standards, and we review the amount of provision at the end of every quarter. So for now, we believe that there's no buffer in terms of the provision to be used to mitigate the tariff impact.

The following question will be presented by Kyung Jae Hwang from Merrill Lynch.

[Interpreted] This is Kyung Jae Hwang. You initially mentioned about the raw material cost [indiscernible] sourcing changes. If these actions are being executed when is it going to be happening? And is that going to be factored in the third quarter results? And I would like to know the timing of digitalization impact on our cost reduction, especially for the raw material costs and [indiscernible] is that going to need relocation for the pricing overall or is not going to be egments, including raw materials versus

And my second question is related with the comparison to our peers, especially the Japanese peers as we see the data released by the pricing level in May North American region has reduced by about 12%. This seems to be impacted by the tariff. And are we going to do respond to tariff impact with the same stand or are we going to respond afterwards? What are your plans on this in the third quarter?

[Interpreted] Thank you for your question. Your question about component sourcing changes or the raw material costs and processing cost reduction, we are actively engaged in these activities when you asked about the actual impact on the third quarter results. In terms of processing costs and efficient production on methodology, as you know, our operations and aim has been about many years.

So we are going to expand our methodology efficient production will be expanded to And that will mean, you can see the results in the third quarter results. However, though, in terms of components or say changes, it's not going to be achieved in the shorter term. So the portion of that impact will also be from the third quarter. However, we have forms of TFT for [indiscernible] changes.

So we have about 200 component suppliers that we collaborated [indiscernible] and we are going to review the [indiscernible] as we're going assess [indiscernible] if that's going to be better for us [indiscernible] some export or be locally sourced. So these kind of reviews have to be implemented in and as you know change suppliers may need some massive scale of analysis because our priority is and customers safety.

So our expectations in various items, including positive production, manufacturing and procurement, we need to take sufficient time to review on these items.

And you also mentioned our competitors on pricing policy or the pricing trend, especially of Japan, their price or SOP pricing to the North American region. And our stance or our reaction to this, I guess you mentioned and asked this question because there is a possibility for us to decrease the FOB price for the export.

However, FOB pricing changes is highly related with the transfer pricing issue, so we cannot touch that easily. And we have been actually reviewing on this agenda for many for a long time. So if we -- once we conclude our review and then we could officially communicate with the market. But as per now, it will be premature to comment on this. And I would like to refrain from commenting on this, especially to prevent any misunderstanding between the 2 countries.

Lastly, I would like to add another point because on the pricing and the amount within the scope, we have been adjusting FOB pricing, so it has been done annually, and that has been done regardless of the tariff, and we are doing it already.

The last question will be presented by [ Chris Roberts ] from [indiscernible].

I just asked, what is the net cash position in the auto business as of the end of the quarter, please? Because I know that that's the number you've given in the past.

This is Zayong Koo. The net cash position as of the last quarter is KRW 14.1 trillion [Foreign Language].

That concludes our second quarter 2025 earnings results conference call. Thank you for listening.

If you have any questions, please contact Hyundai Motor Company's IR Group. Thank you very much for your attention.