Hyundai Motor Stock

Ladies and gentlemen, thank you for attending this conference call. We will now begin Hyundai Motor Company's business results conference call for the third quarter of 2026. Once again, the presentation materials can be downloaded from the Financial Supervisory Service's electronic disclosure system at dart.fss.or.kr or from our IR website at www.hyundai.com.

Joining us at this conference call are Executive Vice President, Seung Jo Lee, the Head of Planning and Finance Division; Executive Vice President, Zayong Koo, the Head of IR Division; Vice President, [ Kyu Seok Ahn ] of Finance and Accounting Subdivision; Michael Yun, the Head of IR Group; and Vice President, Hyungseok Lee, Head of Planning and Finance Division of Hyundai Capital.

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

Now we will proceed with the presentation by Michael Yun, the Head of IR Group at Hyundai Motor Company.

Hello. This is Michael Yun, Head of IR Group. We will now begin Hyundai Motor Company's 2026 Q3 business results conference call. Today's presentation will be based on the 2026 Q3 business results presentation file currently posted on our website. This presentation includes quarterly highlights, sales performance and profit analysis. And for quarterly summarized cash flow statement and detailed regional sales breakdowns, please refer to the appendix.

First, Q3 highlights. Despite a year-over-year decline in industry demand in the U.S., retail sales grew 3.5% year-over-year, and our market share in the U.S. reached 6.6%, maintaining market share in the 6% range for 6 consecutive quarters. Supported by robust demand, hybrids accounted for 18.2% of our global sales. And in the U.S. market, in particular, the hybrid sales mix rose to 26.8%, continuing the growth momentum of hybrids.

As such, despite a decline in global demand amid growing geopolitical uncertainty, we recorded an operating profit margin of 5.9% in Q3, representing improved profitability year-over-year.

Next, the sales performance. In the third quarter of 2026, due to a decline in global industry demand and the impact of strikes, global wholesale decreased 11.3% year-over-year to 921,000 units and retail sales totaled 931,000 units, down 10.1% Y-o-Y.

Next, I will go over the details about our wholesales by key markets. In the U.S., industry demand declined 1.3% Y-o-Y, while our wholesale volume decreased 9.9% to 232,000 units. However, driven by strong sales led by hybrids and Genesis models, retail sales increased 3.5% Y-o-Y.

As for electrified vehicles, hybrid sales increased 18.4% Y-o-Y and accounted for 26.8% of total sales. Supported by such solid retail performance, our market share in the U.S. reached 6.6%, maintaining market share in the 6% range for 6 consecutive quarters.

In Europe, reflecting short-term impact from the transition of our lineup towards electrified vehicles, sales decreased by 18%, totaling 123,000 units. However, through continued optimization of our product mix, the share of SUV sales expanded by 6.5 percentage points Y-o-Y to 76%, while electrified vehicle sales accounted for 52.9% of sales. Looking ahead, we will pursue a sales recovery in the fourth quarter, supported by the full-scale rollout of the IONIQ 3 and the launch of key models.

In Korea, with fewer working days due to the Chuseok holiday and production disruptions caused by labor strikes, sales decreased by 27.2% Y-o-Y to 131,000 units. However, with solid demand continuing led by the Grandeur Hybrid, the hybrid sales mix expanded 3.7 percentage points to 29.4%. In the fourth quarter, we will pursue a sales recovery through production normalization and full-scale new model launches.

Next, I will explain the sales analysis by vehicle segment. Global SUV sales, including Genesis, totaled 571,000 units, accounting for [ 52% ] of total sales. Hybrid sales increased 3.8%, continuing their growth, but EV sales decreased 9.2% Y-o-Y and total electrified vehicle sales decreased 2.7% year-over-year to 245,540 units. This concludes the presentation on sales performance, and I will now continue on with the profits and losses.

This page summarizes our income statement. In the third quarter of 2026, revenue decreased by 3.4% Y-o-Y to KRW 45.1 trillion, while operating profit increased by 5.5% to KRW 2.7 trillion. In the Automotive division, due to production disruptions caused by labor strikes and lower sales under challenging market conditions, revenue decreased by 10% Y-o-Y. However, despite such lower sales supported by favorable foreign exchange and contingency measures, operating profit in the Automotive division increased by 24.8% Y-o-Y.

In the Finance division, revenue increased by 27.8%, driven by growth in the managed assets. Operating profit, however, declined 18.2% Y-o-Y due to higher operating expenses, including increased interest expenses. Net income decreased 24% to KRW 1.9 trillion.

Next is the quarterly revenue and operating income analysis. Revenue benefited from favorable FX rates contributing KRW 0.66 trillion, while decreased global wholesale resulted in a negative volume effect of KRW 3.44 trillion. Additionally, higher incentives resulted in a negative mix effect of KRW 0.69 trillion. Despite higher revenue from the finance division driven by growth in managed assets, total revenue decreased 3.4% Y-o-Y. Regarding operating profit, as shown on the slide, the negative volume and mix effects were offset by positive factors, including favorable FX effects and cost reduction from contingency measures. As a result, operating profit increased by 5.5% to KRW 2.7 trillion with an operating margin of 5.9%.

The last is the SG&A and net profit. Despite higher raw material costs, our Q3 cost of goods sold ratio decreased by 1.7 percentage points to 83.8%. SG&A decreased 19.2% to KRW 4.6 trillion, mainly due to lower sales warranty provisions resulting from the decrease in quarter end exchange rates. However, nonoperating income decreased by 71% Y-o-Y and net profit decreased by 24.2% to KRW 1.9 trillion.

This concludes the presentation of the 2026 Q3 business results. Thank you. Next, Executive Vice President, Seung Jo Lee, the Head of Planning and Finance Division, will assess the company's Q3 business results and update of the 2026 annual guidance.

Good afternoon. This is Seung Jo Lee, Executive Vice President and Head of Finance Division. I'll now present Hyundai Motor Company's 2026 Q3 business performance, Q3 dividend and the 2026 annual guidance update. Third quarter production well fell short of plan, scheduled summer vacation and the Chuseok holiday reduced the number of working days compared with the same period last year, and the strike further affected output.

Because of the production disruption caused by the fire at a parts supplier in the second quarter, our inventory was limited. We plan to recover volume through higher production in the third quarter, but the reduced working days and the strike impact delayed that recovery. As a result, global wholesale sales volume decreased 11% Y-o-Y to approximately 920,000 units. The lower volume led to a 3% Y-o-Y decline in revenue to approximately KRW 45.1 trillion.

Next, I would like to explain operating profit. Operating profit increased by approximately KRW 140 billion year-over-year to approximately KRW 2.7 trillion. This was achieved despite of higher fixed cost per unit due to lower production, rising raw material costs and increased incentives in key markets, which added pressure to profitability. Favorable foreign exchange effects, lower U.S. tariffs driven by differences in tariff rates and cost optimization activities offset these headwinds. The operating margin rose 0.5 percentage points to 5.9%. Due to domestic plant production disruption that continued from the second quarter through the third quarter, not only the domestic sales declined, but shipment volumes from exports to key markets also decreased.

In addition, sales volume in the Middle East continued to shrink. The impact of these global volume declines amounted to approximately KRW 1.1 trillion Y-o-Y. Also due to the prolonged Middle East conflict and inflationary pressures, we incurred a cost burden of approximately KRW 500 billion from higher raw material prices in the third quarter. To elaborate on raw material prices, as previously anticipated, major raw materials such as steel plate, aluminum and plastic peaked in the second quarter and have since turned down.

However, even though prices are trending lower, the magnitude of the earlier price increase was significant. And with the resolution of geopolitical issues delayed, spot prices have remained at high levels since the second quarter and continue to be elevated. When considering the time for raw material sourcing from production, shipment and sales before the impact takes lead time to be reflected in our financial results, the cost burden for the current quarter has increased due to past raw material price increases. For some raw materials, prices continue to rise due to expanding AI investment worldwide and ongoing geopolitical supply-demand issue. As a result, we expect the raw material cost burden to persist through the fourth quarter.

However, to offset this cost burden, we pursued cost optimization activities, which offset approximately KRW 500 billion of the cost increase, including higher raw material prices. In addition, although U.S. sales volume declined Y-o-Y as lower global sales resulted from the production disruption, the U.S. share of wholesale sales in the third quarter exceeded 25%. Hybrid sales volume and share both increased Y-o-Y and the mix effect in the third quarter was slightly positive compared with the same period last year.

With regard to foreign exchange, the Korean won has recently returned to a strengthening trend. However, the average exchange rate increased by KRW 38.1 Y-o-Y, resulting in a favorable average exchange rate effect of approximately KRW 500 billion.

In addition, as the decline in the period-end exchange rate expanded the foreign exchange effect on the warranty provision, both the average and period-end exchange rates recorded positive foreign exchange effects.

Next, I would like to discuss the third quarter dividends. Under the Value-Up Program announced in August 2024, we plan to pay a quarterly dividend of KRW 2,500 per share for both common and preferred shares for the third quarter. The record date for the third quarter dividend is November 30, and the dividend payout date is December 30.

Regarding our outlook for the fourth quarter, our utilization rate declined in the second and third quarter due to production disruptions at our domestic plants. As the vehicles produced during this period are sold in the fourth quarter, we expect the fixed cost burden per unit to increase. In addition, raw material prices remain elevated, and we expect the cost burden to continue in the fourth quarter. U.S. tariffs remain in effect and geopolitical risks persist. As a result, we expect the global business environment to remain challenging.

However, although the launch time of some models have been adjusted due to impact of strike and other factors, domestic plant production has returned to normal since September. In particular, we anticipate improved product mix driven by the growing share of hybrid vehicles, including expanded sales of key new models such as Avante, Tucson GV90 as well as GV80 Hybrid.

In addition, through continuous cost competitiveness, improvement initiatives and reduced incentives following new model launches, we plan to pursue company-wide efforts to minimize cost burden and improve profitability.

I'll now walk you through the update of the 2026 annual guidance update. We have revised our 2026 global wholesale target to 4 million units, down from our previous target of 4.1 million units. This adjustment reflects lower production in our domestic plants due to labor strikes and parts supply disruptions resulting in reduced export volumes to key markets as well as weaker sales in the Middle East and EMEA due to continued geopolitical uncertainty. In the fourth quarter, we plan to expand supply to major markets as domestic plant operations return to normal. We will also accelerate the production and sales of new models whose launches have been delayed.

For 2026, we are maintaining our consolidated revenue growth guidance at 1% to 2%, unchanged from our previous outlook. Lower global wholesale volumes and a weaker Korean won to USD exchange rate are expected to weigh on revenue growth. However, we expect part of this impact to be offset by solid demand in North America and continued growth in hybrid vehicles sales.

Now let me turn to our operating profit margin outlook. Since the announcement of our initial guidance at the beginning of the year, geopolitical uncertainties, including the U.S.-Iran conflict and resulting in higher raw material costs and increased cost pressures. In addition, as previously mentioned, a supplier fire in the second quarter and labor strike that continued into the third quarter led to production interruptions at our domestic plants. The decline in Korean won to USD exchange rate has also negatively impacted profitability.

Moreover, production disruptions delayed the mass production and launch schedule of certain new models. As a result, the anticipated volume and earnings contribution from new vehicle launches is now expected to materialize later than originally planned. Taking into account these changes in both internal and external operating environment, as well as our YTD performance and outlook for the remainder of the year, we have revised our 2026 operating margin guidance to 5.5% to 6.5%. We also note that recent guidance updates from major global automakers point to a similarly uncertain operating environment.

Although the degree of impact varies by company and region, many automakers are facing intensifying competition, including the growing presence of Chinese OEMs in the European market and some have revised their full year outlook downward to reflect these changes. This revision does not reflect any deterioration in our fundamental business competitiveness or earnings generating capabilities. Rather, it primarily reflects the need to incorporate in our full year outlook, the cumulative impact of factors largely outside our control. We remain confident in underlying strength of our business and our ability to deliver sustainable long-term value.

For the Automotive division, we have revised our investment plan to KRW 15 trillion, down from our previous target of KRW 17.8 trillion. While maintaining critical R&D investments to secure future competitiveness, we will review investment priorities and execution time to improve capital efficiency. As a result, we plan to optimize investment by approximately KRW 1.8 trillion, primarily through capital expenditure management. With respect to free cash flow, we intend to maintain our existing guidance range of negative KRW 1 trillion to positive KRW 0.5 trillion.

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

Although profitability faced challenges in the third quarter as external uncertainties persisted, including prolonged instability in the Middle East and rising interest rates, Hyundai Capital and Hyundai Capital America stably maintained a high-quality auto finance portfolio based on the close collaboration with the group.

Now let me walk through the details. First, Hyundai Capital. Leveraging our stable funding base, we continue to support group's vehicle sales financing and the share of automotive finance remained at 80% of total earnings assets in the third quarter. New vehicle financing declined due to an unfavorable operating environment, including lower vehicle deliveries, higher market interest rates and intensified competition in the auto finance market. However, we selectively expanded corporate finance to diversify our portfolio and secured additional profitability and earning assets grew 2.4% Y-o-Y.

In addition to new vehicle installment financing, our flagship product, we gradually expanded leasing and corporate finance, increasing our asset base. The resulting rise in interest income led to 2.8% increase in operating revenue. On the expense side, we offset much of the impact of rising interest rates by diversifying our funding portfolio. However, interest expense increased due to higher borrowings driven by asset growth.

Reflecting higher credit costs from proactive provisioning for corporate finance and larger provisions for liability in light of the softening used car market, operating expense rose 5.8% Y-o-Y. As a result, operating profit declined 26% and pretax profit declined 25%. Our Australian and Indonesian subsidiaries, which are at a relatively early stage of business are also gradually stabilizing their business foundation through continued asset growth and reduction in initial losses.

Moreover, we successfully launched our India finance subsidiary in August this year and began offering dealer financing. Going forward, we will expand our business scope in stages in line with local market conditions. In Hyundai Capital, we expanded its financing business into Hyundai Motor's key strategic markets and strengthen the global sales financing capabilities.

In the fourth quarter, financial market volatility and economic uncertainty are expected to persist due to geopolitical risks, rising interest rates and exchange rate fluctuations. Hyundai Capital will expand profitability through flexible funding and origination strategy tailored to market conditions and continued cost management.

Next is Hyundai Capital America. Despite challenging market conditions in the third quarter, including weakened U.S. auto consumer sentiment, HCA maintained a high penetration rate supported by the group's solid sales and earning assets grew 5% Y-o-Y.

Driven by stable asset growth and higher lease income from rising average vehicle selling prices, operating revenue increased 24%. Operating expenses increased 26%, mainly due to higher interest expense and lease depreciation as managed assets grew as well as higher losses on used car sales due to lower used car prices and return -- higher return rates.

Although the delinquency rate rose slightly with heightened macroeconomic uncertainty and slowdown in the U.S. economy, we are strictly managing a high-quality portfolio with prime customers at around 90%, reflecting the operating profit and pretax profit declined 22%. In the fourth quarter, an uncertain market environment is expected to continue due to U.S. inflationary pressure and persistently high interest rates.

However, despite recent interest rate volatility, U.S. capital markets continue to offer favorable funding conditions and HCA also successfully completed a $1.5 billion funding transaction last September. Backed by ample liquidity of $19 billion as of the end of September and a high-quality asset portfolio, HCA will respond flexibly to future market.

This will conclude the presentation of the financial business. Now we will take questions.

[Operator Instructions] The first question will be provided by Yongmin Kim from Yuanta Securities.

I'm Kim Yongmin from Yuanta Securities. My question is for Hyundai Capital. Usually, I think your sales is more -- has a seasonality. So as of 2024 Q4, you had shown meaningful growth quarter-on-quarter and your sales has been expanding continuously. However, your Q4 outlook for this year, I think it may be due to the big fluctuation of foreign exchange rates and also maybe the big sales of HCA. But how much impact is taken by the FX rate in your finance business to your sales and also your profit and losses? Because your Q3 numbers don't seem that good. Is it mostly because of the U.S.? Or I mean, what is the biggest accountability in terms of these results? Is it the car prices or maybe the interest rate?

Thank you for your question. So as far as I understand, I think you had 2 questions. First was regarding the profit and loss, why it has deteriorated in Q3 and also how the FX rate will be affecting the sales and the P&L for Q4? So to answer your first question, yes, our profitability has gone down for Q3. Was it because of the car prices or because of the interest? I think that was your question. I'm sorry. So I'll first answer regarding the Q4 impact of the FX rate. I think it pretty much follows the earnings of HMC. So we are pretty much in line with the way HMC is headed. As for the deterioration of P&L for Q3, we try to match our debt rate as well as our capital rate. And because the interest rate, the long-term interest rate has gone up, that has also resulted in the interest cost for us. So I think that was the biggest impact in these deteriorated results.

And also another part would be the used car rate. We have seen some losses in selling the cars that have been returned. And because of higher interest, the delinquency rate has also gone up, impacting our cost. Thank you.

And if I could add on to that, the prices haven't actually changed that much. So that's not really a factor impacting our sales. But overall, for Q3, the wholesale sales have not changed that much, maybe gone down a little bit. But I think the impact -- for the finance business, the impact was to do with the sales profit and also the delinquency rate and the delivery fee that gone up as Hyundai Capital has explained. And I believe that they have reflected that trend to the end of September numbers resulting in such numbers. Thank you.

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

I'm Eun Young Yim from Samsung Securities. I have 2 main questions. First, in the 2024 CEO Investor Day, you said that for the next 4 years, you're going to repurchase and cancellation the stocks. And I believe that amount is about KRW 700 billion and KRW 800 billion. And by next year, I just want to know if that policy is going to be into -- coming into reality.

And the second question is in the operating revenue, I saw that there was other area that showed an increase, which was about KRW 640 billion. So was that part of the cost reduction activities? So these would be the 2 main questions.

So to answer your first question, in 2024, we said that we're going to repurchase KRW 4 trillion amount of stock. But after 2024, the business environment changed. So one of the main reasons were because of the tariff. The tariff amounted up to KRW 4 trillion last year, and we believe it's going to be similar this year as well.

So if -- considering the changing business environment, we are not sure what the best solution would be. So we are taking that into consideration. So if we have and come up with a solution, we will make sure that we can communicate that with the stockholders.

So for the other aspect, I always talk about this every quarter. But every month, we are going through contingency measures, and we are coming up with optimization plans. So we are continuing the cost reduction activities. So -- and we are also going to continue the cost reduction activities throughout the fourth quarter, and we believe that amount is going to increase in that quarter as well.

The following question will be presented by Joon Sung Kim from Meritz Securities.

I just want to clarify the answer that you've given to the previous question with Samsung Securities because the other part of -- in Q3 for nonoperating P&L has gone down. So what's the exact reason for that? Is that the term and FX rate or some other reasons? So that I just want to clarify that.

As for myself, I have 2 questions. First is the shareholder return policy. Compared to '24 and '25, you had given 2 tracks that you're going to take. First is regarding the buyback of treasury stock. Second was through the dividend payout. As for the treasury stock, you bought back -- your plan was originally from KRW 1.5 trillion, which has been downsized to KRW 0.5 trillion, so about maybe 60% to 70% of your original plan. As for the dividend, it has been changed from originally KRW 3 trillion to KRW 2.5 trillion. So if the P&L continues to deteriorate in the future, will you still be holding more importance to dividend over the treasury stock buyback as you have shown in the previous years?

My second question is regarding your sales in the domestic market. With the Chinese makers now, the market share becoming over 10%, they're pretty much becoming a big threat. And during the CEO Investor Day, you said that you had a big plan for launching new vehicles and models. Currently, you're selling 50 models. And by 2030, you were saying that you're going to expand this number up to 100 models. However, as of next year and the oncoming years, big Chinese brands such as Zeekr or Chery, they will continue to come into the Korean market and become a big threat. So what is the response that you have in your pocket at the moment? I mean, what models do you have planned to launch at what price strategy? How are you planning to respond to these challenges?

If I could clarify on the repeated question. So you're saying that there was a big drop in our nonoperating profit and losses compared to the previous year. So I think there would be 2 big reasons for that. First is regarding our foreign exchange -- our foreign currency assets. With the FX rate dropping significantly in Q3, the exchange rate loss have become a reason for that. Secondly, because of our share-based evaluation -- the valuation, most -- many of the companies that we have stakes in, their performance in Q3 weren't that good. So that was reflected in the numbers.

And just to further clarify, just because I mentioned about the stakes that we have of our affiliates because of the equity method, that really doesn't take a big portion of the drop in these numbers, mostly it's due to FX rate. So the foreign exchange rate has dropped significantly. So that has come from the losses. The losses come from the FX rate.

Moving on to your second question for the shareholder return policy. We do understand that previously, the treasury share buyback and the dividend payout has been somewhat balanced. But as of this year, we needed to meet the TPR of 35%, while also giving a payout of KRW 2.6 trillion so far. So I believe you are wondering what our future direction is going to be, what our direction is going to be. As we had -- the Value-Up Program that we had announced in '24 during our CEO Investor Day, we promised to keep a TPR of 35% and to give a minimum of KRW 10,000 to our shareholders.

However, as the business environment has rapidly changed, we still do need to keep up to the promise that we have made. So we are still looking into how we can improve the value for our shareholders. And until that plan is finalized and communicated with our shareholders, we do believe that we have to keep the promise of KRW 10,000. So we know that there is a strong voice in the market for the buyback and the dividend ratio to be balanced out. And until we have come out with a concrete plan to do this, we will keep our ears open to listen to the voices of the market and the shareholders.

Moving on to your final question. We do know that the Chinese EVs and Tesla, they are really rapidly expanding their presence in the domestic market in terms of shares. And we have a lot of measures in place to defend our market share. We are not going to frequently fluctuate our prices as Tesla or other Chinese OEMs does, because we believe that measure will damage the residual value of our used cars as well as the value of our customers.

But we do have in our hands the competitiveness in terms of installment payments as Hyundai Capital had also just mentioned. Because this is our strong suit compared to other OEMs, we have significantly lowered the monthly installment pay for these cars that, in turn, also protects the residual value of our vehicles.

Another strong point that we have, which significantly differentiates us from our competitors, especially Chinese OEMs and Tesla is our service network, especially for EVs. In Korea, we have our service points maybe over 1,000 bases, whereas Tesla, we understand they only have 17. If you look at the number of registered vehicles per service centers, for us, it's about 290 vehicles per base, whereas Tesla, each service base is registered with about 1,200 units.

The lead time for repairs for us from when the car comes into the garage to leaving or fixed, it takes less than a week on average 5 days. For Tesla, it takes more than 2 weeks. In terms of procuring the parts, we target to get it within an hour and about 92% of the cars that come into our service centers get their parts within an hour, and within a day, 99%. Whereas Tesla, it takes over a week or 2.

You also mentioned about the new cars that are to be launched. So we have Avante as well as GV80 Hybrid coming up. And in Q4, we have Avante Hybrid, Tucson, GV90, G80 Hybrid and the Santa Fe facelift coming up as well. In December, I think it's planned to have the facelift and G90 as well. For North America, in Q4, we have Tucson GV80 Hybrid. GV90 will probably come out to the market earlier next year. As for Europe, we have IONIQ 3, which sales have already started. And in Q4, the flagship model there is Tucson. That's coming up. There's also Bayon. China, we have IONIQ V that's coming. In India, we have Bayon and IONIQ P. So we have the launch plan of new cars by each year, and there's a lot coming down the pipeline. And maybe you could say it's too much, but we do have a lot of cars that is on the waitlist.

For the prices, there are a lot of factors that are considered to decide a price, but we don't just look at the cost itself. We also look at how we can compete with the competitors in the market, as well as taking a presurvey to see how accepted it is acceptable by the consumers.

Thank you. Due to the time constraint, we will take one last question.

The last question will be presented by Yoonchul Shin from Kiwoom Securities.

My name is Shin Yoonchul from Kiwoom Securities. So I have 2 questions. First, your operating profit, despite it going up year-on-year, your nonoperating P&L, within that, it shows that the corporate tax is approximately KRW 1 trillion. So it's pretty high compared to the previous years. So is there a big reason as to why the corporate tax is that high? And do you have any plans to lower that down to balance that down in Q4?

Second question is regarding the IPO that Korean companies are doing in the overseas market. Because of regulations that ban duplicated listing, many of -- or some of the companies are now canceling their plans to go public. Hyundai Motors, you have experience in going public in the Indian market. So do you have any hits, I suppose, regarding this? I mean, is there something that you can do regarding -- so what is your opinion on the recent regulation regarding the ban?

All right. To answer your first question, there really isn't a big reason as to why the corporate tax has gone up. It's just because of the tax rate itself and a big change in the P&L mix. And we believe that in Q4, there's not going to be much change either.

Just to clarify, we don't have any other plans to go public of any of our affiliates in the overseas market. But if you are asking us about our position and our opinion on the recent policy change, I think it's a bit difficult for us to give an official opinion.

Thank you. This brings an end to the 2026 Q3 earnings call for Hyundai Motor Company. Thank you for your time.

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.]

[Foreign Language] Please welcome Jose Munoz, President and CEO of Hyundai Motor Company to the stage. [Foreign Language]

[Foreign Language] Good afternoon, and welcome to our 2026 CEO Investor Day. A special welcome to those watching online. We are very pleased to be hosting this year's CEO Investor Day here in our home market. Our commitment to this country has never been stronger, just like our economic impact here. Our founder, Chung Ju-yung, literally paved the way to today's Korea. We are very pleased to announce that we have a tentative agreement with our union. Thank you to our employees for their continued dedication throughout this process. Thank you for being here. We appreciate your interest, and we welcome the hard questions.

Last year, we told you what we were going to do. Today, we want to give you a status report and show you the exciting road ahead. So ladies and gentlemen, we are transitioning to a physical AI and technology company. We will be building, deploying, even financing robotics at scale. We are also advancing autonomous driving in-house and with partners. At the same time, we will never lose sight of delivering exceptional vehicles, beautifully designed cars that are highly quality, safe and with features that customers appreciate. Our car business helps fund the future, and we remain laser-focused on delivering our plan.

I say all time that it is a great time to be at Hyundai, and it is great to be in this industry. I've also said it is one of the most challenging times I've ever experienced. We draw inspiration from our founder to create opportunities from challenges. In the first half, we sold 2 million vehicles and delivered KRW 95.2 trillion in revenue, up nearly 3% and a record. Operating margin was 5.6%, and it improved by 0.3 points from the first quarter into the second. Hybrid sales reached 363,000 units, up 18%. And in the United States, we have now grown market share for 5 straight quarters, thanks to our team, dealers and partners in the U.S. Our market capitalization has averaged KRW 105 trillion this year, 2.3x last year's average. That is the market telling us it understands how we are transforming into a technology and physical AI company that also produces cars.

So let's look at where our revenue is derived. North America is about 1/3 of our volume. Korea, India and Europe are each in the mid-teens. The rest sits across Central and South America, the Middle East and Africa, Asia Pacific and China. No single market carries this company. In a year like this one, that matters a lot. In the United States, we set records in the first half with 509,000 wholesale units and 490,000 retail sales. Our hybrid mix rose 3 points. SUVs are now 62% of what we sell. Mix is where margin comes from, and ours is moving the right way.

Third in the world by volume, second in operating income for second year running. Profitability at this level is what enables us to invest in future products, future mobility, capacity expansion and physical AI. We are very proud of the evolution of our product portfolio. This is recognition that you cannot buy. 13 Top Safety Picks this year across 8 Hyundai models and 5 Genesis models.

Consumer Reports has us first for safety among premium brands and second among mainstream. The Palisade is 2026 North American Utility Vehicle of the Year. The IONIQ 6 N is 2026 World Performance Car. And in India, the Venue took Car of the Year. Thanks to our engineering teams in Namyang for developing cars that not only meet or exceed our high expectations for quality and safety, but that have features that delight our customers. We know our competition isn't standing still, especially some of the newer OEMs. You will see how we are developing new cars that are ready to compete today and tomorrow.

A word on our engagement at the World Cup. It is a significant investment, but also a significant return for us. This simply shows that we made the most out of our investment and had very high engagement, including more than 250,000 test drives in 44 countries, which we know drives purchase consideration. We are currently maintaining guidance for 2026 operating margin between 6.3% and 7.3%, and we are also very realistic about the impact of external factors in the short term. I am happy to announce for the first time that we see a path to an operating margin above 9% by 2030.

Our CFO will talk more about how we are increasing our target by maximizing synergies and better utilizing our supply chain. Our 2030 goals are intact, 5.55 million units of global sales by 2030 from 4.1 million. Electrified vehicles at 60% of the mix from 23% and global market share of 6% from 4.7%. How do we get to 6.3% to 7.3% for the year from 5.6% today? The answer is our second half product offensive, which you will see in a few minutes. Those of you who know me know I think we can do always more, but this is our guidance today.

Now let's step back and look at the opportunities and some of the technology bets that we have been making. Future mobility opportunities double our profit pool potential by 2035. The car business is still the largest piece. What changes is everything growing around it. Software and connectivity, aftersales, financing, on-demand mobility, robotics, very few companies sit across all of that.

This is the power of the group: Boston Dynamics and Robotics LAB, Motional and 42dot, AutoEver, Capital, Mobis, Glovis. We do not have to buy our way into the next decade. We are already living in it. The strategy is simple to say and hard to do, maximize the profit of the car business today throughout product efficiency and localization, then fund the future through the power of the group and our partnerships. SUVs, hybrids, performance and luxury pay for software, autonomy, physical AI and robotics. Our business mix shifts across the decade.

Now let me show you the proof. Scale starts with platforms, 4 of them carry almost everything we build from the i10 to the IONIQ 9, and we share them with the group. That gives us the ability to be local without being expensive. The Exter for India, HB20 for Central and South America, Bayon for Europe, Santa Cruz for North America, Grandeur for Korea, IONIQ V for China, the same platforms customized for the taste in each market, finding synergies where they make sense and making sure that our brand differentiation is clear to customers.

And we have the same discipline on powertrains with the most complete portfolio in this industry, gasoline engines from Kappa through Lambda, hybrids in both front and rear-wheel drive layouts, battery EVs from LFP through high-performance nickel chemistry, fuel cells and now extended range EVs or EREVs, which have so much potential and which I will come back to.

This is how we maintain flexibility. When demand shifts, and it has a great deal, IRA, conflict in the Middle East, we already have the product. I always tell the team, it is simple, give customers what they want. The lifeblood of this industry is product. I am happy to announce for the first time that between now and 2030, we will have more than 100 product launches around the world. That is 100 launches for new or refreshed vehicles for Hyundai and Genesis over the next 4 years, 58 in North America and 22 of those at Genesis. I'm excited to also announce for the first time that we will have 49 launches here in our home market of Korea. We will have 41 launches in Europe.

We've spoken about our ambitious plans in India and China, which you will see here as well. There are more than 18 new products and segments in which we don't compete today. This is very significant. And our first extended range EVs start production in early 2027. This is the most ambitious product offensive in our history.

Before we talk about 2030, look at the next 8 months for Hyundai, the all-new Elantra, which is the Avante in Korea, the brand-new IONIQ 3, the all-new Tucson and Tucson Hybrid, the first ever Santa Fe EREV, a brand-new A-SUV EV for India, an all-new global B-SUV and an all-new B-SUV for Europe. 7 Hyundai launches after a slower first half.

The Tucson is the seventh best-selling vehicle in the world with more than 10 million in global sales. The all-new Tucson and Tucson Hybrid arrive in the fourth quarter. And I want you to look carefully at what the hybrid does against the gasoline version. 245 horsepower, 27% more power and 43% more torque, faster to 100 kilometers an hour and 43% better fuel economy at the same time. The all-new Tucson Hybrid offers the best combination of performance and efficiency.

Extended range EVs arrive in early 2027, and we build them on multiple continents. The Santa Fe EREV provides more than 600 miles of range, about 1.6x what the gasoline Santa Fe delivers using a new high-performance battery and a 2-motor system that drives and accelerates like an EV. We already have prototypes of the new Santa Fe EREV on the line at our plant in Alabama.

For a customer who wants the EV experience without changing how they refuel, we now have an answer, and it's made in America. This is a good way to dimension future product opportunities and portfolio white space. There are 26 million units a year in segments where we have little or no coverage. That is 29% of the total industry. Pickups, light commercial vehicles and large SUVs are the biggest gaps in the markets that pay the best, 100 new launches, 18 new products and segments.

You have seen where we are going with Boulder, with IONIQ Earth and with Crater. Concepts are easy. What makes this different is that the body-on-frame architecture behind them is funded and in development. More than half of our growth from 4.1 million to 5.55 million comes from products we do not sell today, body-on-frame vehicles, a large van, SUVs and MPVs. We are simply taking what we already build to places where we currently do not sell.

The Exter and the Verna, both made in India, going to new markets on the back of an ecosystem we have spent 30 years building. And the rest is organic share growth, offset by portfolio rationalization that we're doing deliberately.

Look at how we shape, of this company, how we've changed. In 2020, more of our sales came from Korea and North America. By 2030, you can see a much more diversified regional sales map. Diversification of sales follows growth and opportunity. In this environment, it is also a hedge.

With new vehicles and new launches, we need more production. So we are adding 1.27 million units of capacity by 2030. We are adding 500,000 capacity in North America, 320,000 in India, 250,000 across our CKD sites, including Saudi Arabia, Vietnam and Algeria. 200,000 in Korea, including in our all-new EV plant in Ulsan. As I have said many times, we build where we sell. That was true before tariffs, and it will be true long after. Localization is the name of the game.

North America is where our hybrid story became a scale story. We have sold more than 1 million hybrids there. It started in 2011 with the Sonata Hybrid at 1% of our mix. This year, it is 25% with the Palisade Hybrid. And we'll continue with the all-new Tucson Hybrid and the first hybrid Genesis, the GV80. By 2030, we will offer more than 10 hybrid models, and hybrids will be half of what we sell in the region, built in Alabama and at the Metaplant in Georgia.

As I mentioned, our first extended range EV will be introduced in North America from the first half of 2027. Our supply chain is, of course, an essential part of our production ecosystem and another important aspect of localization. We will increase parts localization on the vehicles we build in the United States from 60% today to 80% by 2030. We have added more than 275 local suppliers since 2024, 1 supplier at a time and 1 part at a time.

Our mission has always been to bring value to our customers and offer affordable options. The Elantra SE brings people into our brand at under $23,000. 64% of those buyers when they come back, come back for a Tucson or something above it. More than half of our sales mix is now trims carrying a 20% premium or better, Limited, Calligraphy and XRT Pro, and we do it spending 13% less on incentives than the industry average, while closing 77% of the transaction price gap to our competitors. We are not buying that volume. Customers are choosing to pay more because the product is worth it.

Let's talk about Europe, one of the most competitive regions on the planet. We now cover 85% of that market with an electrified portfolio, and we are adding 5 new electrified models across SUVs and light commercial vehicles. We cover 100% of the B and C segments, which together are more than 60% of everything sold in Europe. This is full coverage where the volume sits. Our EV volume in Europe was 116,000 units last year, and it goes past 420,000. Every EV credit we earn protects the ICE and hybrid business alongside it.

The EV line does not stand alone in the market. We have 580,000 units of European capacity with room to grow and more than half of it will be battery electric, including the IONIQ 3. Local content is 85% in Czechia and 70% in Turkey. And our next generation of EVs takes 30% out of battery cost per kilowatt hour. Our sales and service footprint is more than 2,250 dealer outlets and service centers and 550 fleet business centers. Quality, reliability and service are the most important topics for fleet customers, so we service them where they need it. The IONIQ 3 goes on sale this month, built in Turkey, nearly 500 kilometers of range, a 61-kilowatt-hour battery and 29 minutes to charge from 10% to 80%. It is also the first vehicle in Europe with Pleos Connect and our Gleo voice assistant.

Now to India, one of our most important markets and where we also trade publicly. SUVs are 70% of what we sell there today. On that way on the way to the 80% by 2030. The Creta has been the best-selling midsized SUV in that market for 10 consecutive years. A brand-new compact SUV EV is coming, designed and localized for India. And electrified vehicles reach half of our mix there by 2030 against 30% for the market as a whole.

The opportunities in rural India are massive. Rural rises to 30% of our sales by 2030. That is often a family's first car ever, and they are choosing us. We reach 85% district coverage by 2030 with more than 1,600 service touch points today and 79% customer retention. Also, this is important, Hyundai Capital launches there this year. So those customers have better ways to finance.

India is now our second largest production base anywhere outside Korea. Our new Pune plant opens this year, taking us to over 1.1 million units of domestic capacity. Localized content goes from 84% today to more than 90% by 2030 with more than 1,400 local suppliers, 3/4 of them India-based and more than 1,300 local engineers. More than 60% of our vendors are clustered around Chennai.

We've been in India for 30 years learning what customers want and how to deliver in the most efficient way possible. India is also a factory for the world. Our cost position there is more than 15% better than our global baseline. 4 million vehicles have been exported to more than 70 destinations. Exports rise to as much as 30% of what we build there by 2030, with half of it going to the Middle East and Africa and 40% to Central and South America. The i10, Venue, and Exter are built there for the world and nowhere else.

Korea is the heart of our manufacturing operation. Ulsan is the largest automotive manufacturing operation in the world, 1.8 million units of capacity, more than 60% of it exported, 27,000 manufacturing employees and more than 4,700 local suppliers, 22 models coming down mixed powertrain lines. We are so grateful for the men and women at our facilities that build our vehicles with such precision and care.

Later in the year, we will open the Ulsan EV plant, and the first car down the line is the Genesis GV90. It is a software-defined factory with 108 advanced manufacturing tools, AI-enabled quality control and a manufacturing AI agent working alongside our people. From 2027, we modernize Ulsan plants 1 and 4. We continue to invest in our model plant. Hyundai Motor Group is investing KRW 125 trillion in Korea, the largest domestic investment in our history. KRW 50.5 trillion goes into future business, across AI, software-defined vehicles, electrification, robotics and hydrogen, including KRW 9 trillion for a dedicated hub, another KRW 38.5 trillion into research and development and KRW 36.2 trillion into our production facilities and the global business center.

Korea is our home spiritually and physically. Sometimes people ask me if we are a Korean company that's global or a global company that's Korean. The answer is yes. Our commitment to this country to creating high-paying jobs and investments that benefit the economy and giving back is literally part of our DNA. No matter how much we grow internationally, Hyundai's success is Korea's success, and Korea's success is Hyundai's success.

Now China, where we are working to turn around the business and using all the levers of the group. After volume and profit declines, we are implementing a new plan and tripling down on the world's largest and most competitive market. Profit is stabilizing now, and we are on the way back to more than 500,000 units by 2030. The plan has 3 parts: relaunch with the IONIQ brand, modernize the network to 484 dealers by 2030, moving into Tier 1 and Tier 2 cities with lighter retail formats and build with the best Chinese technology partners in China for China.

IONIQ V launched there earlier this year. More than 600 kilometers of range, a 27-inch panoramic display, an AI assistant and driver assistance tuned for Chinese roads, which are unlike anywhere else, developed in China, built in China. A B-SUV and a C-SUV follow in 2027, both offered as battery electric and extended range. Then a second phase with premium new energy vehicles on a full-stack software platform. We are tripling down. We have the scale, the engineering, the network and the power of the group to compete with anyone, anywhere, including in China.

The Middle East and Africa is our next frontier. The middle and upper class there passes 700 million people by 2035, and industry volume goes past 5 million units. We are already the #2 brand with 8.4% market share across more than 50 countries with 8 assembly plants and double-digit margins. Our new Saudi Arabia plant opens in December, and our facility in Algeria in 2027.

Let me talk about performance because it is a profitable business, not just an emotional one. Hyundai N reaches about 30% of the performance market today. By 2030, we take that past 60%. We will have more than 7 N variants across more than 40 markets, targeting 100,000 sales a year. And we are adding something between N and N Line, a new volume-high performance variant carrying over powertrain and parts from N. So a customer who wants that feeling every day on the way to work can have it without buying a track car.

N sold 20,000 units last year. N Line sold 161,000. This sits between them, and it is where the volume is. 5 N models on sale today and 12 N Line products, 2 World Performance Car winners in a row, the IONIQ 5 N and the IONIQ 6 N and the Elantra N carving its own racing line. We earned that credibility before we put it in showrooms, and it is now spreading across the whole Hyundai lineup.

Last week, we unveiled the brand-new Genesis GV90 for the first time. I said Korea has K-pop, K-beauty, K-drama. And now with our new flagship luxury SUV, we have K-luxury. Genesis reached 1 million cumulative sales in 7 years and 8 months. No luxury automotive brand has ever done it faster. And we are now in more than 24 markets. 10 years ago, Genesis was a promise. Since then, we've operated like a start-up that has the resources of a well-funded parent company.

This year alone, we have introduced the X Skorpio Concept; the G90 Wingback, our first dedicated dealerships in Europe and the U.K.; the Magma GT and GT3 Concepts; our debut in the World Endurance Championship, and our first Le Mans Racing, which is not just about marketing, win on Sunday, sell on Monday. You cannot hide anything at Le Mans. And what we're learning as part of the World Endurance circuit ends up in the cars our customers drive.

Ladies and gentlemen, please welcome for the first time ever, the Genesis GV80 Hybrid. We brought a new GV80 Hybrid to this event, especially for you. The all-new GV80 Hybrid launches next month. The first hybrid Genesis has ever built, 352 horsepower, roughly 25% better on both efficiency and power with a liquid-cooled hybrid battery. It drives like an EV, and it never asks the customer to plan their day around a charger. 10 years of Genesis, and it still looks like nothing else in the segment. Our Genesis Extended Range EV follows in early 2027 with more than 640 miles of range.

And this is the Magma GT Concept, the first pure sports car in the history of Genesis unveiled at Le Mans. A brand that wants to be taken seriously in luxury has to prove something on a racetrack first. Luxury is where the profit is, and it is growing. The global luxury market goes past 3 million units by 2031 at 10% compound growth, led by the United States, Europe and China. And within luxury vehicles, 25% of buyers express excitement towards electrified super SUVs, more than any segment by a wide margin. We see a lot of excitement for super SUVs, and we certainly saw a lot of enthusiasm for our brand-new GV90 last week in San Francisco. Have a look.

[Presentation]

Genesis GV90, our new luxury flagship, the Neolun Arch Gate coach doors with hidden B-pillars and our reductive design, swiveling seats, adaptive UX, an OLED cinematic display and the world's first roof airbag. Nobody has done that before. The GV90 is the ultimate expression of the brand and our Son-nim philosophy.

The new GV90 rounds out our existing lineup, 7 models or 15 counting derivatives across SUVs, hybrids and performance, 5 Top Safety Pick+ awards, first for safety among premium brands. That is not a coincidence. It is intentional. We build this brand where our customers already are.

The Genesis Invitational and the Scottish Open both extended to 2030. And we built the places to receive these cars. More than 270 retail locations globally by 2030, 50% more than today. Suji and the Genesis Lounge in Seoul, Almere in the Netherlands, Genesis Design California, and finally, Sydney. This year alone, Genesis launched in Italy, France, the Netherlands, Tunisia and Morocco with Spain in the fourth quarter. Austria, Denmark, Poland and Portugal follow in 2027, then India and Asia Pacific, more than 40 markets and 350,000 sales by 2030.

Now let's shift from luxury to future mobility. Autonomous driving has the potential to increase safety and convenience exponentially, and it also has incredible profit potential. Our AV Foundry business is enabling a scalable robotaxi deployment, starting with an AV-ready IONIQ 5. Our approach to autonomy includes in-house development with Motional, 42dot as well as partnerships. Motional is partnering with Uber to make driverless commercial rides available later this year on the Uber app.

I also want to give an update on our Waymo partnership. We have completed 9 months of public road testing so far. Deliveries of AV-ready IONIQ 5 to Waymo will begin later this year, fully built in the United States with a domestic supply chain. I am excited to announce that we are bringing this Waymo partnership to international markets. We are also entering the electric 3-wheeler segment with TVS Motor Company, designed by Hyundai, co-developed and produced by TVS, concept to prototype in under 24 months with very little capital from us. It opens a mass volume segment across Asia and Africa that we could not have reached alone.

Our partnership with Amazon continues to expand as well. Amazon Autos now covers 80% of the U.S. market through dealer enrollment, and 78% of those buyers are new to Hyundai. I'm happy to announce that we are expanding Amazon Autos to international markets as early as 2027. Alexa extends across our entire lineup with Genesis to follow. Together with AWS, we are scaling our AI work across software, autonomy and robotics.

And finally, we are exploring collaboration across optimized logistics, alternative energy and new customer experiences. As our Executive Chair said last week, we are becoming a physical AI company. We are moving faster than our competitors to produce and deploy robotics at scale. Ground zero for commercialization of robotics is our newly opened Boston Dynamics Robot Metaplant Application Center at HMGMA. It exists to collect data and validate robots against real factory conditions before they ever touch a production line. By the end of this year, we expand that site more than tenfold. Deployment at the metaplant in Georgia follows at scale in 2028 and global robotics deployment from 2030.

Let me be clear about our utilization of robots. Robots are in service of humans. They do the work that is difficult and repetitive. Ultimately, this will improve safety, quality and efficiency in our operations. Robots are not replacing humans. We are creating new categories of jobs like robot maintenance, all while maximizing human potential. And here is what makes this different from a research project. We are investing in a robotics manufacturing facility in the United States, starting production in 2028 with 30,000 units of annual capacity. It will be the world's first large-scale commercial robotics manufacturing facility. The first 25,000 commercial units are already confirmed, starting with the metaplant, and we are utilizing additional industrial and logistics partners.

Let me give you some dimensions on the opportunity. Boston Dynamics is now part of the group. We are building Spot and Stretch robots, and soon, we'll be mass-producing Atlas humanoid robots. We have existing potential distribution for selling robots through our dealer partners. And Hyundai Capital is exploring the feasibility to finance sales of robots.

Development, production, distribution, sales and finance for robotics. Ladies and gentlemen, this is the power of the group. All of that sits inside the largest commitment we have ever made in America, $26 billion between 2025 and 2028 and 25,000 new direct jobs, a new low-carbon steel mill in Louisiana, $5.8 billion and 2.7 million tons of capacity supporting 5,400 jobs directly and indirectly. U.S. robotics production starting in 2028 with 30,000 units of annual capacity. We will have more to say about the site soon.

As was reported last week, we need more production capacity. We are actively looking for opportunities. The decision is not yet final. What is final is the direction because we have committed to building more than 80% of what we sell in America in that country by 2030, and we cannot do that without more capacity. We began as a Korean company that is global. In the U.S., with thousands of people working with us and our ecosystem from Alabama and Georgia to Michigan and California, we have become a part of the fabric of America.

Now the data underneath all of this is what makes it work, and nobody understands that better than my colleague. Please welcome Min-Woo Park, Head of our Advanced Vehicle Platform Division.

[Interpreted] Hello, everyone. I'm Min-Woo Park, Head of AVP Division at Hyundai Motor Group and CEO of 42dot. Today, I would like to share the new competitive strength HMG is building for the AI era. Let us first consider the changes we are already experiencing.

You may remember when ChatGPT first emerged, it was remarkably natural in conversation, but at times, it also gave unexpected answers. But today, ChatGPT delivers an entirely different level of experience, more accurate, faster and far better at understanding context. So what has changed? Advances in AI models and computing were important. But more importantly, real-world usage was turned into data and fed back into AI improvement. YouTube works in much the same way. It learns what we watch and what we skip, then recommends more relevant content. The common thread is simple. The more it's used, the better it becomes. This is the data flywheel.

The basis of competition is now changing as well, who can capture more real-world experience, identify meaningful data within it, connect it more quickly to AI learning and turn it into better products. This will be the new basis of competition. And the automotive industry is no exception. Vehicles too must evolve from products whose capabilities are fixed at delivery into products that learn and improve through use.

In the past, vehicle performance, manufacturing scale and quality were at the center of competitiveness. Going forward, beyond these fundamental factors, what will matter is how quickly companies can accumulate data and connect it to AI learning and better services. Global leaders are also looking beyond individual vehicles or the mass production of specific technologies. They're focused on building data flywheels that continuously accumulate data, learn from it and improve performance.

Hyundai Motor Group's transition to SDVs is ultimately about securing data-driven competitiveness. To this end, over the past years, Hyundai Motor Group has built the core technologies and data infrastructure needed for this transition. Starting this year, we're beginning to collect data from production vehicles in real-world road conditions. We're now entering the next phase using that data to improve AI models and services.

Today, I will first discuss the technology foundation that enables the data flywheel. I will then explain how data is collected and translated into AI improvements in in-vehicle experience and AD. Finally, I will explain how Hyundai Motor Group's global sales scale and AI infrastructure will expand this system.

To make a data flywheel work, we need a technology foundation that can collect data, train on it and deploy improvements back to vehicles and services. In other words, everything from vehicle architecture to data, AI, validation and OTA must be connected as one system. Hyundai Motor Group has focused on building this foundation over the past years.

First, we developed CODA, our next-generation E&E architecture to transition vehicle computing and control to an SDV-based structure. This enables us to continuously improve software and functions through OTA updates after delivery. For the in-vehicle experience, we developed Pleos Connect, our next-generation infotainment system, and Gleo AI, an agentic AI for vehicles. We've begun deploying them in production vehicles.

In autonomous driving, AD, we are developing Atria AI, our proprietary end-to-end autonomous driving model. To support this, we're also standardizing AD sensor systems across the group and building a foundation to collect and use driving data in an integrated way. Together, these technologies and systems form the foundation of the data flywheel: data collection, learning, improving and deployment.

Let me now explain how data collected from actual cars leads to AI improvement. The starting point for in-vehicle AI is the customers' real-world experience, starting with the New Grandeur, Pleos Connect and Gleo AI are being deployed in production vehicles. As customers interact with their vehicles, data on vehicle use patterns, trends and the context in which AI services are used is beginning to accumulate.

We use data in anonymized form with customer consent. Agentic AI for vehicles is different from generative AI services. To provide the functions customers want without compromising safety, it must understand the vehicle's condition, driving situation, passenger intent, safety requirements and regulations as a whole. That level of understanding can only be achieved as diverse data accumulates over time.

It begins with customer behavior data showing which functions are used and how often. When this is combined with local data, like language, regional usage patterns and lifestyles, the AI can better understand local content. It can also improve service quality in each market and support the growth of local app ecosystem. When vehicle data, like driving speed, vehicle control status and sensor information is added, it becomes even more valuable by connecting customer behavior with real-world context. With this data, we can see which features customers use most, where they face inconvenience and even why they use certain functions in particular situations. This is how we gain a holistic understanding of vehicle conditions, driving situations, passenger intent and safety.

HMG continuously analyzes key performance metrics generated as customers use Gleo AI, which enables us to identify technical improvements to deliver faster and more accurate responses. Customer needs and improvement opportunities identified from data, either directly or indirectly, are reflected in enhancements to Gleo AI and the development of new Pleos Connect features in compliance with AI-based guidelines.

The results are then deployed back to vehicles through OTA. As this improved agentic AI is delivered back to customers, greater use generates more data. That data improves AI, and better services drive further customer use. The virtuous cycle is now beginning to operate in a mass production environment.

In autonomous driving, we're also building a system that collects data and learns through the same virtuous cycle. Autonomous driving performance depends on how effectively we collect and learn from rare, but challenging use cases. Hyundai Motor Group is, therefore, focused on securing this type of data.

First, based on the NVIDIA ecosystem, we are standardizing sensor systems across the group, which allows us to integrate and use data from HMC, Kia, 42dot and Motional under a consistent framework. Building on this foundation, we have established a data union with global partners like NVIDIA, enabling us to use large-scale driving data accumulated through diverse autonomous driving operations.

In addition, Atria AI will be deployed in the Gwangju AD pilot program that will begin later this year, which will allow us to directly collect critical [ SDV's ] data for further model improvement. Then in 2028, through our partnership with NVIDIA, we will introduce Level 2+ autonomous driving technology in our first production SDV and begin collecting driving data at scale.

Hyundai Motor Group will analyze all of this driving data through a dashboard. We will review recent issues and quantitative metrics to determine where performance improvements are needed. For example, we track a range of metrics like system stability across various scenarios and automated parking performance to monitor ongoing improvements. In particular, when critical issues or unusual cases are identified during the evaluation process, we use the data collected to enhance Atria AI and then verify how much the quantitative indicators have improved.

The improved Atria AI will be rolled out to customers, enabling more people to enjoy safer driving experiences. Ultimately, we aim to expand Atria AI across production vehicles from 2029 onwards and build a full AD lineup from L2+ to L4. So far, I've described a structure that captures data, identifies meaningful data and translates that data into better AI.

The important question now is how far we can scale it. When these technologies are integrated into a full-stack SDV product, a software and AI-centric technology stack will expand across products, fleets and compute infrastructure, creating new demand for computing capacity. This requires large-scale storage and computing infrastructure. This is where the flywheel begins to scale. Hyundai Motor Group's greatest strength in scaling this structure is our global sales volume and business network. We sell more than 7 million vehicles annually and operate in over 190 countries worldwide.

As SDV architecture and standardized sensor systems are deployed in more production vehicles, real-world experience and data from diverse countries and road conditions will grow rapidly. But the key is not simply selling more cars. What matters is how quickly we increase the share of vehicles that collect and use data through the same structure. Accordingly, starting in 2028, HMG aims to apply standardized sensor systems and AI computing platforms to mass-produced vehicles and continue expanding their adoption. Through this, by around 2033, we expect to surpass our competitors in cumulative data volume. Beyond scale, we also expect to build a differentiated competitive advantage in the quality and diversity of our data.

As data begins to grow, the infrastructure to process it and train on it must expand as well. Today, we flexibly secure the computing resources we need through both our current data center in Korea and external cloud partnerships. Then from 2029, as AD data begins to grow sharply, we plan to bring online a 100-megawatt AI data center in Saemangeum capable of housing more than 50,000 GPUs. This is about more than scale. It represents the completion of an independent infrastructure that can process and train on vast amounts of globally collected data in-house without relying on external clouds, while internalizing the full process, data collection, validation, deployment. So Hyundai Motor Group will organically connect data accumulated through its global manufacturing system, in-house AI and the infrastructure that supports it, strengthening our long-term data-driven competitiveness.

The competitiveness of the future mobility industry will be determined not by any single technology, but by the ability to collect data, learn from it and translate it into better customer experiences. Hyundai Motor Group is steadily building a data collection system based on our global fleet scale, in-house AI models and the robust infrastructure to support them.

Throughout this process, the values we consider most important are utility and reliability. We will use data to understand what customers truly need while delivering experiences that are safe and reliable enough for them to use with confidence.

These capabilities will not be limited to vehicles. Over time, they can provide a foundation for manufacturing, robotics and beyond. Of course, building a data flywheel and internalizing AI capabilities cannot be achieved overnight. It's a journey that requires cooperation with governments, local authorities and partners across industries as well as the recruitment of outstanding talent.

Guided by these principles, we will continue to advance our capabilities in data, AI and infrastructure. Thank you.

Next, Chang Hwan Kim -- EVP Chang Hwan Kim, Head of Electrification Energy Solutions Tech Unit, will speak about our battery technology and strategy.

[Interpreted] Good afternoon. I'm Chang Hwan Kim of Hyundai Motor Company. To offer new customer experience and safety, which are the utmost value, Hyundai Motor has always strived to internalize core technologies. In our own steadfast ways, innovations were achieved from the independent development of our hybrid systems to EV-dedicated E-GMP platform now running on roads around the world. Hyundai's drive towards electrification and mobility leadership has consistently advanced towards the future. And at the center of this transition to electrification is battery, and the key to deciding the future mobility's competitiveness is also the battery.

Last year, at CEO Investor Day, I have explained about Hyundai Motor's electrification technology and our acceleration strategy. Today, I would like to share the results of such efforts, how our proprietary technologies offer differentiated customer experience and next-level guaranteed safety in the EV era. Please allow me to introduce our battery technology excellence. Batteries are now no longer a power source that just stores energy. Hyundai Motor's battery innovation goal is very clear. It's to create a perfect customer experience and put safety first, a harmonious fusion of these 2 core values.

Our batteries are designed to have cell, system and BMS meshed together perfectly as a single intelligent organism, which raises the fundamental standard of EVs. Innovation in customer experience includes performance, price and durability, a perfect balance across these 3 dimensions. Our car's marketability is decided by its driving range and charging speeds, which we offer as convenience mobility experience to customers. With innovative optimized design, we secure price competitiveness that satisfies everyone. Furthermore, over the long span of vehicle ownership, the battery performance is maintained, thanks to our long-life technology, protecting the customers' asset value. The completion of such overwhelming performance and economic value can only show its true worth when the highest safety technology is secured, protecting our customers.

Hyundai Motor has secured the ultimate thermal propagation prevention technology, Thermal Runaway Protection, TRP in short, applicable to every battery form factor and chemistry. Through this, we wish to earn customers' trust being a safe EV. By fundamental innovation in technology that satisfies uncompromised performance, durability and safety, we intend to present a new standard unprecedented in the world.

The driving range, power output and charging speed that EV customers experience all begin with the performance of the battery cell. To extend the driving range, we must pack as much energy as possible into a small space, and to achieve high energy efficiency, we need to reduce battery weight. This requires high energy density. However, conventional batteries had limitations. Increasing energy density resulted in reduced power output and slower charging speeds, while boosting charging speed and output compromised energy density. Furthermore, high-performance EVs previously had no choice but to carry larger battery packs simply to increase power output.

Based on design capabilities built and internalized over a long period, Hyundai Motor has successfully developed a proprietary high-performance battery cell that simultaneously achieves both high energy density and high power output. This Hyundai in-house designed battery cell maintains the same energy density as the batteries currently used in our E-GMP platform EVs, yet delivers double the power output, reduces charging time by over 40% and significantly lowers internal resistance, thereby improving cooling performance. You can easily understand this differentiated performance from the diagram on the right.

Compared to the fast-charging LFP batteries with under 10-minute charging time recently announced by competitors, Hyundai Motor's independently developed battery maintains high energy density and power output. This delivers the key advantages of securing long driving ranges and generating high output even with a smaller battery pack. The compact and powerful battery independently designed by Hyundai Motor, which I just explained, will be installed in our EREV launching next year.

EREV, short for Extended Range EV, carries a smaller battery compared to standard EVs and generates additional electricity via an internal engine, enabling a driving range of over 900 kilometers. Generally, EV power output is proportional to the number of the passive battery cells, making it difficult for EREVs, which carry fewer batteries, to achieve equivalent performance level. However, the performance battery packed in Hyundai's EREV achieves equivalent power output and driving performances to IONIQ 5 EV even with less than 50% of battery capacity.

In this way, through our accumulated experience and R&D capabilities, Hyundai Motor Company's battery solution dramatically reduces vehicle weight to maximize energy efficiency, secures more spaces into our room and fully delivers the quiet yet dynamic driving experience unique to electric vehicles directly to our customers.

Recently, a vast majority of customers considering an EV place high priority on price. To accelerate EV mass adoption and offer a wider range of choices to customers, Hyundai Motor has previously utilized 2 battery chemistry types, high-nickel NCP (sic) [ NCM ] and LVP (sic) [ LFP ] , and is strategically introducing mid-nickel NCP (sic) [ NCM ] batteries into our lineup, offering both optimum performance and outstanding cost efficiency.

Our mid-nickel battery serves as a critical solution for securing price competitiveness. It offers a price from close LFP while delivering high energy density. In other words, within the same battery pack volume, a mid-nickel battery can load 100% energy capacity, whereas LFP can only load approximately 70%.

Compared to the fourth generation of high-nickel NCM battery currently used in IONIQ 5, it is 30% lower in cost. And in Europe, the price gap with LFP is within 10%. Therefore, to meet diverse customer needs moving forward, we will offer a tailor-made battery selection: high-nickel performance battery for customers seeking high performance and high charging, mid-nickel batteries for value-conscious customers and LFP batteries for entry-level segments and regions requiring ultra-low pricing.

The mass production vehicle integration of the mid-nickel battery will begin in the first half of next year. And from 2028 onwards, it will be widely adopted across volume models, playing a key role in securing the cost competitiveness of our EREVs.

Hyundai Motor is actively pursuing the development of next-generation battery technologies, including all-solid-state batteries alongside various chemistry-based solutions. This will serve as a core driving force to further strengthen our electrification mobility competitiveness moving forward. The field durability of Hyundai Motor's batteries developed in this manner is clearly proven by real-world driving data from customers across the globe.

Analyzing data from an IONIQ 5 that drove over 400,000 kilometers in Korea revealed that its battery state of health remains at an average of 95% compared to a brand-new cell. Furthermore, according to a survey by an European automotive media outlet in '26, analyzing the residual lifespan of 34 EV models aging over 2 years, our group ranked highest with 99% and 98%. Not resting on this world-class durability, we aim to advance the technologies to the next level. Accordingly, starting in 2028, we will apply various new BMS technologies currently under development by Hyundai to improve battery lifespan durability by more than 20%.

And for consistently differentiated lifespan, starting with GV90, we will put an application, and our cloud-connected BMS will constantly evolve based on vehicle big data. The outstanding performance, reasonable cost efficiency and unwavering durability I described earlier, at the center of all these remarkable technological achievements, lies Hyundai Motor's highest priority and absolute value, which is customer safety.

As shown in the video, when an abnormal behavior occurs in a single battery cell causing a short circuit, thermal propagation typically spreads to adjacent cells. The Thermal Runaway Protection Technology, developed by Hyundai Motor, which I am introducing today, ensures that even if a short circuit occurs in 1 cell, the heat will not propagate to neighboring cells.

Secured through over 60 patents and specialized know-how, Hyundai's proprietary TRP technology prevents thermal runaway across all cell form factors, whether prismatic or pouch. It is designed to allow customers to use EVs with total peace of mind, and this innovative safety technology operates meticulously in step-by-step stages. First, advanced BMS monitors cell status in real time and precisely diagnoses any anomalies. If abnormal cell behavior occurs, the system detects it and immediately notifies the customers to enable proactive measures.

Even if an unpredictable physical short circuit occurs and escalates into an event, the TRP applied battery controls high-temperature heat and smoke dispersion, fundamentally blocking thermal propagation to adjacent cells and concludes the event safely by discharging smoke for a short period. And this video demonstrates the technology in actual operation. As you can see, even when the cell experiences a short circuit and catches fire internally, the fire does not propagate to adjacent cells. It safely concludes after releasing smoke to the outside.

Hyundai's proprietary TRP technology was achieved through over hundreds of rigorous tests and design refinements by our researchers. Uncompromising when it comes to our customer safety, we established a safety technology test building within Namyang R&D in 2023, refining a perfection of a Thermal Runaway Protection Technology through thorough precise validation under real-world driving conditions. This unrivaled Thermal Runaway Protection Technology realized countless trials and iterations will first apply to Hyundai Motor's top-tier luxury flagship model, the Genesis GV90 announced last week.

To maximize safety value of our -- for our customers, we will rapidly expand this crucial and innovative protective feature across all vehicle classes and lineups. By continuously securing battery safety technology solutions across all -- across our entire vehicle lineup, Hyundai Motor will establish top-tier safety leadership in the global EV market.

Today, we shared Hyundai Motor's current battery technologies, our upcoming roadmap strategy and our future vision. From securing cost efficiency to drive EV democratization to market-leading unique performance and top-tier safety features that protect customers under any circumstances, Hyundai Motor's battery technology is continuously advancing towards the ultimate mobility era. The ultimate destination of all these remarkable technological achievements is people and the innovative experience that our customers will enjoy. Our innovation will not remain confined to current battery electric vehicles, but will boldly extend into all areas advancing human mobility, including upcoming robotics and diverse future mobility solutions.

Thank you very much for your time and attention.

Next, I'd like to invite the Executive Vice President, Scott Lee, Head of Finance Division, to present on our mid- to long-term profitability targets and shareholder return strategy.

[Interpreted] Hello, everyone. I'm Scott Lee, EVP and Head of the Finance Division. How did you find the earlier presentations by the CEO and other management members? I hope they provided a clear understanding of our strategy.

Let me now turn to the financial presentation, beginning with our mid- to long-term profitability targets. This year, we are operating amid exceptional uncertainty, including the war in Iran and supplier-related issues. It's a year that demands agile responses to unpredictable challenges. At the same time, we face a difficult business environment marked by competition and persistent geopolitical risks. Even so, we are delivering meaningful results in the U.S. and other global markets. Hybrid sales have exceeded the target, producing a record share of total sales.

For the remainder of the year, we will optimize our mix on the back of strong hybrid momentum and maximize the new product cycle for Avante, Tucson and GV80 Hybrid. Through these efforts, we remain focused on delivering the OP, operating margin guidance of 6.3% to 7.3% announced at the start of the year. That said, given the unpredictable macro environment and heightened business uncertainty, we will continue to communicate closely with the market on our future profitability direction.

Let me now turn to our mid- to long-term operating margin target. At last year's CEO Investor Day, considering changes, including tariffs, we presented a 2030 OP target of 8% to 9%. Today, supported by strong hybrid momentum, driven by our product competitiveness as well as our company-wide cost reduction roadmap, we're raising our 2030 OP target to 9% or higher.

As announced earlier, we're maintaining our target for electrified vehicles to account for 60% of total sales by 2030. But reflecting global demand and the competition, we have recalibrated our product mix. By expanding the share of hybrids, which generate above-average margins, we're not only raising our OP target, but also increasing total consolidated OP by 11%. A strengthened hybrid lineup is central to this improvement.

Last year, we launched the Palisade Hybrid, the first model equipped with our next-generation hybrid system. This year, as you can see beside the stage, we will begin with the GV80 Hybrid and expand our premium hybrid lineup under the Genesis brand. From there, we will roll out our next-generation hybrid system in full, building a hybrid lineup across all segments from affordable hybrids in smaller segments to premium hybrids in larger segments. This will enable us to pursue both volume growth and higher value growth while continuously improving hybrid profitability. In parallel, we will pursue company-wide cost reduction efforts, including material cost reductions and next-generation technologies to maximize profitability and achieve an OP margin of 9% or higher by 2030.

Let me now turn to our cost reduction roadmap, the second key driver of profitability improvement. To respond with resilience to changes in the internal and external business environment, including tariffs and intensifying competition and to secure future competitiveness, we've been pursuing a fundamental transformation of our cost structure since the beginning under strong company-wide leadership. Going beyond our ongoing cost reduction activities, it's a company-wide strategic cost roadmap built through the participation, of collaboration of every function.

Of course, quality remains a core strength on which we will never compromise, we will transform our cost structure comprehensively to achieve our strategic cost reduction targets without sacrificing quality. First, we will drive cost innovation across the full vehicle life cycle. In the past, cost reduction was focused on the new vehicle development stage. Going beyond, we will optimize cost across the entire life cycle, from development to post-launch.

At development, we will maximize commonization across manufacturing and design to secure cost competitiveness from the outset. For vehicles already in production, we will identify new cost innovation opportunities and roll out those improvements globally, improving the profitability of existing models. We will improve efficiency in production and service processes, establishing a life cycle-wide cost management system.

Beyond production process optimization, we will enhance manufacturing efficiency through strategic equipment upgrades. We'll also improve our E&E architecture by integrating in-vehicle controllers, reducing their number and expanding the scope of OTA updates. We will significantly improve serviceability through enhanced high-volt battery structure for EV and the application of new technologies. Through this life cycle cost innovation strategy, we will reduce our cost of sales ratio by 1.5 percentage points by 2030. At the same time, we will strengthen the cost competitiveness of both hybrids and EVs through structural cost improvements. We will introduce a diverse hybrid lineup from premium hybrids, including Genesis, to affordable hybrids optimized for each market, broadening our reach across segments and price points while supporting market share growth.

Beyond incremental component improvements, we will innovate the hybrid system itself. By 2030, we expect to reduce the additional material cost of hybridization relative to ICE by 20%. For EVs, we will build economies of scale by strengthening regionally optimized lineups, not only in advanced markets with models like IONIQ 3, our first EV designed for Europe, but also in emerging markets like India.

Also, we will expand the use of cost-effective batteries, including LFP and develop next-generation motors and inverters. Through PE system development, we aim to reduce EV material cost by 30% by 2030. By delivering on this material cost roadmap -- reduction roadmap, we aim to reduce our cost of sales ratio by a further 1 percentage point by 2030.

Finally, let me address our localization strategy. As discussed earlier, we're strengthening our localization strategy. We'll identify and expand local supplier networks, which will secure supply stability, reduce logistics costs and mitigate regulatory exposure. Also, by improving utilization at new plants to reduce fixed costs and by optimizing manufacturing specs and processes, this will improve the cost structures of major plants to HMC's best levels.

In emerging markets and other price-sensitive regions, we will optimize vehicle specs to meet local requirements.

We will also actively leverage the local operations of global suppliers that meet our quality standards, through this, all established optimal cost structures globally and regionally, reducing the cost of sales ratio by a further 0.5 percentage points by 2030. The 3 pillars I've outlined life cycle cost innovation, material cost reduction and localization will reduce our cost of sales ratio by 3 percentage points by 2030.

Let me now turn to our shareholder return policy. In 2023, we announced our long-term shareholder return policy. Since then, through the value program announced in 2024, we have continued to strengthen our efforts to enhance corporate value. So our total payout ratio has risen from 26.3% in 2021 to 35% in 2025.

Let me now outline our shareholder return plan for 2026. Even amid rapidly changing business conditions and growing macro uncertainty, we will continue to deliver on our previously announced shareholder return policy. First, we'll maintain our target of a TPR of at least 35%. To ensure clear communication with the market, we've changed the English term from TSR or total shareholder return to TPR or total payout ratio. This is a change in terminology only. Our target remains unchanged.

Second, to enhance the visibility and stability of dividends, we will maintain our minimum dividend of KRW 10,000 and our quarterly dividend policy. Third, we plan to cancel all treasury shares currently held except for the shares approved by the General Shareholders' Meeting for employee share-based compensation. We'll continue to deliver a consistent and predictable shareholder return policy.

This concludes the financial presentation. Please join me in welcoming CEO, Jose Munoz back to the stage.

Thank you, Scott. Everything you heard this afternoon rests on something no other automaker has. More than 70 group affiliates, about KRW 477 trillion of group revenue last year, 305,000 people, steel parts, logistics, finance, construction, robotics, when we decide to move, we can move the whole value chain. And we do it while keeping a promise that matters more to me than anything on these slides. We have donated $320 million for pediatric cancer research since 1998. Now expanding into India and Europe.

We have helped save more than 40,000 lives. More than 2 million trees planted across 13 countries, 945 tons of marine waste recycled into vehicle components and 100% renewable energy across our sites in North America, Europe and India.

Let me leave you with where we stand. Record revenue for the 2025 financial years and again in the first half. Market capitalization, 2.3x last year's average. Third in the world by volume; second, in profit. 5.55 million sales by 2030 with 60% electrified and margin above 9%. More than 100 launches, 1.27 million units of new capacity and a total payout ratio of 35% or better through 2027. And the products, the all-new Tucson, Santa Fe EREV, the GV80 hybrid, the brand-new GV90, and a new decade for Genesis. Our fundamentals are strong. Our strategy is clear. Our team is energized. And with your continued support, I am confident about what comes next. Thank you for your time, your trust and your partnership. It is a great time to be with Hyundai Motor Company. Thank you very much.

[Foreign Language] The Q&A session will follow shortly. We kindly ask you to remain seated while we prepare for the next session.

Good afternoon. I am the moderator for the Q&A session, Michael Yun of IR Group. We'll now begin the Q&A session of '26 CEO Investor Day. I would like to first begin by introducing the management that is participating in the Q&A session. First, the CEO and President, Jose Munoz; AVP President, Min-Woo Park; Head of GSO, Heung Soo Kim; Head of Global Business Operations, Hyung Lee; the CFO, Scott Lee; Head of Electrification and Energy Solutions, Chang Hwan Kim; and Head of IR Department, Zayong Koo.

Now we'll begin the Q&A session. [Operator Instructions] So I think we have a question on the right-hand side, [indiscernible] from JPMorgan.

I'm [indiscernible] of JPMorgan. I have 2 questions for you. First is in the U.S., you said that you are switching your portfolio to hybrid. And the uptime rate, however, despite -- because of that, the battery plant uptime rate will not be as high. And some competitors are selling these JVs due to this. So do you have any mid- to long-term strategy for your JVs for batteries?

Second question is for Min-Woo Park. The Atria AI, if you apply that to the vehicles, the electricity consumption is going to be pretty high. So in hybrid or ICE model, will there be restrictions? Or will it be regardless of the powertrain? Will AV be possible?

Concerning the strategy in the United States, as I said, it's very simple. So we need to provide the customers what they want, right? And given the current condition in terms of the regulation and then the customer demand and the particular situation in the U.S. market, definitely, hybrid is the biggest opportunity. Not only the total market is growing, but we are growing way more than that. So you've seen that in Q2 alone, about 70% of our growth in the hybrid models because they are highly competitive in terms of performance and in terms of cost.

And most importantly, for us, also in terms of profitability. So that's why one of the simple ways to enhance our business is to focus, increase capacity, launch new hybrid models and sell more. Concerning the battery, the JV, so you may have noticed that also unlike some of our key competitors, we have not stopped our investments on electrification. We have simply adjusted to the reality. And in HMGMA, for example, we are not only producing EVs, but we started production this year also on hybrid models.

So we are performing well on EVs. The performance of the IONIQ 5 is very strong. The key point to highlight there is if you noticed in my presentation, linked with the growth of additional business on robotaxis, we have signed a contract with Waymo, and we are going to start delivering IONIQ 5 in our plant in HMGMA, which obviously utilize the batteries that we built in our plants for robotaxis. These contracts are very significant, and I also announced today that we are increasing the scope to international markets. And all those units are going to be produced also in HMGMA. So I think this is the very simple answer to your question. Simply, we try to sell more on all domains, but especially robotaxis are the new -- is the new channel that is going to help a lot.

I'd like to answer your second question. I think that was a very sharp question. It's shifting to ICE, the AV computer, would it be well operated with stability compared to EV and hybrid, it could be a bit more complicated. That is true as well as in terms of control, the trajectory that is offered by AV to follow that, doing that in ICE and doing that in EV is very different. So for ICE models, the control optimization would be required for sure. And because of that -- but because of that, AV performance or stability, it won't be -- it won't have a big of a gap.

But in terms of key characteristics, for example, how fast it switches lanes or how it fastly runs at the back end, the control logic will have to be optimized as much as possible. In that sense, we have the control experiences accumulated with ICE engines, and that will be helpful to us. And the gap between EV and ICE, how that can be bridged with the controller would be a key aspect.

The experiences that have accumulated, if that is well used, I think it will be a good solution. And if I could elaborate further, the various -- the coolant for example, is going to be cooled by air or water, it's very different depending on the model, whether it's air cooled or water cooled. So for the ICE engine, there are also restrictions due to this and how that is going to be configured would be another key factor. And our team is currently working on that.

Next question, please. So Eun Young from Samsung Securities.

Hello. This is Eun Young from Samsung Securities. I have 2 questions. First, is on robotics. The other is about battery. So at this year's CEO, robotics feature was announced, we had high expectations. So in the previous shareholders meeting, robotics has now been included in your business scope. Like training center, production plans, Boston Dynamics such robotics business will be operated by your subsidiary, I guess, Physical AI requires a huge amount of resources. So if you just pursue with subsidiaries only, HMC only has auto business. So it's not going to lead to a lot of valuations a lot. So that's the reason behind this business structure. Can you elaborate on this?

And according to what we know Robotics LAB, will kick off production of portable robotics linked to revenues. Then Robotics LAB will be enough? Do you have this plan? And the other question is about battery. From next year, EREV will be mounted with battery that's going to be scaled up to robotics. And by 2030, is it that HMC will produce mount batteries? Or are you going to outsource that just like hybrid and how much internalization rate will you have in terms of cost reduction, material cost will be brought down by 1% you said and EV and hybrid will make significant contributions. Can you elaborate on this?

Thank you very much for your question. On the robotics, to tell you that, as you know, HMC is the main investors. So the HMC is not the company that is running the robotics, but is the company that is supporting thanks to the structure of the group, all the ecosystem development of robotics, and is supporting with finding the facilities, finding the utilization, the application and then providing to the robotics company, all the expertise that the robotic company today doesn't have like manufacturing expertise like safety, like quality, durability, reliability, cost management, mass production, et cetera.

So the structure is like this because the companies are, for the time being, separated companies. I don't know what the future will bring in that area. But then to add to those activities, I would like to invite our EVP in charge of robotics, HS Kim to give us additional information.

Yes. Thank you for your question. As mentioned by Mr. Munoz about the overall business structure. So only this year at the CES, we announced that robotics, overall robotics innovation will be implementing to our manufacturing. So it's intertwined with one another. And to that end, there are so many capabilities required, which will be done based on the cooperation with HMC, which will continue, which is on track. But as you asked, the business scope in the articles of incorporation to implement this, that does not really require the change of the articles of incorporation. As explained by Mr. Munoz, those are separate entities at the moment. So you could interpret that way.

And robotics spin-off possibility. You asked about it across the group, robotics dynamics -- Boston Dynamics, Stretch, Atlas, all these, they work on robotics and the products, as you know are turned into mobility and service robots. About the spin-off possibility. Yes things have not been decided. But if we make an internal decision, we are going to communicate that with the market.

Thank you for your question about battery. As you said the battery, which will be mounted to EREV, we're working on this. We do have our own internalized technology as you said about hybrid, design will be done by HMC and manufacturing will be done by HMETC. That model is now being implemented. So at HMC, we are an auto mobility service provider. So about battery -- it's not about in-house development. You said in terms of performance, cost, volume, safety, durability, there are requirements. If these requirements are met, when we make cars or robotics or future battery packs, if it's enough well on those fronts, yes, we could provide an easy answer, but our own performance level we need and cost levels to have enough competitiveness.

Of course, we want -- if we want to have differentiation in engineering, design and manufacturing, we need to have relevant capabilities. We'll need to make preparations in terms of technology and so on. You could interpret that way.

We'll take the next question. Okay. We have KB here.

I am Seong-Jin Kang from KB Securities. First is regarding the OP margin, your target, you said 9% by 2030, that's a very high target. So it seems very encouraging. But if you think about it, as of 2028, SDV goes into production as well as Atlas, and they will require high cost. While -- and SDV, in particular, do you think it will be able to transfer the cost to the price. As for Atlas, based on articles and meetings, I heard that it could be somewhere close to USD 300,000, USD 400,000. So do you think it will have enough productivity so that it doesn't impact profitability? Or will it negatively impacted into long-term profitability. So what is your outlook on that? That's my first question.

My second question is for the CEO. You mentioned that at the beginning, Hyundai Motor Group is a global Korean company. But one of our weakness is also our nationality because mobility and robotics industry was more of a security industry compared to automobile. And many of Hyundai sales come from global markets. So the higher the security firewall, I think it will be more difficult for Hyundai. So my questions regarding is on foreign resources and collaboration with foreign institutions. So do you think Boston Dynamics will be able to win investment from overseas partners. Is there any risk regarding security walls or tariff barriers, should I say, that prevents any investment from overseas institutions. Do you have any policies regarding this?

Do you want to talk about the margin and then I will complement?

[Foreign Language] Okay. I'll answer the first question. Last year, it was 8% to 9%. And this year, we have increased it to over 9%. And like I mentioned, from the beginning of the year with the EC as well as our management, including Jose, we have been very stringent in running down our cost, and that was reducing saving costs for the mass production vehicles. So we have found a lot of opportunities there. And as of this year, we are seeing some outcome, and that will continue until 2030, and that could lead to trillions won based on our estimation. That was reflected in this number.

And the transition to SDV, yes, the cost will go up. But compared to the increase in cost, will we be able to -- and we already have a value of the specification that the customers are willing to pay for, and that is higher than the cost itself. But what we are thinking about is if we reflect that fully into the price, the MSRP, the list price will go up, which means the accessibility will be not good. So we need to take that into consideration. And our President Min-Woo Park is currently considering on how that should be rationally applied.

As for Boston Dynamics, BD is not included in my consolidated sheet. With Atlas production, we don't know who with what stakes but it's not going to have a big impact on our profitability. With the mass production going in 2028 at the beginning, yes, the depreciation will be reflected. But for the initial volume, that can be digested within our group. So that can be taken within our group. And we think the profitability will improve quickly.

If I could -- so if you shift to SDV, the most important is the consolidation of the controllers. And to do that, many software will have to be internalized. What we are trying to pursue right now and what we think is critical is the validation of software and that will require most of it to be internalized and validated. And if there is any problem that arises, it will be much easier for us to control the issue. And because the control is integrated, the memories that have been dispersed before, let's say, for example, we used 100 mega because it was dispersed. But when it's consolidated, you can only use half that amount.

Increase in quality is really to do with recall risks, which could be lowered. So taking all that into consideration. Shifting to SDV might look like an increase in cost. However, in the end, it's to do with quality control and integration so that we use less memory to produce the same level of performance. And many of it will be internalized, which means we can come up with new cases when we just changed the brain. So with all that into account, it may seem the cost goes up at the beginning. But in the end, everything will be cheaper and more effective in the end.

So to complement all your questions. So, so far, I think our company has been able to increase the margin in many cases by increasing the value of the company, not only the technology but the brand -- and the brand, you have seen some of the key metrics that I presented are highly valued by the consumer, like the top Safety Pick+ like the consumer report. So they are at the very top not to mention the improvement in the quality, durability and reliability. So that is very important. Also through the presentation, I've expressed like we have the opportunity to expand our business into areas of the business, which are more profitable like body-on-frame like large SUV like luxury as well.

There is yet another dimension, which is very important that we are now working diligently to improve, which is synergies. So synergies within the group is a very important element. So -- and as we have been able to navigate situations which are complex in terms of the supply chain management, et cetera, we have in parallel been able to improve our mix, we have been able to also improve our trim and option in a way that, as you noticed, we have achieved all-time record revenue in the first half in a very challenging condition.

Another element which is very important to be confident on the margin is the regional mix. You see that we are having a plan to improve our performance in China, okay? That's very, very important. Another very important element is the increase in capacity in one of the highest margin regions in the world for us, which is the Middle East, right. And also the U.S.A. The U.S.A. is already the largest region and the largest profit contributor and is increasing, as you saw in our investment plan.

So when it comes to SDV technology and other technologies, I think the group has demonstrated the ability to, first and foremost, provide the value to the customers, so the features, the technology needs to be the best in the market. And then in parallel, try to work to make it affordable to make it competitive. And then also conveying to the market, transferring to the market, some of these incremental costs and more, if possible, to get to higher margins. So before tariffs, I think we were able to do more. So 9 is a very good positive number, but of course, we will strive to do even better if we can moving forward.

Next question, please.

[indiscernible] Securities. I have 2 questions. First, the biggest interest from the market is about humanoid. And on humanoid, Boston Dynamics has a certain amount of shares in terms of humanoids. Robotics America and subsidiary investment through this, how much exposure would you have humanoid business exposure. This is the question from the market. I think the exact figure of the share has not been fixed. But majority stake will be taken by your company or if there's anything you can share about this, please share if it's possible, if it's possible, until when you can share, please share this.

And the second question is about OP margin target, which will be 9% or higher, you said which is good. Exchange rate, tariffs, and raw material costs that impact moving margins significantly for the past 1.5 years have changed a lot. So by 2030 about those, what assumptions can you have?

With Boston Dynamics, you ask about RA, with Boston Dynamics and the possibility of majority stakeholder of a company, as you all know, Boston Dynamics has made a lot of announcements at CES and to enter the pathway there was announced. There are investments underway and as for RA global dedicated manufacturing facility that is. So with all those established, robotics ecosystem will be established, which is one of our strategies. So key components, systems how could they play -- how could auto OEMs can engage in that area, not just in upstream and downstream. So there are so many different dimensions to be considered.

Of course, at the very center of it is humanoid Atlas of Boston Dynamics. So how are they going to be deployed into our plans and data flywheel accumulated along the journey and the data that will be advanced. So things are now underway overall. So what I said was about -- so additional funding, I think the question was about additional funding possibility with all various options, we're now considering various options. At the moment, what will happen or at what time we're going to give a clear answer. Well, to answer that, it would be really difficult. But as I said, there are so many dimensions, not just a single line, about Boston Dynamics. So things are intertwined. So considering all those, the overall plan and the optimized scheme, considering all those. If there's anything we can share, we are going to share with the market.

About the second question OP target 9% and higher. When we set the target of 9% and higher, you ask about the plan tariffs. Based on the assumption, the tariff will be maintained at the same level, we set our target and for material costs in the first half, so there was an increase of raw material cost of KRW 600 billion, majority of them have been offset by cost reductions of about half. And in the back half, so raw materials have peaked in the first half and they are now going down now. So considering that, we made the assumptions. And as for exchange rate, it's made 1,400 on average. That was the assumption we made based on which by 2030, we set our profitability target.

Operation wise to add more -- we're working on our business, profitability is the most important we consider. First, by 2030, CEOs vision versus this year's volume, global volume, 5.55 million. If you achieve that, there could be contributions to be made. That's the big chunk. And thanks to the scale, we will be able to bring down costs. And the second one is that our profitability model will be improved further. In Genesis, it will be about 200,000 to 300,000 and above and penetrating the U.S. market will boost these sales based on the strong supply. So even in new markets, we are going to make entries. So body-on-frame will be launched, and there, we will also have additional profits.

On top of that, the U.S., localization 80% was mentioned. We're working on this, we're going to address the tariff regulation and through which we are going to localize the supply chain at the same time. So on those fronts, we'll be able to bring down costs.

Next question from Citi, Mr. Hwang.

I'm Hwang from Citi Securities. I have a question regarding areas of focus or resource allocation. And the next question regarding SDV rollout. Today, you said by 2030, the product launch plans were shown. And the impression that I get is wherever there is the sales, they will be incremental revenue increase. But no matter how big a company is, you cannot invest all your resources everywhere. So what I'm personally worried about is China. China, whether you look at the nature of the market or Europe, considering the strategy of using the Chinese suppliers to lower cost, they're not giving up on this market. And if we localize the -- we also require incremental efforts. And in theory, the Genesis, the margin might be good. But if you look into marketing, that might not the case. So are you really going to aggressively target China with high profile? Or is it going to be more low profile and spread and focus our resources to other regions. I mean, I think the latter may be better. So for what reason, do you have confidence that we will do well in China? What is your rationale on that.

Second, regarding SDV rollout, if you -- whether it be the base car or the SOP period compared to 2, 3 or 5 years ago, the timing has been delayed. Is this because of our partnership with NVIDIA, they have been incremental add-on on the time? Or was it because of a more complicated regulatory environment that wasn't easy? Or was there an actual bottleneck to the rollout? And if so, what was it? And how can that be rectified?

Very good question. let me address the China thing and then Min-Woo Park will address the SDV. So on China, everyone has different starting point. Our starting point is that we have capacity. That's number one. Also is that China is a very good export hub to many regions. And then when you put this together, a very realistic plan, which is not kind of just trying to do any extraordinary thing, but very realistic as a presenter is to achieve 500,000 sales, which would guarantee for us to overachieve breakeven point by executing very smart and pragmatic actions like strengthening our partnership with BAIC, but also utilizing local suppliers and technology companies.

For example, earlier this year, we announced the partnership with Momenta, right? So we are also in terms of autonomous driving technology. We are also partnering with CATL and we have more in the pipeline. So China has demonstrated the ability to develop good technology vehicles and for us to be in that market with a realistic target, it is also a way for us to get better in this market, which also allows us to be competitive, exporting to, for example, Latin America to Middle East to Southeast Asia and utilize the same technology in Europe. In our case, we already have the capacity. So it's not representing an incremental CapEx investment as we are doing in other regions.

The other answer to your question about the capital allocation, you've seen that the capital allocation is basically focus on high profit pool opportunities. So we made the analysis in terms of the product, and we've seen that close to 30% of the market, we were not competing and that market is highly profitable. The luxury market, the body-on-frame market, the high-performance market they're all high profit markets already for us. And then also the incremental capacity out of the 1.27 million incremental yearly capacity, the regions where we are investing the most are high margin. So it's a very clear capital allocation based on margin opportunity.

So namely United States, but also in the Middle East, in Saudi Arabia. Saudi Arabia, we are #2 is the highest profitable market for us and with the new plant that we are building expecting to end by the end of this year, we should be able to do more. So basically, everything that we do, we try to grow the business, but grow smartly and be efficient on our capital allocation, taking advantage in the power of the group.

India, for example, is a very profitable market for us, but also is extremely profitable for export markets. So our investment in Pune with 320,000 incremental units is allowing India to export 30% versus roughly 25% last year. This allows a region like the Middle East and then Central South America to take advantage of that product, which is very competitive and increase the volume and the margin. So that's, I hope, helps clarify how we are doing the capital allocation and why China is in the picture. Concerning SDV?

Yes. So regarding SDV rollout, I joined Hyundai on the 23rd of February. And the first thing I did was to identify what the current status was? And if there was anything that was against the direction that we need to take and to correct that. The first thing that I did was the selection on sensors. What sensors need to be selected for the future scalability of AV that provides no roadblocks. And what computing powers are required to support that. So after by joining Hyundai, I think that was the biggest change that had to be taken. And because of this change, it may have pushed back the schedule. It might seem like it pushed back the schedule.

And as I presented during the Kia CID, at the end of 2027, the SOP will be prepared and sales will go into 2028 and that schedule does not change. And the basic architecture software of SDV is active mounted on the car that is going to be prototyped and demonstrated in Guangzhou. This means that how feasible are we able to release within the time frame that we have promised. We are using the same software, the similar hardware, the integrated controllers in the Guangzhou pilot project. And through that project, we will make further improvement so that by the end of 2027, we would have made a lot of trials practiced with further refinement.

So the release of SDV will not be pushed back further. If there had been a delay in the past, how we -- it was probably due to preparing for the future scalability, and maybe those have been given an impression to the media that many changes are being made. But the integration of SDV, the software itself, basically, nothing has changed fundamentally. We are going as planned and SDV will be piloted at Guangzhou. And our developers using those cars while commuting to test AV. So SDV will not be pushed back further as you worry.

Next question, please.

This is [indiscernible] Investment Securities. Up until 2024, during the CIT presentations versus hybrid, hybrid's margin was lower, you said. But based on today's presentations, OP guidance has improved by 2030 based on hybrid proportion, which is now increasing you highlighted. And as of now, our competitiveness has improved, we understand. Based on the same car by PT, can you elaborate on different margins? Hybrid margins versus ICE? How could you interpret that? And based on which up until the 2030 guidance, how could you reach a conclusion? If you share that information, it would be much appreciated.

And the other question about robotics is about 300,000 production capacity was mentioned and the 300,000 robots, can you share the breakdown, will it be just second generation Atlas or some of them will be just 4 legs or logistics robots? You talked about EV a lot. So can you share such details, it would be much appreciated for analysis.

The first part of the question related to the hybrid. So you saw that we started hybrid with just very low mix with the Sonata Sedan hybrid, 1%. And then now we are around 25%. And then especially in the U.S., the hybrid mix is growing significantly. So normally, every month, we are growing in hybrid somewhere between 50% to 70%, which is quite remarkable. Obviously, the increase in the production of hybrid has brought economies of scale, but also our R&D colleagues have made significant improvements in terms of optimization of the hybrid system across all the elements like also EVP, Sang Hyun Kim has explained in terms of the battery. So -- and you may expect that the next generation of hybrids to have lower cost, higher efficiency, and therefore, allowing our company to be more and more competitive. This is not a coincidence. Obviously, when we look at our mix of products, I've said that by 2030, 60% of our vehicles are going to be electrified. And then within that, the hybrids are going to be, unless there are significant changes in the North American market is still very relevant.

So I think I could summarize by saying today, hybrid margin is the highest. ICE is the second, and we are making good progress on the EV. And then unlike some of our competitors, our EVs are profitable, especially when you consider the credits and the profit contribution that they allow us through precisely hybrid and ICE products. So we'll continue with that journey. And then now the mission is to ensure that we have also a so-called low-cost hybrid for emerging markets, where we see also a very clear trend with that technology. So maybe HS.

About the U.S. robotics production plants. You ask a question. So to answer that, going beyond just Atlas, other BD products will be produced at the plant. So that's our plan. In line with that to share more. RA plants, about RA plants internally a lot of manufacturing capabilities, our group has built and manufacturing solutions group has worked with BD based on all the capabilities, the so-called robot by robot. The most advanced robotics plants will be established under the plan. But the key here is flexibility and adaptability with our own internal business plan, the robotics market trends and the corresponding manufacturing and allocation plans are also underway, but the market itself is really dynamic. And that role is now improving further. Then are we going to produce that at 1 plant or with flexibility one by one? Would you have additional plans even including all those elements under the long-term plan, the starting point is 300,000 capable production.

Due to the lack of time, I think this will be our last question. Anybody with a question, please raise your hand. Okay. We have 2 people who are raising their hands.

I have 2 questions. First is regard -- for the CFO. As it is written on the screen by 2030, you'll be launching more than 100 models. Was it -- would it include facelift of existing models? If that is so how many models is actually increasing. The reason I'm asking this question is because developing a single model development fee will then be big and resulting in increasing costs. And despite that, you are saying that an OP margin of 9% is possible by 2030. And 5.55 million unit sales by 2030, it really will be a big contribution to Hyundai Motors. But as an analyst, if I try to be very conservative, maybe 4.5 million or 5 million. If you look -- if we estimate the revenue because you emphasize hybrid, how much of contribution would that make? And how much contribution would EV make? What will be the proportion of the contributional margin of each of the models? Because I want to identify by each powertrain, maybe roughly, if possible.

And my second question is also regarding SDV directed to Mr. Park, you mentioned and emphasize about the data flywheel. Within SDV, we have Pleos Connect. And what we are more interested in is actually Atria AI. And this is something that was somewhat designed by your predecessors. So we were curious on whether you would continue with his legacy, and it seems that is the case. Then why was sensor standardization not done so far? Because I know that it would have been very important within the group. So the fact that sensor standardization has not been done so far, even now, if you have to have high-quality data, you would need a standardized data. So if that is being done now, maybe it's a bit too late. And would -- will you be able to gain data from individual vehicles for personal use because for Guangzhou, you said that you're going to collect data from the pilot project. But compared to your competitors, I think you're pretty slow in gaining your data. And if NVIDIA is also involved, maybe the speed might go up, but how will you be able to open a very positive scenario because I think that's not going to be very possible in the near time.

Let me start with the product question and then I'll move to the CFO on the margin. You've seen 100 products roughly have shown 50% are brand new segments for us. And then the other 50% is existing ones. That's number one. Second one, I've shown also we are optimizing and then capitalizing on the optimized number of platforms. Out of the existing ones, we are consolidating platforms to be efficient and to optimize the cost and the performance. And in the new ones, if you look at it, the new platform that we are proposing introduction is the body-on-frame. So basically, would you've done your own calculation, we've done our own calculation, 5.55 million is the reasonable volume with the platforms and then with the expected synergies in the group and the capacity that we have that can bring the best return on investment in our particular case.

So the 100 is the value to each individual market and our dealers and the consumers. But obviously, the back office, we see differently 50-50. And within 50 existing utilization of existing platforms and powertrains. We've also included in this announcement, 19 new hybrids as the key driver of profitable growth. Maybe, Scott, do you want to elaborate more on margin.

[Foreign Language] Yes. So you talked about contribution margin, and we cannot open that by each model. However, as a big picture, the contribution of margin on average, the marginal profit is a little over 20%, maybe between 20% to 30%. And hybrid average is about 5% higher than that. Now regarding autonomous driving, and I will try to answer the question. So continuing the Atria AI, we are not using it as is, of course, because when I arrived, it's been 6 months since I joined Hyundai. And 6 months ago, the Atria AI architecture then and now is pretty different. But we didn't start from 0 base. And where we were was not that kind of a position. So we wanted to improve the architecture. So we are carrying over the Atria AI, but making improvements to it.

You also mentioned about the data for autonomous driving. I also want to apply better sensors to the cars that we sell right now. And when I see the YouTubers, they're asking why don't you have like the sensors, high-performance sensors [indiscernible]. And it actually takes a lot of time for these specifications to be reflected in the plan. So the car that applied with the standard sensor will be as of 2028. And as rolling change, we will be cascading the common sensor.

That means that with personal vehicles, the data will be collected and whether it be ADAS, the NVIDIA solution or whether it be our solution, in terms of AI model, the so-called edge corner data will be collected through the cars. And the pilot project to us we don't think of it as an opportunity to collect data. It's more to demonstrate the data flywheel from A to Z. It's a very good forcing function for us.

Of course, the data collected there will be pretty much meaningful. However, considering the production capacity that we have a year, which is a very large scale, it's not really comparable to that. So in conclusion, what I want to say is that the common sensor rollout will be done, and with the series product, the data that is collected through the sensors, we will be enhancing our AI model. And as I had mentioned in my presentation, as of 2028, the vehicles produced, then the rollout changes will be applied so that we can collect as much data with these vehicles with commonized sensors and computing.

I said 2033 in my presentation, but it's a bit of an uncertainty, but roughly around that time we believe that we'll be able to overcome their accumulated data by 2033. So we'll meet a breakeven and collect more than our competitors by then. Of course, our target and our reality might slightly change depending on the situation. But our goal is to put as much common sensors as much as possible, and we're all working together to get that done, more details and you would probably want more specific numbers, but that currently is in progress so we cannot open that to you, but we will come up with another venue where we can share that number.

Thank you. This will be the end of the Q&A session of 2026 CEO Investor Day. The mid- to long-term strategy of HMC will be consistently updated so that it is communicated not only through CEO Investor Day, but other various platforms. Thank you for your time today.

Hello. This is Michael Yun, Head of IR Group. Welcome, everyone, to Hyundai Motor Company's 2026 Q2 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 2026 Q2 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 is Q2 highlights. Despite stagnant industry demand in the U.S., one of our key markets, our market share in the U.S. rose by 0.2 percentage points year-over-year to 6.3%, maintaining market share in the 6% range for the 5 consecutive quarters. In response to strong hybrid demand, the global hybrid sales reached a record quarterly high of 188,000 units and the share of global hybrid sales recorded an all-time high of 18.9%. In the U.S. market, the share of hybrid sales recorded 26.2%, continuing its growth momentum. Finally, despite unfavorable conditions with demand slowdown, market share growth in major markets and robust hybrid sales led to the highest second quarter revenue on record.

Next is the sales performance. In the second quarter of 2026, global wholesale sales totaled 992,000 units, down 6.9% year-over-year, primarily due to a decline in global industry demand and parts supply issues. Retail sales totaled 999,000 units, representing a 4.2% decrease from the previous year.

Next, I will go over details about our wholesales by key markets. In the U.S. market, sales increased 0.9% year-over-year, totaling 265,000 units, while industry demand remained largely flat with a 0.5% increase from the previous year. Demand for electrified vehicles supported by factors such as elevated fuel prices continued to drive sales. Electrified vehicle sales increased 2.5% year-over-year, reaching 81,000 units. Hybrid sales accounted for a record high 26.2% of total sales. Amid weaker consumer sentiment caused by uncertainties surrounding interest rate cuts and persistently high inflation, demand concentrated on practical vehicle segments such as midsized sedans, resulting in sedan sales increasing 9.6% Y-o-Y.

In Europe, sales decreased by 10.9% Y-o-Y, totaling 144,000 units. Optimization of mix drove SUV sales to rise 0.4% Y-o-Y and hybrid sales increased by 17.8%. Despite challenging sales environment, mix improvement was achieved by focusing on high-margin vehicles. Strong hybrid sales continued in Europe as well, driving electrified vehicle sales up 3.7% Y-o-Y to 75,000 units. To respond to growing demand for electrified vehicles, we plan to strengthen our EV lineup and further expand sales momentum in the market through the launch of the all-new IONIQ 3 in the second half of the year.

In the domestic market, sales decreased by 16.4% Y-o-Y to 158,000 units due to production disruptions caused by a fire at a major part suppliers. However, EV sales rose 30.8% Y-o-Y, driven by government incentives for eco-friendly vehicles and IONIQ lineup. However, due in part to hybrid supply constraints, total electrified vehicle sales declined 7% Y-o-Y to 64,000 units. In the second half of the year, with the rollout of key new models, including the Grandeur Hybrid, Avanta Hybrid, Tucson Hybrid and Genesis Hybrid models, we plan to restore sales momentum and further expand electrified vehicle sales.

Next, I will explain the sales analysis by vehicle types. Global SUV sales, including Genesis, totaled 611,000 units, accounting for 61.6% of total sales. While EV sales declined 12.7% Y-o-Y, hybrid vehicles sales increased 11.3%, continuing their strong growth trajectory and driving overall sales performance. As a result, total electrified vehicle sales rose 1.7% from the previous year to 266,000 units.

This concludes the discussion on sales, and I will now provide an explanation regarding profits and losses. First is income statement. Consolidated revenue increased by 1.9% Y-o-Y to KRW 49.2 trillion, and operating income decreased by 20.8% Y-o-Y to KRW 2.9 trillion. In the Automotive division, revenue decreased by 2.1% Y-o-Y due to lower sales caused by the global demand slowdown and disruptions in part supply. Operating profit decreased by 11.5% Y-o-Y due to higher incentives and unfavorable mix resulting from production disruptions of high-margin models.

Revenue from the Finance division increased by 15.7% Y-o-Y and operating profit increased by 16.2%, driven by a continued high penetration rate and growth in managed assets in the U.S. market. Net income decreased by 11.1% Y-o-Y to KRW 2.9 trillion as a result of operating profit decline.

Next is quarterly revenue and operating income analysis. Revenue benefited from favorable exchange rate contributing KRW 2.7 trillion, while decreased global wholesales resulted in a negative volume effect of KRW 2.25 trillion. Additionally, rising incentives resulted in a negative mix effect of KRW 1.01 trillion. Combined with growth in the Financial segment, total revenue rose 1.9% Y-o-Y.

Despite the record high second quarter revenue, positive foreign exchange impact was reduced to KRW 238 billion due to higher quarter end exchange rates relative to the quarterly average exchange rate. In addition, sales decrease in Middle East region and sales disruptions caused by parts supply issues resulted in a negative volume effect of KRW 542 billion.

Regarding the mix effect, despite favorable contributions from increased sales of high-margin models, including hybrids, a negative impact of KRW 569.9 billion was recorded due to higher incentive spending resulting from intensified competition in major markets. As unfavorable business conditions and intensified market competition negatively impacted our profitability, operating profit decreased by 20.8% Y-o-Y to KRW 2.8 trillion, resulting in an operating profit margin of 5.8%.

The last part is SG&A and net profit. Our Q2 cost of goods sold ratio recorded 82.2%, an increase of 3.3 percentage Y-o-Y due to the rising material costs. SG&A recorded KRW 5.9 trillion, a 6.8% increase compared to last year due to higher sales warranty provisions resulting from the increase in quarter end exchange rates. Finally, our net profit decreased by 11.1% to KRW 2.9 trillion as a result of operating profit decline.

This concludes the end of the presentation of the 2026 Q2 business results. Thank you for listening.

Next, Executive Vice President, Seung Jo Lee, the Head of Planning and Finance Division, will assess the company's business results in Q2.

Good afternoon. This is Seung Jo Lee, Executive Vice President and Head of Finance Division. I will now present Hyundai Motor Company's 2026 Q2 business performance as well as details regarding the Q2 dividend. In the second quarter, unfavorable business conditions persisted due to geopolitical issues, U.S. tariffs and inflation. Production disruptions caused by component supply issues from both domestic and overseas suppliers, combined with decreased sales in the Middle East region, resulted in global wholesale volume declining 6.9% Y-o-Y to approximately 992,000.

Despite these challenges, we achieved continued top line growth driven by robust sales in the North American market and record high hybrid vehicle sales. Additionally, favorable FX effect from the continued weakness of the Korean won contributed to a record high quarter revenue of KRW 49.2 trillion, representing 1.9% growth Y-o-Y.

Next is our operating profit. Production disruptions occurred primarily in Genesis due to component supply issues from suppliers. This not only resulted in lower sales volumes, but also negatively impacted the product mix. Combined with increased incentive spending to respond to intensified competition in major markets and clear inventory of aging models ahead of new model launches, operating profit reached approximately KRW 2.85 trillion. The operating profit margin declined 1.7 percentage point Y-o-Y to 5.8%.

Our domestic plant, which is the largest facility among all global plants experienced a supply interruption of engine valves due to a fire at our component supplier. This resulted in production delays affecting Hyundai's major volume models and Genesis vehicles. To minimize production losses, we made efforts to shift production to alternative vehicle models. By May, we successfully completed the development and application of substitute engine valves across all products. However, since most of the affected vehicle models were high-margin vehicles, the product mix deteriorated in the second quarter, which had a negative impact on operating profit. Additionally, a fire at Hyundai Mobis India plant caused temporary production disruptions at our HMI plant.

To minimize the impact of these domestic and international production disruptions, we maximized the use of existing inventory in the second quarter, and we expect to recover these losses in the second half through expanded production.

Due to the Middle East conflict and inflationary pressures, prices of key raw materials such as plastics have risen sharply. In the second quarter, raw material costs increased by around KRW 400 billion. However, to offset this impact, we have implemented company-wide material cost reduction initiatives, successfully offsetting approximately 50% of the negative impact from raw material price increases. We continue to pursue these cost reduction efforts as major raw material prices have begun to trend downward in the second half of the year, we anticipate that the negative impact on product profitability from rising raw material costs will be further reduced in the second half.

In addition, I will explain the major factors affecting our financial results, including incentives and currency exchange effects. First, we expanded incentives in response to the evolution of the U.S. IRA and the aggressive market entry and sales expansion of Chinese electric vehicles in Europe. Additionally, ahead of new model launches in the second half, we executed incentives to clear inventory of aging models, which resulted in expanded incentive spending in the second quarter. However, as major new models launched in the second half, we are targeting a normalization of incentive spending in the second half.

Finally, regarding currency exchange rates, as the Korean won continued to weaken, the average exchange rate increased compared to the same period last year, resulting in a favorable currency exchange effect. However, the quarter end exchange rate also increased, which created a negative currency exchange effect on credit provisions, offsetting a significant portion of the positive effect.

In this manner, HMC has endured an increasingly challenging business environment, including unfavorable operating conditions across the entire automotive industry and temporary component supply disruptions. Based on our diversified powertrain and regional portfolios, we have demonstrated rapid and flexible responsiveness to changes in internal and external business environment to minimize negative impacts. As a result, alongside revenue growth, our profitability has continued to improve following the turnaround that began in the first quarter, and we have recorded relatively favorable performance in the second quarter.

We aim to continue improving our performance in the second half and demonstrate our market competitiveness. The component supply issues mentioned earlier have normalized at this point, and we plan to recover the production losses from the first half, we expanded production in the second half. Additionally, in the second half, we have scheduled the launch of the Hyundai Grandeur facelift hybrid sales and the Avante full model change as well as new Genesis models.

Through these new model launches and sales, we expect profitability recovery to accelerate in the second half of the year. To this end, we are maintaining our annual operating profit margin guidance of 6.3% to 7.3% without downward revision from our initial guidance at the beginning of the year.

Next, I will explain the second quarter dividend. Based on the value-up program announced in August 2024, we plan to implement a quarterly dividend of KRW 2,500 per share for both common and preferred shares in the second quarter. The record date for the second quarter dividend is August 31, and the payment date is September 30.

Geopolitical issues intensifying competition and tariff policies continue to create a challenging business environment and global automotive companies are facing unprecedented difficulties. Nevertheless, our company will pursue recovery of first half production losses through expanded production alongside the full-scale launch of new models in the second half and through company-wide efforts, including active implementation of contingency plans, we will achieve the annual guidance presented at the beginning of the year and strive to demonstrate our fundamentals in the global market.

Thank you for your attention.

Next, Vice President, Hyungseok Lee, the Head of Planning and Finance Division of Hyundai Capital, will assess the Q2 results for the finance business.

Good afternoon. I'm Hyungseok Lee, Head of Finance at Hyundai Capital. I'll present Finance business' second quarter 2026 results and outlook for the second half. Despite continued external challenges in the second quarter, including prolonged geopolitical risks stemming from the Iran conflict and increased exchange rate volatility in both domestic and global markets, Hyundai Capital and Hyundai Capital America maintained stable performance. This was supported by close collaboration with the group and a strong captive asset portfolio.

Let me now walk you through the results of each company, starting with Hyundai Capital. Leveraging strong credit profile and funding competitiveness, we continue to support the group's vehicle sales through financing programs. As a result, the share of the automotive finance maintained 81% of total earning assets in the second quarter. Despite intensified market competition, earning assets grew 3.8% Y-o-Y, driven by the expansion of dedicated EV financial products and joint sales promotions with the OEMs. Despite external uncertainties, interest income increased on the back of the solid asset growth. However, lower gains from the sale of nonperforming loans resulted in operating revenue remaining largely flat Y-o-Y.

On the expense side, interest cost increased due to higher borrowings supporting asset growth. Nevertheless, we minimized funding cost pressures by diversifying our funding mix through new funding instruments and foreign currency borrowings despite the higher interest rate environment. Also, while delinquency rates have been rising across the financial industry, our delinquency ratio improved by 11 basis points Y-o-Y to 0.78% as of the end of June. Although lower credit costs reflected improved asset quality, total operating expenses increased 3% Y-o-Y, mainly due to higher SG&A expenses, including payroll costs and additional provisions related to leased assets. As a result, operating profit declined 23% Y-o-Y. However, driven by improved performance at overseas affiliates such as the U.K., France and Germany, equity earnings increased 26% Y-o-Y. Consequently, our net income increased 2.3% Y-o-Y.

Looking ahead to the second half, along with prolonged geopolitical uncertainties, increased volatility in funding markets following the Bank of Korea's recent base rate hike on July 16 will create challenges for us. To navigate this environment, we'll further strengthen funding stability to optimize financing strategies tailored to market conditions, including favorable foreign currency borrowings and funding opportunities linked to investment demand from tech companies.

At the same time, we'll continue to focus on high-quality assets and rigorous credit risk management to minimize risk. We also plan to successfully complete the launch of our India Finance subsidiary, which is currently in the final stages of preparation and further expand our operations in Australia and Indonesia. We will continue to strengthen our role as the group's global mobility finance partner and reinforce our captive finance franchise.

Next is Hyundai Capital America or HCA. Supported by strong vehicle sales from the group, driven by robust demand for hybrid vehicles in the U.S. market, HCA maintained a high penetration rate, resulting in 11% growth in total earning sales. Operating revenue increased 21% Y-o-Y, driven by continued asset growth and higher finance and lease income. Operating expenses increased 22% Y-o-Y, reflecting higher lease depreciation expenses as well as increased interest expense associated with larger funding requirements to support asset growth.

While delinquency rates were higher than a year ago due to ongoing macroeconomic uncertainty, quarterly delinquency trends continued to improve following the first quarter. Also, we continue to maintain a high-quality portfolio with prime customers representing 88% of total assets. Based on this, HCA's operating profit increased 9.7% Y-o-Y, while net income increased 9.76%, delivering solid financial performance. In the second half, market volatility in the U.S. will increase driven by persistent inflationary pressures and geopolitical conflicts. Nevertheless, leveraging its strong credit ratings and funding competitiveness, the company has secured ample liquidity and is well prepared for potential market disruptions.

In the second half, we'll continue to work closely with the group to support vehicle sales financing, respond flexibly to changing market conditions.

This concludes the presentation on the financial business. Thank you for your attention.

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

[Interpreted] [Operator Instructions] The first question will be provided by Ji-Woong Yoo from DAOL Investment & Securities.

[Interpreted] This is from Ji-Woong Yoo from DAOL Securities. I'd like to appreciate your previous explanation regarding the financial results of the second quarter. I do have 2 questions. If I explain my first question first, you've mentioned that you're going to maintain the guidance for the OPM for the year 2026. I'm wondering you're also maintaining the annual guidance for the annual sales figure as well. If you look at the results of the second quarter, there were some production disruptions that are happening around Genesis model as well. And if you look at the results by region, the second quarter's results in the European region was quite sluggish. Of course, I think that you're going to make more efforts to make up for this in the third quarter and fourth quarter. And I'm wondering if these efforts are going to raise the sales figures in these areas and the Genesis as well. And if you think it will be stable, safe to say that you can deal with the situation in the third quarter and fourth quarter.

And my second question is related to European region. I believe that the industry demand in the European region is rising. So the size of the European market is higher and larger than that of the U.S. But then if you look at our situation and result in the first quarter and second quarter, there was a negative growth in the first quarter, and the result was quite sluggish in the second quarter. So that's something I feel quite regrettable. So if I may say this, I think that if you launch new models like IONIQ 3 and Tucson, and you mentioned that you're going to make profit in the second half, I'm wondering if you think this is still a valid statement or not.

I think the Tucson will be more important because this is a volume model. So if you think the production capacity will increase compared to NX4. And I'm thinking that mix in this situation is mainly happening in Europe. And of course, this can be applied to other regions as well. But I think still -- the European region is still suffering. So do you think there will be a different view toward the second half for this reason with new launches that you've explained?

[Interpreted] Let me answer your first question first. You asked about if we are going to maintain our sales guidance for the annual basis while we maintain our OPM guidance. We think that the production disruption caused by several issues was quite significant in the first half, and we made our efforts to deal with the situation by liquidating the inventory that we have. We still are making -- we are still making efforts, but our efforts that we've done so far until during the first half of this year was not actually enough to cover up. So we are currently implementing our countermeasures by utilizing our domestic production line as well as our overseas production lines in India as well. So we are going to make more efforts to meet our annual guidance.

But if you look at our external -- I mean, the external forecast and others, still, there are things that we need to make up for it. So -- but if you look at our history last year and 2024 as well, sometimes we couldn't meet the guidance for the sales figure, but we were sure to maintain and achieve the OP guidance. And also, it is true that we overachieved our top line revenue guidance by producing more high value-added and hybrid vehicles.

If I add a little bit more, I'm not saying that we're going to change our annual guidance for the sales figure. We are going to do our efforts to achieve the sales guidance and others that we communicated with the market, and we are preparing for the initiated countermeasures for that. And we will continue to monitor the market situation. And since we are going to hold the CID at the end of August, so we are going to share more details and accurate numbers when we have the event.

So your second question was around your concerns about our performance in the European market. So -- and also, you asked about the forecast for the second half of this year. We are operating ICE volume models like KONA and Tucson, and they are aging. So because of that, we had a difficult time in the first half. And also, we are facing very aggressive entry by the Chinese players with their EV lineup, and that has contributed to enhancing the overall industry demand in Europe.

So on the other hand, we had to operate a limited number of lineups like IONIQ 5 and KONA in Europe, whereas we didn't have a appropriate model for the big segment, which can be against the Chinese players. Like you have mentioned, we are making preparation for new model launches, including IONIQ 3 and KONA. And also, we are going to make sure that those models will be equipped with competitive price so that we can be producing and introducing competitive model for the consumers. And also that will be achieved by taking the balance between profitability and cost.

And with respect to new model launches, what we are preparing for in the second half of this year will include IONIQ 3 and BC4 CUV. But then the time line is concentrated in the latter half of this year to the year-end. So it will have limited impact to increasing our yearly based sales figure. For IONIQ 3, we are expecting around 20,000 units in the latter half of this year. This is our sales target. And the Tucson will be launched in the fourth quarter of this year. So there will be some immediate impact to increase in our overall annual sales figure and that the revenue generation will be created in earnings from next year. So it is true that it will be difficult to achieve 100% of what we are committed to. But with the new model launches scheduled for the fourth quarter, starting from the next year, we'll be able to sell those vehicles on a full year basis, and we can expect a growth in the European market.

And also the proportion of HEV is increasing in Europe as well, and it is having a positive contributing impact to our profitability level.

[Interpreted] The following question will be presented by Yoonchul Shin from Kiwoom Securities.

[Interpreted] I am Yoonchul Shin from Kiwoom Securities. I have 2 questions. First is regarding the SoftBank put option. There have been a number of media reports regarding the SoftBank put option. However, I haven't seen any official announcement from either SoftBank or Hyundai Motor Group regarding this. So could you share Hyundai's official position on how to handle the remaining SoftBank share? And also, could you elaborate on the background of such decision?

Second question is regarding IONIQ 3. You mentioned that IONIQ 3 will launch in Europe in the second half of this year. And during Kia's first quarter earnings call, it was said that new EV launches typically require higher provisions compared with ICE models. So can we expect a similar approach for Hyundai as well? Also, given that IONIQ 3 is expected to be a high-volume model with around 20,000 units, do you see any meaningful profitability burden or margin pressure during the initial launch phase?

[Interpreted] I'm Zayong Koo from IR office. And in order to answer your questions about the SoftBank put option exercise, yes, the SoftBank did exercise the put option in the early July of this year. However, because each shareholding company is making decision in a very discreate manner and in a very careful manner, so I cannot give you more details at the current stage So please understand that.

[Interpreted] Yes, I'm Seung Jo Lee. Let me answer your second question. You asked that the provision about the provisions that will be applied to the new IONIQ 3 and whether that will have a burden on the future profitability. And yes, it is true that the provision amount of EV3 will be higher than the ICE model in amount. And this is because the key parts such as electrification parts and battery parts, their unit cost is higher than the ICE models. So even with the similar level of sales guarantee and provision, then the amount must be -- amount is bound to be higher than that of EV. So that is why the profitability of EV is lower than the profitability of ICE models.

Additionally, we are making a multifaceted efforts to reduce quality cost in terms of components. We are -- as you know, we are reworking on battery. We are doing the partial repair of battery. And also we are doing developing system and reducing the labor cost and upgrading the system. So like this, we are making various efforts to reduce quality cost.

[Interpreted] The last question will be presented by Seong-rae Kim from Hanwha Investment & Securities.

[Interpreted] This is Seong-rae Kim from Hanwha Securities. I have 3 questions. My first 2 questions are related to cost. My first question is centering around the deteriorating mix impact. And you gave us the explanation by providing the breakdown between incentive and mix. So I'd like to hear more from you if we can understand more details about this.

And also, of course, the tariff issue has been already set and there can be ongoing issues with respect to tariff still. So if you can remind me once again or give me an update regarding the tariff impact in the second quarter, that will be also appreciated.

And my third question is related to share buyback. If I look at your company's direction for shareholder return policy, you intend to close the gap between preferred stock and common stock. But if we look at the cumulative number of share buyback so far in the first half of this year, it can be understood that the controlling shareholders' net income will be around KRW 6.1 trillion. Of course, on an annual basis, it can go up a little bit more. But it is safe to say that your purchasing amount so far is quite tight considering how much treasury shares you bought so far for the purpose of shareholder policy. So I'm wondering if you are going to maintain the previous direction to set the target of around KRW 4 trillion for this purpose.

And also with respect to the direction that you need to give more priority for the preferred stock for their shareholders. I'm wondering if this direction is still valid or not.

[Interpreted] Let me answer your first question. You asked about the breakdown of the financial figures that we've explained. So the mix deterioration can amount to KRW 0.6 trillion. And out of KRW 0.6 trillion, KRW 0.2 trillion stems from the powertrain deterioration, including production disruption, including Palisade and Genesis. The net incentive increase reflecting price increase is about KRW 0.2 trillion.

If I add a little bit more, there can be other factors with respect to the deterioration of mix. I can say that the proportion of the HEV is increasing. And also our sales figure for the HEV actually went up on a Y-o-Y basis. And also that made a positive contribution to the mix as well, and the amount can be translated into KRW 0.4 trillion. So overall, there can be multiple factors, but there were a negative factor because of the powertrain deterioration. But I can say once again, the contributing factor from the HEV can be translated into KRW 0.4 trillion, which is very positive for our side. And since we expect that the proportion of HEV is going to go up, so this will have -- this will positive impact in the latter half of this year since we are going to not have any impact from the production disruption that we had in the past.

Your second question was about tariff. The tariff payout amount in the first quarter was KRW 0.9 trillion, and we -- the payout for the second quarter was flattish on a Q-o-Q basis at the amount of KRW 0.9 trillion. For your reference, the payout for the third quarter was KRW 1.8 trillion. And for the fourth quarter, it was KRW 1.5 trillion.

So if we compare the numbers on a Y-o-Y basis in the latter half of this year, the tariff impact will decline.

So let me answer your third question. I believe that there were 2 parts of your question. First part of your question was related to our plan to share repurchase. And second part of your question was related to the gap between preferred stock and common stock. When we repurchased the treasury stock in the first quarter, we gave a high proportion to the purchase amount of preferred stock, but the amount was not really big. That's the reason why it was not really well represented. But when we calculated the number, we said the proportion of the preferred stock to be 25% higher than the portion for the common stock. So maybe this can answer your question with respect to the direction of the shareholder return policy that we've communicated to the market.

But regarding overall shareholder policy, we -- it is kind of very difficult for us to disclose specific matters since it will be related to disclosure issues and legal concerns. So please understand this. When we have the CID this August, we are going to make sure we can give you more accurate numbers and more details with respect to the shareholder return policy.

If I explain a little bit more lastly, OPM in Q1 was 5.5% and 5.8%. for Q2, indicating a turnaround compared to Q4 last year in Q1 and a continuous growing trend in Q2. The fact that we aim to achieve the annual guidance implies that there should be continuous growth in the third quarter and fourth quarter. Given that OPM in Q1 last year was mid -5%, we can, for sure, achieve a Y-o-Y growth in both Q3 and Q4.

We were able to post quite solid performance. And -- of course, the first quarter results and guidance, I talked about these numbers. And of course, the second quarter's financial results are not fixed in stone. But I'd like to mention once again, our performance that we recorded was quite solid, and this is not lagging behind other competitors. We will continue to implement the measures that we've taken so far in the second half as well, and we are going to make sure that we can achieve a top-tier OPM in this auto industry.

[Interpreted] This is the end of the second quarter 2026 earnings conference call of HMC. Thank you for your attention.

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.]