“Hyundai Motor, the recall will be positive for brand reinforcement…with little impact on performance and stock prices”

[이데일리 이슬기 기자] Has decided to recall about 80,000 electric vehicles (EVs) such as Kona, taking into consideration battery fire concerns. The stock market said that the recall is positive for brand reinforcement, and the impact of quality costs on the stock price will be limited.

Kim Dong-ha, a researcher at Hanwha Investment & Securities, said in a report on the 25th, “This recall, which preemptively responded to customer safety even with a low possibility of fire and financial burden, is positive for strengthening the EV brand. We believe that the impact on the stock price will be limited by reflecting it.” We maintained a target price of W300,000 and our rating on Buy.

On the 24th, Hyundai Motor Company decided to recall all vehicles that are likely to cause fire due to battery defects such as Kona Electric Vehicles (EV). The target vehicle is a total of 81,701 domestic and foreign Kona EVs, Ioniq EVs, and Electic Buses produced from November 2017 to March last year. The Ministry of Land, Infrastructure and Transport announced that a joint investigation with the Korea Automobile Safety Research Institute (KATRI) confirmed that there is a possibility of a fire due to misalignment inside the battery cells.

The total estimated cost for the recall is around 1 trillion won. In the future, it plans to share costs with LG Energy Solutions, a battery producer. Hyundai Motor Company plans to reflect the shared recall cost in its business performance in the fourth quarter of 2020.

Researcher Kim said, “Depending on the situation, the share of LG Energy Solution may be reversed in the future after Hyundai Motors reflects the total cost.” “There may be differences in positions between the two companies. There is also a possibility” he pointed out.

It is evaluated that the impact of this recall on Hyundai Motor is not negative. Researcher Kim said, “As quality issues are inevitable in the early stages of EV conversion, it is important to take active protection measures for EV purchasers. In particular, to resolve fire-related concerns ahead of the release of E-GMP-based EV (Ionic 5), It was also necessary to secure trust in the customer protection policy and this recall is positive for strengthening the brand.”

Researcher Kim said, “The impact on the stock price is limited due to the reflection of 4Q results, and if the share of LG Energy Solutions is reversed in the future, a positive impact is expected.” It will work,” he added.