War costs ripple through Kia's P&L
Kia told investors that the ongoing conflict in the Middle East is lifting costs across the supply chain, from energy to metals, and eating into earnings. The company estimated the impact shaved roughly 600 billion won from third quarter operating profit, which totaled 1.82 trillion won and missed analyst expectations.
"The fallout from the war goes beyond the Middle East," Chief Financial Officer Seung-Jun Kim said on the earnings call. "Logistics expenses have also escalated significantly, and we expect this situation to persist into the fourth quarter."
Investors react and context from Hyundai
By Friday's close, Kia's shares were off 12%, a new low since June 2025, and are more than a fifth year to date. The pressure comes as automakers juggle higher costs and tougher competition, with Chinese makers including BYD Co. pushing harder into overseas markets.
What drove the earnings shortfall
Kia said it planned this year on the assumption the Middle East conflict would not extend into the third quarter. That call backfired. A stronger won also weighed on results, since much of Kia's revenue is generated overseas, and spending on promotions increased, according to Korea Investment & Securities Co. analyst Changho Kim.
Even so, Kia highlighted demand momentum outside China and Southeast Asia, helped by a wide lineup of hybrids and battery models. In the US, hybrid sales more than doubled, lifting Kia's market share to 5.8% for the quarter. In Western Europe, sales rose 18% on rising EV deliveries. Globally, retail sales of electrified vehicles jumped 47% and accounted for over one third of Kia's volume.
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EV economics and strategy
Battery models remain less profitable than combustion cars, and pricing pressure has intensified, with Tesla Inc. and China's brands setting the tone. Kia said it will keep its aggressive incentive strategy in Europe and other regions at least through next year, and will step up internal cost cuts to cushion the blow.
The company expects its electric cars to match the sticker prices of gasoline models sometime in 2027 to 2028. "When asked if pursuing EVs at the expense of profit is the right move, we saw the exact same trajectory with hybrids," Kim said. "We cannot survive in Europe or China without EVs, and we cannot walk away from the markets because of short-term margin erosion."
The bottom line: cost inflation, currency headwinds and price wars are squeezing margins, even as Kia gains share with hybrids and EVs. Keep an eye on incentives, currency moves and EV pricing timelines - they will shape how quickly those volumes translate into durable earnings in your portfolio.
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