Kia Motors Stock

Hello. This is Seong-guk Jeong, Head of Investor Relations at Kia. Let me begin the fiscal year 2026 Q1 earnings results, starting with the sales summary, followed by the consolidated income statement, earnings analysis and the consolidated balance sheet.

First off, the global retail sales performance. As of Q1 2026, the global industry demand declined by 7.2% Y-o-Y due to the downside to NEV purchase tax exemption policy in China, which is the largest automotive market and the base effect following pre -- strong pre demand in the U.S. prior to the tariff impact in April 2025.

Kia's Q1 global retail sales witnessed a 3.7% growth Y-o-Y, marking 780,000 units despite the decline in industry demand led by solid HEV, EV sales and launch of the new Telluride and Seltos recording 4.1% of the global market share, exceeding 4% level for the first time.

By market, domestic sales skyrocketed by 5.3% Y-o-Y, reaching 142,000 units centered on EVs, including EV3, EV5, PV5, buttressed by reinforced EV subsidy.

In the U.S. market, HEV-centered sales continued ranging from the new Telluride ICE model launched early this year to its HEV model launched in February on top of the Sportage and Carnival. As a result, our sales increased by 4.1% Y-o-Y, recording 5.6% market share.

In the Western European market, underpinned by sales expansion of our volume model Sportage launched after EV2 and the net increase effect of EV4, EV5 released in the second half of 2025, the sales increased 1.2% Y-o-Y, marking 140,000 units.

In the Indian market, the new Seltos launch effect and the Sonet benefiting from GST cut since late September last year boosted up the sales to 84,000 units, 11.6% increase Y-o-Y.

In Chinese market, the sales increased 6.5% Y-o-Y, backed by K3, Seltos and other key models despite the NEV policy adjustments.

While emerging markets such as Latin America and CIS realized 20% or higher growth, thanks to the increased supply from Chinese plants and SOP initiation in Qazaqstan from Q4 2025. On the other hand, due to the prolonged war in the Middle East since late February, major countries in MEA region have suffered from demand reduction and supply disruption for distributors, resulting in a 15.6% decrease Y-o-Y.

Next is our electrified vehicle sales summary. In Q1 2026, electrified vehicle sales increased by 33.1% Y-o-Y to 232,000 units, driven by Kia's flexible powertrain strategies aligned with shifting demands in each market amid strong demand for HEVs in the U.S. and EVs in Western Europe. As a result, the mix of electrified vehicle in our global sales expanded by 6.6 percentage points from 23.1% in Q1 2025 to 29.7% in Q1 2026, while HEVs and EVs accounted for 17.6% and 11%, respectively.

In the HEV segment, the strong sales momentum of Sportage and Carnival HEV added on the launch of Telluride HEV in the U.S. and Seltos HEV in Korea resulted in a 32.1% increase Y-o-Y, marking 138,000 units. Consequently, Kia's HEV market share in the U.S. expanded from 6% in 2025 on a full year basis to 7.5% in Q1 2026, consistently raising our standing in the market.

Moving on to EV. In Korea and Western Europe, the net increase effect of EV4, EV5 and Kia's first PEV model, PV5, contributed to 86,000 unit sales, which is a 54.1% increase Y-o-Y. The EV market share in Korea and Western Europe grew significantly from 28.2% and 4.1% each in 2025 on a full year basis to 39.1% and 5.2% in Q1 2026 as a result.

Following is the regional wholesale performance. In Q1 2026, Kia's wholesales increased 0.9% Y-o-Y to 780,000 units. By major region, NA saw 252,000 unit sales backed by the new Telluride launch and HEV-centered sales expansion achieving Q1 business plan, while the sales decreased Y-o-Y by 2.1% due to strong base effects following wholesales expansion prior to tariff impact in Q1 last year.

In Europe, sales increased 3.8% Y-o-Y, recording 153,000 units owing to expanded sales of Sportage and Sonet PE, the EV2 launch with the start of production in Slovakia plant from February as well as the sales growth of EV4 and EV5.

In India, based on the new Seltos launch and solid sales of Sonet benefiting from GST cut, as mentioned earlier, sales grew 11.6% Y-o-Y, marking 84,000 units.

Finally, in the rest of the world, the conflict between the U.S. and Iran resulted in the blockade of Strait of Hormuz and supply disruption to distributors in the region, dropping the wholesale sales by 31.2% Y-o-Y in the MEA region. But in Latin America, countries with the strong demand such as Colombia and Ecuador raised the export volume from the domestic and Chinese plants, resulting in 34.6% growth Y-o-Y.

Taken together, despite the sales disruption in MEA countries, Kia succeeded in achieving its quarterly business plan, hitting the record high Q1 sales of 780,000 units.

Next, the income statement. Despite limited growth in consolidated sales volumes, revenue for Q1 2026 came in at KRW 29.502 trillion, up by 5.3% Y-o-Y, supported by higher ASP resulting from positive price effect and favorable exchange rates. As for operating profit, due to the impact of the U.S. tariffs, increased incentives, mainly in overseas markets and the impact of FX valuation on warranty provisions resulting from a sharp rise in the quarter-end won-dollar exchange rate, the figure decreased by 26.7% Y-o-Y to KRW 2.205 trillion. Accordingly, the operating profit margin declined by 3.2 percentage points Y-o-Y to 7.5%. Pretax profit and net profit also fell by 18.8% and 23.5% Y-o-Y, respectively, to KRW 2.635 trillion and KRW 1.8 trillion.

Next, operating profit analysis. Let me walk you through each factor behind the changes. First of all, the impact of the U.S. tariffs was fully reflected over the 3 months since the beginning of Q1 2026, leading to a profit decrease of KRW 755 billion Y-o-Y. In addition, intensified competition in North America and Europe pushed up total incentives by KRW 215 billion Y-o-Y, reducing earnings. And the sharp rise in quarter-end exchange rates resulted in an additional cost increase of KRW 75 billion, mainly due to FX valuation on warranty provisions.

Regarding volume effect, although consolidated sales volume increased by 0.4% Y-o-Y, a slight deterioration in the regional mix due to sales declines in regions such as the Middle East and Africa led to a KRW 44 billion Y-o-Y drop in earnings. Even amid the challenging business environment, Kia generated KRW 49 billion in positive price effects through enhanced product value added with the launch of the new Telluride and Seltos. And by expanding sales of high-margin models such as the Telluride and Carnival in the U.S., it delivered KRW 143 billion in mix effect.

Furthermore, favorable won-dollar and won-euro exchange rates contributed to an additional KRW 93 billion increase in earnings, leading to KRW 2.205 trillion of operating profit for Q1 2026, down by KRW 804 billion Y-o-Y.

Next, revenue analysis. First, the regional sales data on the left shows that consolidated revenue increased by 5.3% Y-o-Y. Despite ASP increases centered on HEV and SUV model, the share of North America declined by 0.2 percentage points from 42.5% in Q1 2025 to 42.3% in Q1 2026 due to lower wholesale volume.

The share of domestic revenue came in at 17.6%, the same level as in Q1 2025, supported in part by a 4.1% increase in ASP. In Europe, we witnessed improved sales led by new EV models, a relatively high EV sales mix and favorable won-euro exchange rates, which increased the share of Europe by 1.4 percentage points Y-o-Y to 24.4%. The share of India remained at around 5%.

Moving on to the ASP changes on the right, supported by expanded sales of HEVs and EVs centered around advanced markets, including the U.S. and Europe and favorable foreign exchange effects, global ASP increased by 4.9% Y-o-Y to KRW 39.9 million in Q1 2026. Domestic ASP also rose by 4.1% Y-o-Y to KRW 35.9 million, maintaining its growth momentum.

Next, cost of sales and SG&A. Revenue expansion, supported by higher ASP and favorable foreign exchange effect, was offset by the U.S. tariff impact mentioned earlier, driving up the cost of sales ratio by 2 percentage points Y-o-Y to 80.3%. For your reference, excluding tariff impacts, the cost of sales ratio in Q1 2026 was 77.8%. The SG&A ratio for Q1 2026 went up by 1.2 percentage points Y-o-Y to 12.2%.

One of the main drivers was the significantly bigger impact of asset valuation on warranty provisions with the quarter end $1 exchange rate reaching KRW 1,513, leading to a 1.4 percentage point increase in the sales warranty expense ratio.

Next, nonoperating income. First, equity method gains declined by KRW 47 billion Y-o-Y to KRW 128 billion due to weaker earnings from affiliates. Financial and other nonoperating income rose by KRW 243 billion Y-o-Y to KRW 302 billion, mainly due to an improvement in foreign exchange translation gains and losses. As a result, nonoperating income for Q1 2026 recorded KRW 430 billion, up by KRW 195 billion Y-o-Y.

Next, the balance sheet. As of the end of Q1 2026, the total value of assets stood at KRW 105.36 trillion, up by KRW 6.381 trillion from the end of 2025. The main drivers include higher liquidity, increased accounts receivable, expanded inventory assets and higher equity in affiliates. Total liabilities at the end of Q1 2026 went up by KRW 5.933 trillion from the end of 2025 to KRW 43.722 trillion. Despite a KRW 96 billion reduction in borrowings, the figure increased from the end of 2025 due to higher accounts payable, expanded sales warranty provisions and the reflection of over KRW 2.6 trillion of accrued dividends.

Total equity increased by KRW 448 billion from the end of 2025 to KRW 61.638 trillion. Although the debt ratio rose by 9.1 percentage points from that of the end of 2025 to 70.9% due to the impact of accrued dividend, it dropped by 1 percentage point when compared to the figure at the end of Q1 2025.

This concludes the presentation on Kia's Q1 2026 earnings results. Thank you.

Next, CFO, SVP, Seung-Jun Kim, will deliver a review on Kia's earnings for Q1 2026 and business outlook for Q2.

Hello. This is CFO, SVP, Seung-Jun Kim of Kia. The Q1 earnings will be divided into the sales and the profitability. As mentioned earlier by Mr. Jeong, I think the overall explanation is well delivered. When it comes to Q1 sales, we have reached the global market share of 4.6%.

During the COVID-19 era, there has been a short-term impact due to the shortage of the semiconductor. Therefore, we have surpassed the level of 4% for 2x. However, this year, the global brands are fast advancing into the global markets. So the sales growth were not concentrated in the specific regions. However, we had a very balanced growth, reaching the 4.6% of the market share in the global market.

I believe that this was one of the great transitional points when it comes to our sales growth. So to add on some explanation on the profitability as well. Compared to Q1 last year, we have been under the full impact of the tariffs and the OP has decreased about KRW 800 billion, and about KRW 750 billion is due to the tariff impact. So excluding the tariff impact, I believe the numbers are quite similar to that of Q1 last year. Compared to Q3, OP has increased. OP was 3.1%. And this Q1, it has been upgraded to 7.1% once again. So last Q3 was the lowest point, and now, we are continuously increasing after Q3 throughout the Q1 of 2026.

I believe that you are wondering the annual sales of 2026, especially the Q2. When it comes to NA region, Seltos will be launched as of April 1 as well as the hybrid model. And when it comes to Telluride, we will sell the Telluride model for Q2 in the full swing. When it comes to Europe, ranging from EV2 to EV5 to EV6, we have established the mass market EV lineup. We are currently expanding the EV lineup in the European region as well. And when it comes to emerging markets, including India, we're trying to expand the sales of the region-specific models.

Last year, we have suffered a lot in the European region. And partially, it was due to the transitional points from the ICE to the EVs. And there has been some discontinuation of the existing models last year. However, since March and April this year, we believe that our European market sales are once again increasing, overcoming the uncertainties and difficulties of the past. And since Q2 2026, as we have announced in the recent CID, we believe that we can maintain the business plan for this year as it is.

I think some of you are wondering the external risks of the 2026 as well. The raw material price increase and the war in the MEA region would be the prime examples. When it comes to raw material price increase, not only the oil price, but aluminum, nickel, rhodium and palladium could be the great examples. It has been impacting our revenue since March.

And when it comes to the oil price, even though the war comes to an end this year, I believe that the oil price will be maintained on the level of $100, bringing about the additional cost increase risks. And we are currently selling about 260,000 units of our models due to MEA region. However, we believe that there is a room for our recovery in other regions such as India in order to cover up the losses in the MEA region, where there is a war still going on. Of course, there could be some shortage in the MEA region this year. However, we'll make -- we'll try very hard to offset the losses in the other regions such as India. That is our current take.

When it comes to the raw material price increase, I believe that you're wondering about a specific number. So of an OP of KRW 10.2 trillion of the revenue this year expected, I believe that the raw material price increase will impact about 5%. And when it comes to the war impact, it will be around 2% to 3%. However, we believe that we need to fully respond to the price competitiveness, cost competitiveness responding to the fast rise of the Chinese brands. And this is the part that we have been working very hard from the past. And I am very confident that we have spared no effort to increase the price competitiveness from the past up until this quarter. At the moment, at CID, we presented an annual OP of KRW 10.2 trillion, and I believe we are going to stick toward the number.

This concludes the presentation on Q1 2026. Thank you.

Now we are going to take questions. So please follow the instructions from the operator.

[Foreign Language] [Operator Instructions] [Foreign Language] The first question will be provided by Eun Young Yim from Samsung Securities.

[Foreign Language] This is Eun Young Yim from Samsung Securities. I have 2 questions in total. First is on the raw material increase and the negative impact of the MEA region's exports as SVP, Seung-Jun Kim, has just mentioned. And I believe when it comes to the negative impact, it can be offset by the positive impact, which is the high FX rate. However, at the moment, if the total sales are going down, we believe that high FX rate is not enough to offset the negative impact. So I would like to understand what is the OP sensitivity of Kia if KRW 10 of differences occur between the FX rate of KRW and dollar.

And I believe that the vehicles that are being produced in the U.S. are continuously increasing. So I would like to understand the specific number in the Q2 based on the expectation.

And my second question is on the operating profit ups and downs. You have mentioned that there has been an increase of the incentive of about KRW 200 billion. And I believe when it comes to the U.S. numbers, it is very similar to that of last year. Then, is the increase from the European region? I would like to understand the updates going forward. And I wonder whether there could be any possibility of increased incentive going down this year.

[Foreign Language] So to answer your first question, when it comes to the FX changes between won and dollars, I would like to mention the won revenue first. So based on won, our revenue is about KRW 120 trillion. And I believe based on the revenue-based revenue of won, you'll be able to calculate that of the dollars as well. So I think it's not appropriate at the moment to mention the changes of the dollar-based revenue whenever there is KRW 10 differences between the dollars and won. However, it is true that there would be some changes when it comes to the material costs that we have to pay in dollars.

And based on my explanation, I believe that you'll be able to understand the changes that is coming from the won and dollar changes or differences. And earlier, I have not mentioned the FX rates. And I want to tell you that Kia is not the company that is benefiting from the slight changes of FX rate. So whenever we set a pricing or the incentive for the new model, we take a very conservative approach and set our standards for the pricing and profitability. So if the FX rate goes up down the road, it is very true that our profitability will go up. So I believe these kind of calculations was one of our drivers that made the Kia of today.

[Foreign Language] So regarding your second question on the production disruption, I think you have mentioned about the production when it comes to the safety, and there has been a disruption accounting for 220,000 units, including [indiscernible] and [indiscernible]. However, based on our engine verification, we were able to have a transition towards the EV. So we are able to offset the losses up to half. And I believe from May this year, there won't be any additional production disruptions.

[Foreign Language] And regarding your second question, which is the second part about the incentive impact, I think you have better understanding when it comes to incentive trends than us. So when it comes to the U.S. region, the incentive level is very similar to that of last year. However, it is true that the incentive for the U.S. region has increased due to the fast increase of the Chinese brands in the European market. So we thought that we need to slightly increase the incentives in order to respond to the fast penetration of the Chinese brands in the region. However, we believe that we cannot revise the incentive level downwards in the short term. So throughout Q1, the current incentive level will be maintained.

[Foreign Language] The following question will be presented by Yong-Kwan Moon from Shinyoung Securities.

[Foreign Language] This is Moon, Yong-Kwan from Shinyoung Securities. I have 2 questions. First is on the warranty provisions. Because of quarter end exchange rate fluctuations, the warranty provisions have increased by KRW 200 billion. But even we exclude the impact of KRW 1 trillion impact, it's still very high compared to 3.7% towards revenue ratio. So I'd like to ask that previously, you mentioned about your quality risk sensing organization and you're going to rigorously sense any risks related to quality issues.

And you previously said that 2% -- mid-2% range was maintained. But this was the first time we see this high increase of warranty provisions compared to previous quarters. So even excluding the quarter-end exchange fluctuations, as we increase EV sales volume overseas, provisions on EVs are going to increase, I believe. So should we expect that it is going to increase by 3% to 4% range?

And my second question is about exports from domestic markets. And for Q1, the volume of domestically produced vehicles was around the same as previous quarters. But compared to 6 years ago, it has slightly decreased by about 10%. So in European market, EV local production is projected to be expanded. And in North America, hybrid volumes will increase as well. And as we are not -- as we don't have to send a lot of EVs to the U.S., I'd like to talk about the situation in the Middle East first. Are we going to have a second half impact on domestically produced vehicles volume? And should we expect that 2020 -- compared to 2025, the volume will change slightly to this year?

[Foreign Language] So let me address your first question. You mentioned warranty provisions first. And you were right on the mark when you said that we have KRW 1.2 trillion of total warranty provisions. And compared to Q1 2025, the figure has increased by KRW 440 billion. And among the figure, KRW 250 billion was because of FX valuation on warranty provisions. And I believe you are well aware of this, but we are experiencing a high increase in the EV share. And this has an impact on per unit warranty provision scale.

And in the first initial phases of the new model launch, about [ 104 ] years have no choice but to see an increase in warranty provisions. But over time, the figure is bound to decrease. But this year, we had a lot of EV launches. So that's why we have a high increase in warranty provisions because ICE parts have lower part prices than EVs. EVs parts are more expensive. And this is because a lot of new launches are in their first year of the model cycle. But down the road, about 2 to 3 and 4 years down the road, we're going to decrease the warranty provision. So I believe you don't have to worry about that, that much.

[Foreign Language] So regarding the production volume decrease, even if we have Middle East situations prolonged, we're not going to have that many disruptions on our volume. And our business plans included a 6% growth Y-o-Y of volume. So even if the situations in the Middle East intensify further, exports from domestic plants will remain similar or even increase. And our business target was a 5% increase in volume. So even if there are some difficulties in our businesses in the Middle East, there will be more requirements from Central and South America rather. So we believe there is not much impact on domestic volume.

[Foreign Language] I'd like to add something on his explanation. When it comes to the total demand from emerging markets, the demand environment we have today is very favorable. And in markets, including India, Central and South America and Asia Pacific regions, we have experienced a higher than 10% growth in Q2. So this shows that we have a lot of growth in demand, and plants that address the demand from emerging markets include domestic plants and Chinese plants. And both plants are increasing their volume. In particular, we're expanding exports from Chinese companies. So the figure for domestic markets is 5%, and the figure for Chinese markets is more than 10%.

[Foreign Language] The following question will be presented by Kyung Jae Hwang from Merrill Lynch.

[Foreign Language] This is Hwang, Kyung Jae from Merrill Lynch Securities. I have a question on the material cost that you have mentioned. So you have said that you are expecting an increase of the material cost of 5% per the revenue. So based on the last year's business report, we believe that material cost payments have been about KRW 80 trillion. So based on the revenue, it accounts for 70%. Then you have said that if there will be an increase of 5%, then can we understand it as 7% increase based on the revenue this year. And you have mentioned the materials, including the aluminum and others. However, this morning, there have been some mentions regarding the semiconductor and electronic components. And I believe that there is no -- the OEMs are not directly managing the material cost when it comes to semiconductor and electronic component material cost increases. Is this right?

[Foreign Language] So to answer your first question on the material cost, if the level of the March is maintained throughout the year, I believe that the material cost increase would account for 5% per operating profit. And on the type of the raw materials that I've mentioned, the reason why I have first mentioned the aluminum is because the use of the aluminum is one of the highest out of all raw materials.

And when it comes to semiconductor, of course, there will be an impact on our side as well. However, compared to oil price increase or aluminum cost increase, the increase of the semiconductor would slightly be lower than others. That's the reason why I have not mentioned it earlier. So on the OEM side, there will be some impact due to the semiconductor price increase as well.

[Foreign Language] The following question will be presented by [indiscernible] from Macquarie Securities.

[Foreign Language] This is [indiscernible] from Macquarie Securities. I have 2 questions. The first one is on India. In Q1, you showed an exponential growth trend, although that was slightly falling short of industry demand. In India, growth potential is huge, and due to the GST cut, you have a lot of potential there, but there are also some concerns about cost increase and the downside risks on margins. And as for the HMG subsidiary, the prices of steel are expected to increase by 1%. So how are you going to respond to price increases?

And in the second half of the year, there will be tax increases for gasoline. So what are your response strategies in order to respond to this tough situation? And how are you going to execute your growth strategies in a market where the battery EV mix is very low? And could you elaborate on your strategies on growth in India again?

And second of all, in Western Europe, the EV mix is continuously increasing. And last year, you mentioned that this will decrease total incentives. Then, how would you expect the profitability in the Western European market would be in total? And could you provide some specific numbers on profitability trends? And new models launches, there will be some impact on margins? Or did you set some directions? Could you please provide some specifics so that we can estimate figures down the road?

[Foreign Language] First, on price increases in the India market, we don't have any plans to proactively increase the prices. If there is inflation and other external variables and naturally prices go up, then we're going to align our plans accordingly. But we don't have any plans to proactively increase the prices.

And second of all, on incentives in Western Europe, early in 2025, we mentioned that we are going to decrease incentives with increasing EV new models, but we couldn't keep the promises we made. That's because Chinese players have attacked our profitability with low-priced EVs. And in some European countries, the [indiscernible] of Chinese players has gone up too rapidly compared to our expectations. And the price gap between us and theirs is about 25%. So we couldn't have choice, but just increase incentives, that was inevitable. But that was -- but there have been some benefits from the won-euro exchange rate, but our profitability ratio is about in the high single-digit range.

[Foreign Language] Due to time constraints, let me take the last question.

[Foreign Language] The last question will be presented by Joon Sung Kim from Meritz Securities.

[Foreign Language] This is Kim, Joon Sung from Meritz Securities. I have 2 questions in total. In addition to your answer regarding the question from Macquarie Securities, you have mentioned that the incentive increase was due to the price competitiveness of the Chinese brands. And I would like to ask a question regarding the volume growth. And considering the rise of the Chinese brands, the sales of the models of Chinese brands has increased about 50% Y-o-Y. And currently, they are selling about 2.23 million units worldwide. And I believe that it will increase to [ 100 ] million this year.

And considering the production in Hungarian plant and other European plants, our production capacity at the moment amounts to 500,000 units, and there is a rumor that Zeekr and Xpeng will advance into Korean market as well. So considering the situation, both in Korea and the European market, do you think that we can keep the guidance when it comes to the sales and the volume growth? And I would like to understand whether the incentive increase rate will be maintained throughout Q3, Q2 and Q4 as well?

And I also have one more question regarding the recent CID. As you well know, our stock price is very high at the moment. So it is a bit lower than our record high price. And I believe this is one of the highest valuation when it comes to our stock price in our history. And CEO also mentioned about the advancements into the Robotics America as well. And I believe that this is the timing to start the operation when it comes to the assets. And I would like to learn about the specific timing for the Robotics America plan.

And CEO has also mentioned about our smart car project in collaboration with NVIDIA. And I would like to also understand when would be the timing where we can experience the demo for the smart car.

[Foreign Language] So to answer your first question on the sales volume and the incentives, in the early of this year, we have mentioned that our wholesale sales target is about 3.35 million units. And as of Q1 performances, we have already exceeded our target. And this is not a result from the single region. Though there has been some negative impact from the MEA region, we were able to recover the shortages of the MEA region in all other regions in a balanced manner. We were able to achieve the target when it comes to the sales volume, and we have already exceeded it based on our business plan. So at the moment, I can confidently say that we can keep the promises for the sales volume.

And when it comes to the incentive level in the Western European region, currently, the Q1 incentive level is same to the level of Q4 level last year. So for the remaining period throughout this year, I believe that there won't be any additional changes, but Q1 level will be maintained. But then some of you might wonder whether there is any possibility for the incentive rate to go down. However, at the moment, we do not have a plan to do so. Rather, we will maintain the level of Q1 in order to increase the market share. And currently, we are preparing for a countermeasure to it.

[Foreign Language] So to answer your second question on the Robotics America contributions and the smart car and face car plans, when it comes to the production subsidiary, our CEO has mentioned the overall direction. So whether it's in Korea or the U.S., when it comes to the production subsidiary, it is certainly that Kia will take part -- will be participating in the project. And when it comes to the specific scale or the measures of the contribution, it will be determined in the second half.

And regarding the question with the collaboration of NVIDIA of SDV and the face car, the face car will be launched within the 2026, and I believe that the development will be complete as of 2027, and the official release will be made around 2028. And then, we will work on our projects to launch the L2++ model, the mass market model of SDV. And I believe that the schedule for our smart car and the face car collaboration will be similar to that we have mentioned earlier.

And to be specific, when it comes to the face car, it will be released in the second half or at the end of the year. And when it comes to the test drive or the demonstration, the schedule is yet to be confirmed, and we have not yet confirmed how to release it to the public yet. So once the schedule and the measures to release our face car is finalized in the second half, we will get back to you with the correct information. Thank you.

[Foreign Language] This concludes the fiscal year 2026 first quarter earnings results by Kia. If you have any further questions, please contact the Kia IR team directly. Thank you for your time and participation.

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

Hello. This is Seong-guk Jeong, Head of Investor Relations at Kia. I will begin with business results for the fourth quarter of fiscal year 2025.

I'll commence with the sales summary, followed by the consolidated income statement, revenue and earnings analysis, the consolidated balance sheet and finally, Kia's business plan for 2026.

First, we will begin with the global retail sales performance. In Q4 2025, global industry demand declined by 1.6% year-on-year due to mounting pressure on consumer purchasing power in the U.S. market following the expiration of IRA subsidies at the end of September and rising vehicle prices and budget constraints on the trade-in policy in certain local regions in China.

Kia's global retail sales witnessed a 1.6% growth year-over-year, led by higher sales centered around the Sportage HEV and Carnival HEV in the U.S. and increased sales led by the SOE in India following the goods and services tax rate cut lifting our global market share by 0.1 percentage point to 3.3% -- by market, domestic sales dropped by 5.9% year-over-year, reflecting deferred year-end demand due to the extension of the individual consumption tax cuts.

In the U.S. market, in response to changing market conditions such as tariffs, the expiration of EV subsidies and easing environmental regulations, we leveraged our flexible production system and focused sales efforts more on ICE and HEV models than on EVs. As a result, despite an overall decline in market demand, our sales increased by 1.7% year-on-year, resulting in our market share expanding to 3%.

In the Western European market, despite continued strong sales of the EV 3, fourth quarter sales were somewhat subdued due to the impact of the discontinuation of the Ceed and the aging of the existing ICE lineup, including the sportage. However, we expect sales to recover in 2026, driven by the full-scale contribution of newly launched models such as the EV4 and EV5 released in the fourth quarter. In the Indian market, the September 22 goods and services tax cut rate cuts drove a sharp surge in A segment SUV demand. Benefiting from these tax incentives, our Sonet and Sers lifted sales 41% year-on-year and took our market share to 5.7%.

Major emerging markets such as Central and South America and CIS markets recorded sales growth driven by increased supply from expanded export volumes from Chinese plants by the start of mass production at the Kusostan plant in October and the increased CKD volumes in Uzbekistan.

Next is our electrified vehicle sales summary. In Q4 2025, electrified vehicle sales increased by 13.2% year-over-year to 186,000 units, driven by Kia's powertrain strategies aligned with shifting demand in each market amid strong demand for HEVs in the U.S. market and EVs in Western Europe. As a result, the share of electrified vehicles in our global sales expanded by 2.4 percentage points from 21.5% in Q4 2024 to 23.9% in Q4 2025.

And the sales mix for HEVs and EVs accounted for 15.6% and 7%, respectively. HEV models continue to lead the growth of our electrified vehicle sales driven by strong demand in the U.S. with global sales of the Sportage HEV and Carnival HEV increasing by approximately 16,000 units and 500 units, respectively.

Consequently, Kia's market share in the U.S. HEV segment nearly doubled, expanding from 4.2% on a full year basis in 2024 to 8.2% in the fourth quarter of 2025. In the EV segment, continued strong sales in Western Europe, together with the introduction of the EV 4 and EV 5 in the fourth quarter contributed to a 0.3 percentage point increase in Kia's EV market share in Europe from 3.2% for full year 2024 to 3.5% as of Q4 2025.

The following is the regional wholesale performance. In Q4 2025, Kia's wholesales decreased 0.9% year-over-year to 763,000 units. Looking at the key regions, North America saw a 2.5% growth year-on-year to 258,000 units owing to expanded shipments of the Carnival and Sported GTV based on robust HEV-led demand and stronger SUV-focused wholesale volume.

In Europe, despite continued strong sales of the EV3, sales volume declined by 10.2% year-over-year to 119,000 units due to the discontinuation of the Ceed production adjustments for the new EV 2 launch at our Slovakia plant and heightened competition.

In India, sales grew 40.9% year-on-year to 74,000 units, driven by the impact of the GST rate cuts and strong demand for the Sonet, which benefited from such.

Finally, in the rest of the world, such as the CIS region, sales increased nearly 30% year-on-year, owing to increased sales of the sportage produced at the Kazakhstan plant and the cement produced at the Uzbekistan plant.

Next is the consolidated income statement. In Q4 2025, revenue rose 3.5% year-on-year to KRW 28.088 trillion as higher ASP resulting from continued price effects and favorable FX effects outweighed the decline in consolidated sales volume.

Operating profit recorded KRW 1.843 trillion, down 32.2% year-on-year as the benefit from the retroactive application of the 15% Korea U.S. tariff effective November 1 was offset by the temporary burden of a 25% tariff on U.S. inventories through October and November and higher incentives in overseas markets. Pretax profit stood at KRW 2.111 trillion and net profit at KRW 1.471 trillion, down 13.6% and 15.5% year-on-year, respectively.

Next, operating profit analysis. Breaking down the evolution of operating profit by factor. First, the impact of U.S. tariffs continued into the fourth quarter, reducing profit by KRW 1.022 trillion. Increased spending for competition in the North American and European markets resulted in a KRW 342 billion Y-o-Y increase in consolidated incentives, reducing earnings. In addition, vehicle sales declined by more than 8,000 units Y-o-Y, resulting in a KRW 132 billion decrease in earnings. However, the PP mix turned positive in the fourth quarter after having been a negative factor until the third quarter, reflecting an improvement in our fundamentals.

Even amid a challenging business environment, Kia improved profit by KRW 90 billion through price effect driven by enhanced product value and efforts to mitigate the impact of U.S. tariffs resulted in approximately KRW 108 billion in cost savings.

Lastly, the continued favorable impact of the Korean won, USD exchange rate increased earnings by KRW 424 billion. And as a result, operating profit for the fourth quarter of 2025 amounted to KRW 1.843 trillion, down KRW 874 billion Y-o-Y. Next, revenue analysis. First, based on the regional sales share data on the left, consolidated revenue increased by 3.5% Y-o-Y.

In North America, revenue increased on the back of higher wholesale volumes and higher ASP centered on AUVs and SUVs, lifting its share by 1.3 percentage points from 43.3% in Q4 last year to 44.6% in Q4 2025. In terms of domestic sales, despite a 2.1% increase in ASP, revenue declined by nearly 6%, leading to a 1.2 percentage point decrease in its share Y-o-Y to 17.6%.

Despite a decline in sales compared to the fourth quarter of last year, Europe's revenue share remained at a similar level to the previous year, supported by a relatively higher share of EV sales and a favorable EUR 1 exchange rate. India's revenue share expanded to approximately 5%, driven by sales growth of over 40% -- now moving on to the ASP improvements on the right. The global ASP for Q4 2025 increased by 4.7% Y-o-Y to KRW 39.1 million, driven by the expanded HEV EV sales centered on advanced markets in the U.S. and Europe, along with positive exchange rate effects.

Domestic ASP also increased by 2.1% Y-o-Y to KRW 35.1 million, continuing its growth trend. Next, cost of sales and SG&A. Despite revenue expansion driven by favorable foreign exchange rate effects, the cost of sales ratio for Q4 2025 rose 2.9 percentage point Y-o-Y to 81.7% due to the previously mentioned impact of U.S. tariffs amounting to KRW 1.022 trillion. Without the tariff impact, however, the Q4 cost of sales ratio is estimated to have slightly improved Y-o-Y to 78.1% -- the SG&A ratio for Q4 rose 0.6 percentage point Y-o-Y to 11.8%, mainly driven by increased volatility in the Korean won, U.S. dollar exchange rate at quarter end and the reflection of quality costs, which led to a 0.8 percentage point Y-o-Y increase in the sales warranty expense ratio.

Next, nonoperating income. First, equity method results posted a loss of KRW 72 billion in the fourth quarter of 2025, following a loss in the same period last year. However, results improved by KRW 79 billion Y-o-Y, driven by absence of one-off impairment losses recorded in the fourth quarter of last year and improved performances at affiliates.

Financial and other nonoperating income improved by KRW 462 billion Y-o-Y to KRW 341 billion, reflecting FX gains driven by quarter end exchange rate movements as well as improved gains on disposals of tangible assets. As a result, net nonoperating income expense for Q4 2025 increased by KRW 541 billion Y-o-Y to KRW 268 billion.

Next, the balance sheet. As of year-end 2025, total assets amounted to KRW 98.979 trillion, an increase of KRW 6.23 trillion compared to year-end 2024. The key drivers behind the asset expansion were increases in tangible and intangible assets, inventory assets and equity method investments.

Total liabilities at year-end 2025 amounted to KRW 37.789 trillion, an increase of KRW 879 billion compared to the year-end of the previous year. Despite a reduction in borrowings of KRW 890.2 billion, total liabilities increased compared to year-end 2024, mainly due to increases in accounts payable and warranty provision.

Total equity stood at KRW 61.19 trillion, an increase of KRW 5.35 trillion compared to the year-end of the previous year, and the debt ratio improved by 4.3 percentage point Y-o-Y to 61.8%. Lastly, our business plan for 2026. For 2026, Kia targets wholesale sales of 3.35 million units, representing an increase of 214,000 units Y-o-Y or 6.8% growth. Retail sales are also expected to grow 6.8% Y-o-Y in line with wholesale growth.

In the U.S. We plan to drive sales growth centered on SUV and HEV supported by full model changes of our core model, the Ceed and Seltos ICE, along with the addition of new HUV variants for both models.

In Europe, with the early year launch of the EV 2, we will complete our mass EV full lineup spanning EV3, EV 4 and EV 5 and focus on a full recovery in sales, further strengthening our EV leadership.

In India, we will continue to strengthen our market leadership by targeting premium SUV customers through the new CTO. For 2026, Kia sales revenue target is KRW 122.3 trillion, representing a 7.2% growth Y-o-Y. Operating profit is targeted at KRW 10.2 trillion, an increase of KRW 1.1 trillion Y-o-Y with an operating profit margin of 8.3%.

In 2026, despite the application of a 15 U.S. tariff and an expected increase in incentives amid the intensifying competition, Kia will pursue robust top line growth driven by ambitious volume growth targets and ASP improvements supported by increased HEV and EV sales while continuing to enhance profitability through multifaceted cost reduction efforts. More details on our 2026 business plan will be provided at the CEO Investor Day scheduled for early April.

This concludes the earnings results for the fourth quarter of fiscal year 2025. Thank you.

Next, CFO, Senior Vice President, Seung Kim, will deliver a review on KO's earnings for the fourth quarter of 2025 and business outlook for 2026.

Hello. I'm Seung Jun from Kia. First of all, we'll talk about the fourth quarter and year, the performance and also the business plan for 2026 and also the shareholder returns. We will divide those 3 buckets and explain each and every one of them. First, about the fourth quarter and 2025 performance. in Q3, as we have explained during the performance results, we have went on a bottoming out, but now we are on a recovery stage.

However, as Head of IR, has said, the tariff being impacted -- affected in 15% was November 1. But due to the inventory in October and November, it was after December that the 15% was clearly shown. And -- so in Q4, what we -- compared to what we have thought, the reason why we didn't go as much as we expected was because the Q4 sales, as we have explained in domestic and Europe compared to the year before, we were a little bit low, but in domestic due to the individual consumption tax rate extension, there was an impact.

And also there was an increase -- intensified competition of our competitors and the incentive strategy impacted in Kia also. And for EV transition, we have the later full EV launch and that impact did not show in the fourth quarter of 2025. And that impact will show in 2026. And that's why we have reflected it in our business plan for 2026. So our trial was in Q3 2025, but we have turned around our recovery stage for Q4 2025. And in 2026, we expect our earnings to normalize. I don't know if normalizes will turn to you, but from Q1 2026, we believe that we'll be able to show better performance.

Regarding this, in relation to our business plan for 2026, we will explain. Our 2026 business plan, we do not think that the market conditions will be much different from 2025. However, Kia believes that there will be about 6.8% or up to 7% growth. We can divide it into Europe and the United States. In the United States, first time in 7 years, the Telluride Live model has been newly released, and we have competitiveness in that model.

And also, there's a hybrid model that we have scheduled for release. Therefore, we believe that it will play a role as a cash cow. And from fourth quarter of 2025, Carnival Hybrid is also increasing in our supply and also it will impact in our sales globally in 2026. And also, we had the Seltos that released recently, not only in the U.S., but for Seltos domestically and in India and all over the world, from a profitability perspective is a big contributor to Kia's growth.

However, in Europe in 2025, we were lacking in some extent. But in 2026 compared to 2025, we believe that we'll be able to achieve 10% growth. And the reason is because we did launch the EVs in 2025, but they were usually at the end of the year. And in 2026, we believe that we can sell in full. And at the beginning of the year, we have EV 2, which is a low-cost model. that will to be released. Therefore, according to the EV transition period, we will be able to supply accordingly.

And also for the Ceed, the ICE has been discontinued. It was produced in -- so as the K4 that was produced in Mexico was being sold in Europe, the ICE model and EV model balance was being met -- and we believe that, that will be able to drive growth.

According to this, the electrified vehicle EV new cars increasing will be able to impact our revenue growth in 2026. Also, the earnings compared to the year before, we will be able to see a significant growth. It may seem aggressive growth or conservative growth, but we believe that in sales, we will be able to achieve profitability growth. And as I said, the tell ride and the cash cow models have been released.

Backed by these models, we will continue on enhancing our profit -- product value and also our financial stability will also be increased. We will reduce our debt and also have our cash increase. That will be our 2026 business plan.

And also, I want to move on to our shareholder return policy. On 2025, we mentioned that we would achieve TSR of 35% for 3 consecutive years. Last year, there was a tariff impact partially. But our fundamental policy towards our shareholders and our promises to our shareholders should be met regardless of these external headwinds. Therefore, we are going to keep to our original promise that we have already made. Whatever the situation may be in Kia, we are going to show increasing sales.

And we believe that, that is right since our shareholders have shared our burden and supported us. Therefore, we will increase the dividend per share from CNY 6,500 to CNY 6,800. And therefore, the TSR is going to be kept at 35%. And through our efforts, shareholders and investors may see -- may be able to see Kia as a credible company. Once again, I'd like to stress that we are going to keep to our promise -- and if our cash increases, then we will make reinvestments internally, and we will also provide some of that free cash balance to our shareholders as well. We will make reasonable decisions.

And next, we will take the -- to begin the Q&A session. Please follow the instructions from the operator.

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

[Foreign Language] [Interpreted]. I am Young from Samsung Securities. I have 2 questions. The first question is on the tariffs. You have explained about the tariff. In the morning, there was the Hyundai Mobis earnings results that was announced to the public, and they have said that all of the tariff impact in the manufacturing parts have all been recovered. And so when you have announced your impact of the tariffs, you included the numbers of giving back the cost of the parts included in your statistics?

And regarding the 3.75%, does it also include the drawbacks of the parts in the tariffs? The second question is regarding the CapEx. HMC has announced about the investments in robotics and also fiscal AI. And although Kia's cash flow is very good at the moment, they cannot help with the investment with this. And so this year, what are your plans for CapEx? And also, will there need to be additional financing for this

[Foreign Language].

[Interpreted]. First, regarding the tariffs, I think that the cash basis on the accrual basis will be different. But if we look at the tariffs that are impacting the OEMs and the parts, it can be divided into 3 parts. First is the OEM that pays for the tariffs when they export to the country. And also second is for the parts tariff, and this could be divided into 2 parts as well for the key parts as well as the general parts tariffs.

Regarding the MSRP, we have the 3.75% referral refund provision that we have, but that has already been burdened, and so it does not reflect additionally into our income statement. And in regards to our parts and OEMs, so there will be impacts of only the general parts that have not been refunded yet. And so the 2 that it will be actually be burdened by the OEMs with the OEMs exports to the United States and also the general parts that will be also be burdened.

And also for the general parts, there are exports that we do directly ourselves, which we take the burden of and also there's the exports that are done by the vendors. And -- but it has also been 100% reflected in our pricing. Therefore, we do not believe that there will be any changes in the acknowledgment in our accounting unless there is any changes to the tariff amount. And if we consider the 2025 tariff total burden, it was KRW 2.9 trillion.

And also, if we consider in mind that the U.S. volumes will go up this year, we believe that there will be a full year reflection of the tariffs that has been burdened in May, which is about KRW 3.5 trillion. And therefore, 80% of the tariff is burden by OEMs and 20% will be the general parts tariffs that will be refunded. And because it has been 100% being reflected, we do not think that there will be any confusion going forward.

Regards to the exports from Mexico and the tariffs from Mexico, we believe that we have to wait until Q1 in order to see how much refunds will need to be done. And so after the Q1 is over, we'll be able to know a little bit better.

Second question regarding CapEx, adjustments will be needed. But based on rolling basis in the mid- to long-term calculation based on the mid- to long term in 2025. In 2025, we have our calculation set as KRW 5.7 trillion for 2026, KRW 5.5 trillion and 2025 2027, KRW 5 trillion. And based on our top line growth, we have 2025 as 5.1%, 2026, 2.4% and also 2027, 3.5%.

Although our group has announced our plans to invest in autonomous vehicles and also AI, additional and additional investments may be needed. However, even if they are reflected, we believe that we have the fundamentals very solid in place that we are able to take care of that CapEx increase. And regarding the cash flow as well, we -- as our Senior Vice President has announced, we have increased our generational core generational business capabilities. Therefore, we believe that we will be able to go to the extent that we can take care of the increase in the CapEx.

[Foreign Language] [Interpreted]. The following question will be presented by [indiscernible] Securities.

[Foreign Language].

[Interpreted]. I am [indiscernible] Securities. So I'd like to, first of all, ask about the 2026 sales target. So it seems like there's a launch of EV and Seltos. And in regions like Europe, you're targeting for 11%. In APAC, you're targeting for 13% sales growth, and that is seemingly above the industry average. So you're targeting to go above the industry. However, when we look at these regions, there has been very aggressive entrance of the Chinese OEMs recently.

And in the fourth quarter, I'd also like to ask about how much the incentives have played a factor because other than the U.S., it's very difficult to track the incentive status going on. So I'd like to ask how the fourth quarter incentive has differentiated from the year before on the Y-o-Y basis other than the U.S.

And also, I'd like to also -- so my 2 questions were regarding the 2026 sales target as well as the incentives and also how much the incentives will be impacting the sales target of 2026.

[Foreign Language]

[Interpreted]. Thank you very much. Regarding the question on the Chinese OEMs, yes, you have seen correctly, the competition is intensifying from Chinese OEMs and the price difference between us and Chinese OEMs is quite large. However, we are not thinking of offsetting all of their impact through giving more incentives and through price transfers. -- compared to 2024 and 2025 to put it roughly, per unit, the incentive increased by 10%, which was around KRW 200,000.

And in 2026, when we set the business plan, we also set it as a similar rate, the incentive increased at a similar rate to last year. And in Europe, you also have to think about the fact that there's not only Chinese OEMs in the competition. There is the European OEMs that are very aggressive in their sales promotion. Therefore, we need to deal with the European OEMs as well in that market. And to increase our sales, yes, we have to increase our incentive ratio. However, when thinking about the direct impact that incentives has had on the actual sales unit, it's very difficult to say, especially when we think about countries like the U.S. and the regions like Europe and India, especially for India, there's not been that big of a change in incentives, and we've tried to rather take the new model launch effect with the Seltos.

We have targeted aggressive sales volume increase based on that rather than incentives. In the Europe, yes, incentives have played a big part in the volume increase of around more than 10%.

So you've asked regarding the different situations of different regions when we look at the 2026 BP.

Now I want to mention that the market environment is very different region by region. So if you look at the very big numbers, then yes, we will see that the numbers volume will actually increase from 3.14 million to 3.15 million. However, we have to see that the characteristics are different by emerging markets and advanced markets. The share would be emerging markets half and advanced markets half. And the situation is especially very different from Europe and the U.S.

When we first look at the U.S., the EV subsidy has ended and the regulatory framework has also changed very much. Therefore, we will be focusing on increasing the sales of ICE and HEVs more and decreasing the sales of and decreasing the ratio of EVs.

So when we look at the very big picture in terms of our products, we will be focusing on increasing the Telluride from 120,000 to 180,000, which is more than -- which is around 50% growth. And also, we will have a new lineup of the Seltos. And also, we will be targeting for a Y-o-Y 90% increase when it comes to HEVs in the U.S. So there will be an increase of 20,000 going to 250,000, that is the business plan. So basically, in the U.S., in a nutshell, we will be focusing on our new car as well as the transition to hybrid centered sales.

Now in the EU, of course, EVs are going to take a center front and center. In the fourth quarter, we have there for the very first time, set the milestone of EV sales outpacing that of gasoline vehicle sales, we believe that this trend will continue on forward.

In the EU, the success of EV lies in how we can really take the lost volume of ICEs and we transition that to the EV portfolio, that will be the most important factor for us to gain the upper hand. In 2024, we did post a negative number. However, that was because we were not able to transition the demand from ICE to EVs fully. But now that we have the full lineup of EV 2 to EV 5, and we also have the PV 5 as well as Seltos, we believe that in Europe, we do have the strength to now transition away from ICE and take all of that demand into EVs.

So for Europe, the plan is 11%. But the thing is the numbers may be similar, but the market characteristics is very different when we look at the U.S. and Europe. And in EU, we are -- and in Europe, we are targeting for 80% growth rate in terms of EVs. Now in emerging markets, the competition is very high from Chinese OEMs. And in EV segment, we have the Sonet and the Seltos, and these are very strong SUV segments that we can lead with. And also when it comes to the pricing, we are going to try to expand the production in the Chinese plant to reduce the cost of sales.

And also, we will be making use of the regional hubs in Asia Pacific like Malaysia and also increasing the ratio of CKVs. Therefore, we will be using our product lineup as well as the regional hubs to target that area and to reduce cost of sales specifically.

And we're especially thinking of going more aggressive in Asia Pacific in terms of our expansion. And in CIS, we also have the production base of Kazakhstan and Uzbekistan. And therefore, when we look at the numbers in the U.S., it 4% to 5%, it's more than 10%. And for other emerging markets, we believe that we will be able to achieve a high single-digit growth rate.

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

[Foreign Language] [Interpreted] I am Jinsuk Kim from Mirae Securities. I have 2 questions. The first question is regarding the earnings from the United States region. And the United States region earnings has a big impact on our performance. And this year, you probably have a scheduled increase for sales.

So I would like to know the details about the pricing and the incentives and the tariff impact on the earnings and compared to the year before Y-o-Y, how will it be? If we look at the tariff itself for 8 months, there was the implementation of the 25% tariffs and for 12 months, there will probably be the impact of 15% tariffs. But will the cost of tariffs go down or be maintained or go up Y-o-Y?

The second question is regarding the robotics and the autonomous vehicle-related features that HMC Group has announced recently. There's a lot of people that are expecting a lot in regards to the autonomous vehicle technology and robotics in the HMC Group. And so there will also be the demos and a lot of test cars that will be in place and a lot of events. So are there any events that you can explain at the moment to the public?

And also, what is the difference between HMC and Kia's perspective on these features and robotics? Although this is the earnings results announcement call, regarding the CES, recently, there was events that happened. And so we would like to know if there's any other events that will be happening soon.

[Foreign Language] [Interpreted]. Regards to the earnings in the United States region, in Kia, the NA region holds a big part in our earnings in 2025 as well. But in 2026, we expect the same to be true. And the basis for this is because of the sales volume increase, but also we have our Telluride, which is a high-profit model that will be released in the United States, which we have the volume set as reaching from 120,000 to increase to 180,000. And it's not regarding just the NA region, but Kia in our good times had reflected the increase in the cost of sales reflected in the pricing. But with the intensified competition with other OEMs like Chinese OEMs, we cannot reflect all of our costs into our pricing. Therefore, we are putting in a lot of efforts to secure our cost competitiveness.

And I have emphasized this several times, but Kia has put in a lot of efforts with a desperate heart in order to reduce our fixed costs as well as reduce our cost in general. So it's not just the NA region, but Kia as a total in order to secure our profitability and maintain our profitability have done our best in order to reduce our cost and fixed costs.

So we believe that the earnings in NA region will be maintained.

At CES, we take turns during the announcement and it was HC's announcement this time. And -- but in the group perspective, autonomous vehicle technology and robotics is a strategic asset and a future industry. And it is a common investment that we are putting in together as well as a common development and a common project that we are engaging in together. So through the robotics lab and diverse arenas, it's like the DGMP is our common asset.

We have the autonomous vehicle technology as well as robotics as our common asset as well. And regarding the CES, we have been able to show our big picture in our robotics. And at the end of the year, we have the demonstration in place and also, we are going towards the mass production POCs. -- but -- and also the industry mass reduction as well. But rather than showing this and our plans on a one-off event basis, I think that there will be a better place for us to show you the progress on the road map through a structured manner.

And so if we have plans in order to have this event in place after our preparation, we will be able to let you know. Also, it's the same for autonomous vehicle technology. Our big plan is to have the SEV launch in 2027 and also have the L2++ stage of autonomous vehicle technology as an initial launch and also have our L4 autonomous vehicle technology developed with Motional. And this year, we have our launching as well. Therefore, after our preparation is over, I think that we are going to go to the stage of mass production development and our leadership is looking into ways to accelerate this, and we have assignment in place for this as well. So we will be able to have a structured event where we can regularly tell our audiences about our plans and our big picture.

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

[Foreign Language] [Interpreted]. I am from Gwi-Yeon-Kim from Daishin Securities. I have 2 questions for you. The first is regarding the recent DRAM price increases. I'm talking about semiconductors. Is this going to impact our cost of sales? It seems like there's a lot of talk about this overseas. So I'm wondering if there's been any long-term contracts in place regarding the DRAMs and how the volume is going to be planned for the future.

Second is regarding the conversion cost. In the fourth quarter, it seemed to go up. Is there a special reason for this?

[Foreign Language] [Interpreted]. So regarding the very first question, the semiconductors that go into automobiles are different from DRAM. So we are not impacted right now. It's difficult to say if we'll be impacted if our cost of sales will be impacted going forward. However, what's more important for us is basically the price of platinum and rhodium as well as palladium that goes up. That is what impacts us even more.

We have experienced the semiconductor shortage in the past, and that was a very difficult time for us to we do have long-term contracts in place to prepare ourselves. So that is not a big risk that we think. And regarding the increase in warranty provision, there were a lot of new model launches in 2025. And therefore, when there's a new model launch in the beginning, we need a bigger provision. And also, we saw increased sales in EVs and EVs do need more warranty provision than ICE. So that is why there was a Y-o-Y increase. But when we look at the comparison with the third quarter, you can see that the ratio has actually gone down. So I want to say that this difference in the ratio is because of the new model launches as well as just organic differences in the cycle.

And also, I would like to add on about the question regarding semiconductors. When we actually signed the contracts regarding semiconductor procurement, we actually do individual contracts for different models. So it is not like for semiconductors, we have a yearly procurement repricing contract altogether. Therefore, of course, these factors are forecasted, and that is included in our price -- in our contracts.

[Foreign Language] [Interpreted]. The following question will be presented by [ Kwangsik Kim ] from Kyobo Securities.

[Foreign Language] [Interpreted]. I am from [ Kyobo ] Securities. I have a question on the net cash, about KRW 19.6 trillion has been announced, but you have also announced that in 2026 with the cash generation capabilities that you have from Kia side, you'll be able to have more cash accumulated. But I believe that there's already enough that is accumulated from KS side, and I have more questions about how it will be used effectively.

And if we compare it with HMC as well, it looks like you have a lot of net cash on KSI. Therefore, will there be any other plans for the usage of the net cash, for example, like the increase in TSR. If we look at the earnings results that call that was done by Kia recently, now they announced that out of the KRW 10 billion, about KRW 6 billion will be done as a share buyback, which is over 50% of the TSR. Therefore, if we look at the EV transition that GM is going towards, there will be a lot of costs that will be incurred from GM side. But even with that in mind, they are increasing their shareholder returns.

Therefore, if we look at Kia, the TSR being 35%, I believe, is a little bit lower compared to the net cash that Tia has. Although you have talked about the common investment that will be done on autonomous vehicles and robotics, I still think that TSR could be done on an individual level separate from the other groups in HMG. Therefore, are there any other plans to use your net cash.

I believe that the answer is in the question itself. And so to summarize the comments, I think that although the net cash that we hold on Kia is KRW 20 trillion, the reason why it has gone up is that it has been to this level in the recent 5 to 6 years. And compared to the scale of our company, the KRW 20 trillion net cash that we have isn't that excessive if we compare the net cash to our peer groups, as you're well aware. And the reason why I said that the answer is in the question is because of the room of the increase in the TSR.

Of course, we are reviewing this. But in the situation that there may be another variables that may be in place or unexpected situations that may arise, we are holding the net cash in Kia currently. But as I said before, if the performance in our earnings go up and our cash goes up accordingly as well, we cannot help but think about the increase in TSR.

This concludes the fiscal year 2025 fourth quarter earnings results by Kia. If you have any further questions, please contact the Kia IR team directly. Thank you for your time and participation.

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

[Interpreted] Hello. This is Seong-guk Jeong, Head of Investor Relations at Kia. I will begin with business results for the third quarter of fiscal year 2025. I'll commence with the sales summary, followed by the consolidated income statement, revenue and earnings analysis; and finally, the consolidated balance sheet.

First, I'll begin with the global retail sales performance. In Q3 2025, global industrial demand increased by 4% year-on-year due to continued strong demand for ATVs in the U.S. market increased EV purchases by consumers ahead of the expiration of IRA subsidies and economic stimulus measures in the Chinese market. Kia's global retail sales witnessed a 5.5% growth year-over-year led by higher sales centered around the Sportage HEV and Carnival HEV in the U.S., and the new EV4 model in the domestic market keeping our global market share steady at 3.6%.

By market, domestic sales grew by 10.3% year-over-year driven by the increased RV sales centered on the Sorento and Carnival and the new model effects of the EV4. In the U.S. market, amid continued strong demand led by HEVs and a surge in EV demand ahead of the expiration of IRE subsidies, overall market demand remained more solid than expected, rising 6.3%.

During this period, our sales increased by 11.1%, outpacing industry growth driven primarily by strong performances from the Sportage HEV and Carnival HEV, resulting in our market share expanding to 5.3%. In the European Western European market, despite continued strong sales of the EV3, overall sales declined due to the discontinuation of certain models and temporary production adjustments associated with electrification transition at the Slovakia plant. However, entering the fourth quarter, we plan to further solidify our EV leadership by completing our mass EV lineup with the launches of the EV4 and EV5 amid rapidly growing market demand for EVs and by entering a new segment with PV5.

In the Indian market, sales declined by 3.2% year-on-year to a 5.9% market share due to deferred demand ahead of the goods and services tax rate cuts implemented on September '22. However, with the launches of the Clavis EV and the full model change of the Seltos, sales are expected to return to a growth trajectory in the fourth quarter. Major emerging markets achieved sales growth centered on the Middle East and Africa and Central and South America markets driven by the strategic expansion of export volumes from Chinese plants.

Next is our electrified vehicle sales summary. In Q3 2025, electrified vehicle sales increased by 32.3% year-over-year to 204,000 units driven by strong demand for HEVs in the U.S. market and EVs in Western Europe. As a result, the share of electrified vehicles in our global sales expanded by 5.4 percentage points from 21% in Q3 2025 to 26.4% in Q3 2025 and sales mix for HEVs and EVs accounted for 15.2% and 9%, respectively.

By model, the sales growth in HEVs was led by the Carnival, while in EVs, the growth was driven by the EV3 and EV4. In the third quarter, the Carnival HEV continued to expand its penetration in the U.S. midsized MPV HEV segment maintaining a 27% market share and together with the robust performances of the Carnival and Sportage drove U.S. HEV sales up over 87% year-over-year expanding its market share to 6.4% as of July, August 2025 from 4.2% in 2024.

In Western Europe, positive market response and solid demand for the EV3 continued, while the launch of the new EV4 in the third quarter, further boosted Kia's EV market share in the region to 4.2% as of July, August 2025 from 3.2% in 2024. Kia plans to further strengthen its position as a leading global brand in electrification by completing a full lineup of mass EVs with the EV5 in the fourth quarter and the EV2 early next year, while also adding new models to the HEV lineup such as Telluride and Seltos to swiftly respond to evolving demand and regulatory changes in advanced markets such as Western Europe and the U.S.

The following is the regional wholesale performance. In Q3 2025, Kia's wholesale increased 2.8% year-over-year to 785,000 units. Looking at the key regions, North America saw a 2.3% growth year-on-year to 279,000 units owing to expanded shipments of the carnival and Sportage HEV based on robust HEV led demand and stronger SUV focused wholesale volumes.

In Europe, despite strong sales of the EV3, sales volume declined by 2.9% year-over-year to 128,000 units due to the discontinuation of certain models and production adjustments associated with electrification transition at the Slovakia plant. In India, sales fell to 3.2% year-on-year to 64,000 units due to increased deferred demand ahead of the GST rate cuts.

Finally, in the Rest of the World, such as the CIS region, sales increased 45.6% year-on-year to 11,000 units owing to expanded sales of the -- produced at the Uzbekistan plant. Next is the consolidated income statement. In Q3 2025, revenue reached KRW 286.6 trillion, up 8.2% year-on-year, backed by a 1.8% increase in consolidated sales represented an additional 13,000 units stronger HEV EV sales centered on advanced markets and higher ASP resulting from continued price effect based on product value added. Operating profit recorded KRW 1.462 trillion, down 49.2% year-on-year, mainly due to the impact of the 25% tariffs and higher warranty and R&D expenses.

However, the operating margin for the third quarter stood at 5.1%, led by strong sales of the Sportage and Carnival HEV underpinned by robust demand in the U.S. disciplined operations focused on residual value management by executing incentives at around 60% of the U.S. industry average and maintaining effective cost control.

Next, operating profit analysis. Breaking down the evolution of operating profit by sector. First, the application of 25% U.S. tariffs impacted our third quarter performance as well, reducing profit by [ KRW 1.24 ] trillion, despite efforts to reduce incentives in the U.S. market to mitigate the impact of tariffs, increased spending for competition in the European market led to a KRW 264 billion Y-o-Y increase in consolidated incentives, reducing earnings.

The negative mix impact due to the high base effect last year continued in Q3. Nevertheless, a boost in new vehicle sales in Q3 limited its impact to KRW 59 billion, improving the visibility of a shift to a positive effect in Q4. Additionally, factors such as increased sales warranty costs due to the rising quarter-end yuan to dollar exchange rate and higher SG&A expenses, including R&D costs led to a Y-o-Y decline in operating profit. However, Kia largely mitigated the negative impact to its profit through volume growth and pricing effects.

Volume growth in advanced markets, particularly in the U.S. HEV segment and rational mix improvements contributed KRW 160 billion. Price effects from enhanced product value-added contributed KRW 118 billion and favorable exchange rate effects from the week 1 contributed KRW 253 billion to profit improvements. As a result, our operating profit for the third quarter of 2025 amounted to KRW 1.462 trillion, a decrease of KRW 1.419 trillion Y-o-Y.

Next, revenue analysis, first, based on the original sales share data on the left Consolidated sales revenue increased by 8.2% Y-o-Y despite sales growth in North America, driven by expanded wholesale units and higher ASPs for HEVs and SUVs, its share decreased by 1.1 percentage points from 46.4% in Q3 last year to 45.3% in Q3 2025. In terms of domestic sales, the launch of the new Tasman EV4 and the expansion of operating days contributed to an over 10% increase in sales on top of which an improved RV-focused mix led to a 5% increase in ASP, increasing the sales contribution by 1.3 percentage points from 16.8% in Q3 last year to 18.1% in Q3 2025.

Despite a decline in wholesale units, Europe's revenue share remained similar to that of the previous year at nearly 21%, supported by ASP growth driven by strong EV3 sales and a favorable EUR 1 exchange rate. India's revenue share decreased by 0.3 percentage points Y-o-Y due to weaker sales.

Now moving on to the ASP improvements on the right. The global ASP for Q3 2025 rose 6.3% Y-o-Y to KRW 38.6 million, driven by expanded HEV, EV sales centered in advanced markets and positive exchange rate effects domestic ASP also rose 5% Y-o-Y to KRW 35.5 million, maintaining strong growth momentum. Next, cost of sales and SG&A.

Despite volume growth, increased ASP-driven revenue expansion and favorable foreign exchange effects, the cost of sales ratio for Q3 2025 rose 4.3 percentage points Y-o-Y to 81.1% due to the previously mentioned impact of U.S. tariffs that amounts to [ KRW 1.24 ] trillion.

Without the tariff impact, however, the Q3 cost of sales ratio is estimated to have remained at last year's Q3 level at 76.8%. The SG&A ratio for Q3 rose 1.5 percentage points Y-o-Y to 13.8%, driven by increases in warranty expenses and R&D costs. The sales warranty expense ratio rose 0.9 percentage points Y-o-Y to 5.4%. This was mainly driven by the depreciation of the yuan -- depreciation of the yuan, sorry, against the dollar at the end of Q3, R&D expenses increased Y-o-Y, accounting for 2.2% of sales revenue, primarily due to higher predevelopment research costs at the R&D center.

Next, operating income. First, equity method gains increased by KRW 49 billion Y-o-Y to KRW 161 billion, driven by higher profits at some affiliates. Financial and other nonoperating income increased by KRW 24 billion Y-o-Y to KRW 263 billion, reflecting FX related gains due to volatility in the yuan dollar exchange rate. As a result, net nonoperating income expense for Q3 2025 increased by KRW 74 billion Y-o-Y to KRW 425 billion.

Last but not least, the balance sheet as of the end of Q3 2025. Total assets amounted to KRW 97.984 trillion, an increase of [ KRW 5. 8 ] trillion compared to 2024 year-end. Key factors driving this asset expansion include increased liquidity, growth in tangible and intangible assets and an increase in inventory assets.

Total liabilities at the end of Q3 2025 reached [ KRW 39.224 ] trillion, an increase of KRW 2.308 trillion compared to the end of the previous year, despite a KRW 923 trillion reduction in borrowings, liabilities temporarily increased compared to 2024 year-end due to higher accounts payable and increased accrued expenses, following the reflection of KRW 1.1 trillion in employee performance bonuses, which were paid in early October.

Total equity stood at KRW 58.759 trillion, an increase of [ KRW 2.9 ] trillion compared to the end of the previous year, the debt-to-equity ratio rose by 0.7 percentage points Y-o-Y to 66.8%. This concludes the earnings results for the third quarter of fiscal year 2025. Thank you.

[Interpreted] Next, Kia, [indiscernible] Senior Vice President, Seung-Jun Kim will deliver a review on Kia's earnings for the third quarter of 2025 and business outlook for the fourth quarter.

[Interpreted] Hello. I am Kim Seung-Jun. So regarding the profitability of the third quarter, we would like to give you the main element. So as we have said, in third quarter, the tariff impact has been more pronounced and with the entry of Chinese companies, the market volatility was very high. However, even in these key situations, particularly in the U.S. market, there has been meaningful growth that we have realized and from a revenue perspective as well, we have been able to sustain a strong upward sales trajectory, which is a great performance for Kia.

By region, to explain, for the United States, compared to the year before, we have 11% growth in sales, and we have the new Carnival HEV, Sportage PHEV and HEV led growth has been achieved also Telluride in its last model year is expanding in sales as well.

And in H1, as we have explained, Kia's low incentives have been maintained and maintenance of our residual value has been achieved as well. Although sales have grown, we don't use high incentive rates, but we have efficient incentives executed and maintained our residual growth while growing our sales, which is our biggest advantage in this difficulty.

However, for the European market, there was the electrification transition in the Slovakia plant. Therefore, there was the temporary down of UPH and also, there was a discontinuation for partial models, and so there were difficulties faced. However, there are 40% growth that was EV led. And in the fourth quarter, we have EV4 and PV5, and therefore, EV sales will be fueled by these models.

Also from a revenue perspective, hybrid and in EV mix, improvement and for high advanced safety, convenience specs that will be expanded. We believe that revenue will be -- has been high.

From a profitability perspective, as you're well aware, the tariff impact was the biggest compared to the year before. It was KRW 1.4 trillion of impact, but KRW 1.2 trillion has been impacted by tariffs. And as we said, at the end of the year, foreign exchange rate fluctuations and foreign currency in our warranty provision has deteriorated our profitability.

However, our sales growth is continuing on and we are continuing to add on to the product value and one of our advantages or of our raw material cost or labor cost reduction is continuing on. With that, we have been able to have efficient cost control. This basic Kia's fundamentals are being maintained without change in these hardships and all of the investors here share, to you, we would like to show you the fundamentals that we have been able to maintain. And also in the fourth quarter and next year, the fourth quarter, the industrial demand in the United States will continue on.

So in H1 earnings results, we said that in H2, the industrial demand in the United States, we thought it would go down. But unlike our expectations, our industrial demand will be robust. In particular, for hybrid, there will be strong demand for HEVs that will continue.

In Europe, although it's hard compared to the year before, for ICE, compared to ICE, EV is growing amid this we have EV4, EV5 and PV5 that will be launched at the end of November. And we have EV2 next year, which is an entry-level EV that will be released as well. With this in mind, in Europe, so according to the change in the market, we have aligned our strategies. Therefore, we can show our strong advantage there.

Based on that, in next year as well compared to this year, we will continue to grow. And in that aspect, after the confirmation of the specific numbers, we will be able to explain again. If we look at the third quarter performance, we had an opportunity to reflect that ourselves because the external factors or tariffs, what will be added are something that is uncertain.

Next year and going forward, the external conditions, not only the tariffs but there will be unexpected other external economic conditions that will become risks that may appear continuously. And if that's the case, then the changes in the external circumstances, whether we will fall down and sit on our hands, we have reflected ourselves to show that we should not sit on our hands anymore, and we should take action. We have reflected ourselves in this quarter. And based on this, what we've done existingly not only the internal fundamental improvement, but additionally, the internal environment will be strengthened in our fundamentals and also reduce our costs. We will move with urgency and strengthen our fundamentals. Those are the efforts that we're doing.

We won't be -- we will stay strong and stable, no matter the environment. We will put all our efforts into maintaining that stability. Thank you.

Now we'll begin the Q&A session. [Foreign Language]. [Operator Instructions]. [Interpreted] The first question will be provided by Moonsu Chang from Hyundai Motor Securities. Please go ahead with your question.

[Foreign Language]. [Interpreted] Hi, I'm Chang Moonsu. I am from Hyundai Motor Securities. I have 3 questions. One, the eight page regarding the operating profit analysis, I would like to ask about the increase in the other costs. For example, in the warranty provision expenses compared to usually I think that there has been a KRW 350 billion increase, therefore, even if we consider in mind, the year-end, the quarter end foreign exchange fluctuations, it is higher than expected. So is there a special reason for this?

The second question is regarding the R&D expenses. And during the presentation, you mentioned about the predevelopment research and R&D expenses that was included in the R&D. However, compared to on average, I think there's about KRW 20 billion to KRW 30 billion increase. So is this temporary? Or will this R&D expense cost be maintained?

The third question is on the tariffs. And does this include the part of reduction in the tariffs, because if there are the inventory that has been depleted for parts, maybe there has been impact there. So we would like to ask that there is impact for the tariffs there.

[Foreign Language]. [Interpreted] Regarding the warranty expenses, yes, there is the impact of the quarter end fluctuations in the foreign exchange rate. But separate from that, there was the campaign cost that are centered around the software updates and which contributed to the increase temporarily on the ratio of the warranty expenses.

The second, regarding the increase in R&D costs. We have talked about this in the CID and Investor Day. And so we -- not only do we invest in the investment that we currently do, but we also invest in new projects as well as new investments as well, and we cannot reduce such investments even with the difficult conditions that we are facing. Therefore, this contributed to the increase in R&D costs. And for Kia, this year and next year, we have the PBV new car that's based on SW and LW, which are also factors.

Regarding the tariffs, yes, we have included the import parts as in the tariffs as well. And adding on to the response regarding the warranty expenses, we have -- if we release new cars, there's the warranty expenses per unit that goes up when the new car is released and then after the mass production, it reduces. And this year, we had a lot of new releases of cars. Therefore, that has been reflected in the third quarter.

[Foreign Language]. [Interpreted] Regarding the quality costs, we have continued to increase and strengthen our criterion standards for quality management and we've taken measures proactively in order to control our quality. And regarding this, we have the claim ratio that has been reduced to 2.5%, which is lower than the industry average. And we are continuing on to do our quality sensing using our dedicated organization that is dedicated for the quality sensing proactively.

Even if it's small issues by the model year and the model type, we are trying to proactively sense the issues that may appear. And this year, we have been able to identify 10 items proactively by sensing and monitoring ahead of time like the ECU upgrade as well as software upgrades have been proactively done. And these are some of the measures that we have done in order to block bigger issues from happening, which has been reflected in the third quarter.

[Foreign Language]. [Interpreted] The following question will be presented by Paul Hwang from Citi Securities.

[Foreign Language]. [Interpreted] My name is Hwang Paul from Citibank. I would like to ask some questions about the graph that you showed us and some other costs that you talked about. For example, in Q3 2024, there was an increase in diverse costs. You just explained, provided an explanation about the increase in R&D costs and also the quality cost. And there were some other expenses that I was worried about. So I would like to ask you about the state of the market and also about the market tariff mitigation effect because I think that the mitigation result was smaller than what you had expected and what you presented in the previous quarter earnings call.

So for example, initially you expected to set off the tariff effects by about 60%. And I would like to know what is the results for Q3? And if you can expect further reduction of the tariff effects in Q4 and in what items?

My second question is regarding the Experian noise that we have been hearing about. If this problem continues in the mid to long term. Do you have any plans to respond to this issue?

[Foreign Language]. [Interpreted] Thank you for your questions. You have mentioned some concerns about the increasing warranty costs, for example. I think that the FX effect has something to do with the results Y-o-Y. And I must confess that there are some quality campaigns that we are conducting preemptively. So these campaigns are having an impact on the warranty costs. That is true. And also the fact that we are launching new models, that is also incurring some costs and having an effect on the quality side of the expenses, and additionally, what we can tell you on top of what we already told you is that the inflation is also having an effect on the labor cost, which is increasing and also the cost of parts that are rising as well. So these are some factors that are influencing the increase in quality costs. You also mentioned being curious of our efforts to reduce the tariff effects. So what can be done is being done on our parts there is no delay that I can assure you. And there is no timing effects that will be having an impact on the mitigation efforts regarding the tariffs.

[Foreign Language]. [Interpreted] I would like to add something about the Experian issue. So during the COVID epidemic. We have experienced some disruption in our supply chain. So what we have come up with after we experienced that challenge is that we are separating our supply of general parts and key components. So for example, for strategic components, we had a more stable supply chain strategy, and we are also operating an alternative supply chain for those important parts.

In the short term, we don't expect any disruption to occur. But if, let's say, any issues get prolonged in the long term, then there are some measures that we are putting in place that we have planned in the short and long term directly and indirectly. So we keep -- we are monitoring the supply chain status continuously. If there are any issues, however, that occur, then we do have some strategies to respond to them. So I don't expect them to impact our production activity in absolute terms.

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

[Foreign Language]. [Interpreted] I'm Jinsuk Kim from Mirae Assets Securities. I have 3 questions. The first is regarding the tariffs. And you have mentioned in the analysis, there will be impact of KRW 1.2 trillion, and it is monthly KRW 400 billion, as you have previously stated in your previous earnings call. And so if you look at the fourth quarter, and it will be applied from November 1, partially and moving on, then KRW 400 billion of October and KRW 250 billion, and KRW 250 billion each in November and December. And in total, we think it will be KRW 900 billion. So would this be the tariff cost that we should expect?

And second question is regarding the dividends payout. And so there were uncertainties of the performances until now. And looking at the last year's TSR, that was 35%, KRW 650 billion. Will this be continued on in this years dividend payout. As the tariffs have been reduced to 15% and confirmed there has been ease of concerns of the TSR, but will the KRW 650 billion that is the level of last year be the same for this year's dividend paying out.

And the third question is on the cooperation with NVIDIA. There are a lot of hype towards the cooperation with NVIDIA and there are a lot of people that are actually putting in a lot of attention in the cooperation. If you look at the Investor Day announcements from Hyundai Motors and Mobis, they said that there will be a demonstration that will be done in May and June. And also in 2028, there will be the sales that will start. For Kia, will it be the same time line.

[Foreign Language]. [Interpreted] The person that's asking the question is someone that is really familiar with our company, we have burden on responding to the questions. First, regarding the tariff impact. Tariff impact in the fourth quarter will be similar to that of the third quarter, although it will be implemented of the 15% of tariffs from November 1, it will be retrospective. And therefore, we already have the inventory that has been applied with the 25%. And therefore, we believe that the impact will probably be the November sales that will be impacted. Then it will probably be similar to the impact of the third quarter. Of course, it will be a little bit lower, but the gap will not be that big and the impact will be fully reflected in next year performances.

The second question regarding the dividend payout, we have announced and promised our shareholders about our dividend payout already. Therefore, we will maintain and keep that promise. Regarding the third question for the smart car plans, we also have the same time line as the other companies, and so our release and the time line will not be different.

[Foreign Language]. [Interpreted] The last question will be presented by Chang Kim from Korea Investment & Securities.

[Foreign Language]. [Interpreted] I have 3 to ask you. The first one is regarding sales in America. I know that there is some discrepancy between the sales and the wholesale units and retail sales and especially the wholesale units is a little bit lower than the retail sales. Is that because of inventory management or another reason?

My second question is regarding the lowering profitability. I would like to know the reason. To my knowledge, Kia has -- does Kia revert some of its reinvestments towards research and development and what is the ratio of that investment. Is there a change in Kia's policy regarding how to invest your profits for common R&D expenses between Hyundai Motor Company and Kia Motor Company, I know that the ratio -- distribution ratio is 6:4. What -- could you elaborate more on the differences? Is there any details that you can tell us about that?

My third and last question is with regards to NVIDIA because we are hearing a lot of rumors in the market about Kia getting a chip from NVIDIA. So could you elaborate more on that? What is your long-term plan?

[Foreign Language]. [Interpreted] Thank you for your question. Regarding the first question for the discrepancy between wholesale units and retail sales. One of the major factors of that, I think, is the difference in inventory based on the model of the vehicle.

And the second factor that I can cite is the difference in the contract timing when we do flip contracts. For your second question regarding R&D reinvestments, there is no changes in our policy or criteria. And I know that it may worry our investors to see some expenses increase. But I would like to ask you to please consider this as Kia's symptoms of growth, and it is not a symptom of a worsening profitability.

Regarding your last question about NVIDIA's chips, we are thinking that this chip from NVIDIA will be helping us in the development of SDV or automotive vehicles in the future. Thank you.

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

[Foreign Language]. [Interpreted] I'm Eun Young Yim from Samsung Securities. I have 2 questions. The first question is regarding the EV industry growth that we are looking at in -- which is very high in the demand growth, but there are not -- if we exclude the ICE and just look at the EV, there are the EV3 and a lot of new cars that are being released from Kia's side. We have thought that the expectations were that it would exceed that of the industry growth, but it is actually falling behind.

So compared to the Chinese OEMs, what is the drawbacks that we have on the Kia side and what are some of the strategies that you are taking in order to improve and go over the Chinese OEMs. And the second question is regarding the incentives. So the United States incentives have gone down the decrease of EVs and HEVs have gone up, but there will be new policies that will be implemented for European niche market. And so regarding the incentive directions, what are some of the guidances that you can provide us for the fourth quarter?

[Foreign Language]. [Interpreted]. During the Investor Day, the President has asking the question, we told you that we would like for you to continue on to look at what Kia's performance would be doing, but response that we got was that the answer feels really outdated. But I would like to say and emphasize one more time, but if you look at the Q4 results, then it will be normalized and Q3 is at its lowest point.

And so if we look at it again, yes, in the European market, the EV growth has been 40%. However, there was the ICE that has not been able to go along with the growth of EVs and how we have fallen behind compared to the industry growth, as you've said, but looking at the pricing gap between the Chinese OEMs and for us, there's 25% of pricing gap.

In the past, we were able to raise our prices along with the rise in raw material costs, but no longer can we have that policy in place, and therefore, we cannot increase our prices anymore. Then how can we compete with the Chinese OEMs. We have to look back at our fundamentals, and we have to increase our fundamentals and strengthen them also secure the competitiveness with ourselves and our new cars. And regarding the incentives compared to last year, it has gone up, yes. And the first half of last year, we were at 1,000 level in the United States, which was very low. And it was going on an upward trend and now is going back and being normalized.

In the fourth quarter, the incentives will not change significantly compared to the third quarter and particularly in the United States, we do not believe that there needs to be change in incentives as there are sales that are growing without the change in incentives. Therefore, with the shortage of inventory, we will not change our incentives. In the European market, there is fierce competition that is ongoing, therefore, that will be -- there has been an increase compared to last year. But with the new release of our EVs, we believe that the incentives will be normalized in the fourth quarter and the beginning of next year.

[Foreign Language] [Interpreted] To add on a little bit more. Regarding the United States, there has been growth that has been led by the HEVs and we have been able to grow by 80% compared to the year before. With the Seltos and Telluride -- HEV that will be released soon. We believe that we will be able to achieve similar growth for -- so there the biggest driver for the United States was the hybrid, but for the United -- for the European market, the EVs is our major growth driver.

This year, we have been able to grow by 70% for EVs in Europe. And in third quarter, our proportion of EVs took about 19% in the fourth quarter with the growth trajectory of the EV4 we'll be able to achieve 100% compared to the year before in our EV growth. And we believe that our proportion of sales will be able to reach 30%. And with the next year of EV2 release, the EVs in the European market will play a really big role for Kia.

And we are the few companies in the world that has its full EV lineup that is not full lineup. And so we believe that even although the EV market has been slowing down in the European market, we will be able to grow with our leverage of EVs. And next year, we will be able to have a single mid- to late digit achieve in our sales growth through our mass EV lineup strategy.

And so the EVs are a major powertrain in the European market, and we believe that it will continue on for 2 to 3 years.

[Foreign Language] [Interpreted] This concludes the fiscal year 2025 third quarter earnings results by Kia. If you have any further questions, please contact the Kia IR team directly. Thank you for your time and participation.

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