After spinoff, Hyundai Mobis to focus on future mobility, M&As

Amid market concerns of Hyundai Mobis’ share value declining over a corporate governance reform drive that plans to spin off its lucrative after-sales business, the auto parts maker said Thursday it will invest heavily into future mobility technology and seek mergers and acquisitions opportunities overseas.

While setting its annual growth rate at 8 percent, the company said it will reach 44 trillion won ($40.7 billion) in sales by 2025 from the estimated 25 trillion won for this year.

A quarter of the company’s revenue will be generated from sales of Hyundai Mobis’ future mobility sector, including technologies needed for autonomous driving and connected cars, and 16 percent, or 7 trillion won, is to come from core auto components such as brakes, lighting and in-car entertainment, the company said in its first-ever mid- and long-term strategy. 

For the rest, more than half of its revenue will be attained from an investment division it plans to set up after spinning off its after-sales business and merging it with Hyundai Glovis, another company affiliated with Hyundai Motor Group.

Through its new investment arm, the company plans to actively engage in M&A, make an “intensive investment” into developing auto parts connected to information and communication technology to expand its growth.

To meet the goal, the company will secure auto parts orders worth $10 billion from its global clients in 2022, by increasing investment on development of technologies including radar, cameras and other sensor systems for self-driving vehicles.

Operations of the remaining businesses at Mobis will be supported by 6.5 trillion won in cash as well as profitable businesses such as core auto parts.

Calling it a “strategically selected” plan, Mobis will shift itself from a traditional car parts company to a technology-oriented company that leads future auto components such as self-driving platform and connectivity system.

Mobis announced the plan about a month after Hyundai Motor Group’s announcement of a large-scale corporate governance reform scheme on March 28.

The steel-to-auto conglomerate’s announcement baffled the widespread market calculation of the group launching a holding company. Instead, the group chose to position Mobis as a de facto holding firm while implementing a massive stock transaction by the controlling family. Mobis’ stock value has been dwindling on concerns of Mobis losing its cash cow after-service unit. The share price of the parts maker closed at 241,000 won on Thursday, a 1.23 percent decline from the previous trading day.

Having the parts-making affiliate at the peak of its governance structure was devised to deliberately push the groupwide M&A drive overseas.

“With the paradigm of auto industry shifting, calls on Hyundai Motor group to seek massive M&A have been growing,” an official said. “Hyundai Mobis will collaborate with (Hyundai’s) open innovation centers around the world to discover talented startups, and the company is also expected to bolster its M&A drive in joint ventures with Hyundai Motor and Kia Motors on a large scale,” he said.

The plan was devised to enhance shareholders’ value, not particularly at the demand of US activist hedge fund Elliott Management, led by Paul Singer, the company said.

Meanwhile, Hyundai Motor posted 22.4 trillion won in revenue in the first quarter, with its operating profit dropping 45.5 percent to 681 billion won. 

Despite high market demand for newly launched vehicles -- Kona, G70 and all new Santa Fe -- profit has dropped significantly largely on the strong won. 

The value of the Korean won strengthened 80 won per $1 from the same quarter last year, an official said. “When the value of Korean won grows 10 won, the carmaker generally loses 100 to 200 billion won in operating profit.”

By Cho Chung-un (christory@heraldcorp.com)