Ladies and gentlemen, thank you for attending this conference call. We will now start Hyundai Motor Company's IR conference call for 1Q of 2024. Once again, the presentation materials can be downloaded from the Financial Supervisory Services electronic disclosure system at dart.fss.or.kr or the IR status in the operating performance presentation on our website on www.hyundai.com. In today's conference call, we have Hyundai Motor Company's Head of Planning and Finance Division, Senior Vice President, Seung Jo Lee; Head of IR, Senior Vice President, Zayong Koo; Head of Finance Division, Vice President, [ Jungeun Kim ]; Head of Investor Relations team, Michael Yun; and Head of Planning and Finance Division of Hyundai Capital, Senior Vice President, Hyungseok Lee. After the IR conference call presentation, we will have a Q&A session for the investors. [Operator Instructions] Now we will proceed with Head of Investor Relations team, Michael Yun's presentation on the HMC's 2024 1Q business performance.

Hello. This is Michael Yun, Head of Investor Relations team. I would like to add, we have Senior Vice Presidents Zayong Koo and Seung Jo Lee; and we also have Lee Hyungseok from Hyundai Capital as well. Welcome, everyone, to Hyundai Motor Company's 2024 Q1 Business Results Conference Call. On behalf of Hyundai Motor Company, I appreciate your time for participating in today's call. Please refer to the presentation HMC 2024 Q1 Business Results on our IR website. Today's presentation consists of two parts, sales summary and financial summary. For more information, please refer to the appendix page. First part is sales summary. Our 2024 Q1 global wholesale decreased by 1.5% year-on-year to 1,006,767 units, while retail sales decreased by 4% year-on-year to 946,870 units. In the first quarter, wholesale decreased slightly compared to the previous year. However, sales momentum continued in markets such as North America and India where profitability is solid. In the domestic market, sales decreased by 16.3% compared to the previous year due to temporary shutdown of Asan Plant, which was planned in advance for the retooling of lines to produce new EVs. The sales decreased by 16.3% as mentioned. North America saw an 11.1% increase in sales driven by continued strong sales of high-margin vehicles. The U.S. market witnessed increased sales of SUVs and hybrids with respective growth rates of 9.9% and 14.2% compared to the previous year boosted by the launch of all-new Santa Fe in January and all-new Santa Fe hybrid in March. Genesis also saw an 18% increase in sales compared to the previous year driven by the success of the G80 pace of launch in March. In Europe, despite a decrease in demand for EVs due to reduced subsidies, sales increased by 1.8% compared to the previous year on a wholesale basis, exceeding quarterly business plan, driven by strong sales of the Kona and Tucson hybrids. In India, sales increased by 8.1% compared to the previous year on a wholesale basis driven by the strong sales of the Creta facelift release in January and continued growth in the SUV segment. Nest is sales by model and key stats. Global SUV sales accounted for 57.2%, a 4 percentage point increase compared to the previous year, influenced by the global expansion of Santa Fe and the release of the Creta facelift in emerging markets. Despite a 4-point decrease in sales for eco-friendly vehicles due to weakened EV demand, hybrid sales increased by 16.6% compared to the previous year. In the domestic market, hybrid sales accounted for 21%, a 6.3 percentage point increase compared to the previous year driven by strong sales of the Tucson and Santa Fe hybrids. This is the end of presentation on sales summary, and now I'll move on to financial summary. This is the income statement. In the first quarter of 2024, revenue increased by 7.6% year-on-year to KRW 41 trillion, while operating profit decreased by 2.3% year-on-year to KRW 3.6 trillion. In the automotive division, despite a slight decrease in sales volume compared to the previous year, revenue increased by 3.5% year-on-year due to regional mix improvements centered on North America and product mix improvements centered on high-margin vehicles. Operating profit, including consolidation adjustments, decreased by 6.6% year-on-year. Despite increased provisioning costs associated with growth in size of business and rising interest costs, the financial division saw revenue increased by 30.8% year-on-year due to ASP increase, resulting from OEM mix improvement and continuous increase in asset yields. Operating profit increased by 15.4% year-on-year. Net profit decreased by 1.3% year-on-year to KRW 3.4 trillion. Next is revenue and operating income analysis. In terms of revenue despite a negative volume effect of KRW 231 billion caused by decrease in sales, there was a mix effect of KRW 942 billion due to the strong North American sales and ASP increase. Favorable exchange rate environment and increase in financial and other division revenue resulted in a 7.6% increase in total revenue compared to the previous year. As for operating profit, there was a positive FX effect of KRW 251 billion due to the strengthening of the won-dollar exchange rate. However, there was a KRW 50 billion decrease due to volume decline and the expansion of North American sales and ASP increase, offset by incentive increase resulted in a negative total mix of KRW 21 billion, resulting in a 2.3% decrease in operating profit. Our first quarter cost of goods sold ratio recorded a 0.1 percentage point decrease year-on-year to 79.3%. SG&A increased by 17.9% year-on-year to KRW 4.8 trillion due to increase of labor and provisioning costs. Nonoperating income increased by 16.5% year-on-year to KRW 117 billion due to increases in equity method income and decreases in interest costs associated with reduced borrowings. Reflecting discontinued operating losses, net profit decreased by 1.3% year-on-year to KRW 3.4 trillion, affected by the decrease in operating profit. That concludes the presentation of the first quarter 2024.

Moving on, we will have Hyundai Motor Company's Head of Planning and Finance Division, Senior Vice President, Seung Jo Lee.

Good afternoon, I'm Seung Jo Lee, SVP of Planning and Finance Division. Let me share the Q1 business results for 2024, the performance outlook and Q1 dividend plan. In Q1 of 2024, despite wholesale slightly decreasing due to the retooling of lines in domestic plants and temporary shutdowns, favorable exchange rates, regional mix in advanced markets and improvements in the product mix has helped HMC achieve an operating profit margin of 8.7% on a consolidated basis. First, sales volume. EV sales are continuing to slow in 2024, with EV demand weakening from the latter half of 2023. This has led to a significant decrease in EV sales year-over-year. However, we are maintaining stable sales and profit by flexibly responding to market changes by utilizing our existing lineup of green vehicles, including hybrids and plug-in hybrids. Despite having weak demand in the domestic market, we are continuing to deliver solid growth in key markets such as the U.S., Europe, India, et cetera. Next, operating profit. The operating profit for 2024 1Q is KRW 3.6 trillion, and the operating profit margin is 8.7%. As mentioned, we saw the continued effect from the product mix improvement. SUVs increased 5.2 percentage points year-over-year to 60.6%, reaching an all-time high of SUV share in the quarter. Genesis has also increased 0.5 percentage points year-over-year, continuing to be a high-margin vehicle and contributing significantly to our consolidated operating profit. While EVs have seen a huge decline in sales volumes, hybrids remain a high-margin model. Increasing by 17% year-over-year, hybrids are contributing to HMC's high profitability. We will continue to focus on high-margin vehicles improved profitability and continue increasing our market share and boosting profitability in key markets. Let's move on to the incentives that recently heightened. The automotive market is rapidly changing due to external factors such as the downturn in EV demand, strong sales performance of hybrids, and supply chain normalization. However, we remain strong as we are able to flexibly respond and boost profitability and increase market share amidst changes in the market. Incentives are being managed in a stable manner under high profitability. While incentives may temporarily be above the market average because of strategic decision-making, it is being managed so that it does not largely affect profitability, and we will continue to thoroughly manage the incentives. Next, I'd like to discuss 1Q dividend. With great improvements in our performance in 2023, we implemented a dividend payout ratio of minimum 25%. With stable profits in 2024, we will continue to implement an annual dividend payout ratio exceeding 25%. Considering improvements in being able to create profit, the Q1 dividend was decided at KRW 2,000 per common share, a KRW 500 increase year-over-year. Lastly, I'd like to mention the corporate value-up program that is receiving the spotlight in the market. In line with our medium to long-term shareholder return policy announced in 2023, we are reviewing the corporate value up to enhance our value. Once we finish reviewing the program details, we will seek approval from the Board of Directors and announce our plans to the market. Thank you for listening.

Next, we will have Hyundai Capital's Head of Planning and Finance Division, SVP Lee Hyungseok present the 2024 1Q business results and outlook for the first half of 2024.

Good afternoon. I am Lee Hyungseok, Head of Planning and Finance Division of Hyundai Capital. I will report the 2024 1Q business results and outlook for the first half of 2024. Despite seeing sustained high interest rates and unfavorable business environment, Hyundai Capital and HMG have a strong sales finance cooperation to strengthen our auto finance competitiveness and solidify our position in the market. As a result, Moody's raised Hyundai Capital's corporate credit rating from Baa1 to A3, and Fitch raised Hyundai Capital's corporate credit rating from BBB+ to A-, the highest level of among nonbank financial companies in Korea. This has helped strengthen our procurement capabilities. I'll now elaborate on the details of Hyundai Capital and HCA. First, is Hyundai Capital. 2024 1Q auto volume increased 5.4% year-over-year and financing assets grew 4.4% year-over-year. With strengthened support for auto sales, auto finance grew and takes up 82.4% in the asset portfolio, the highest figure in 12 years. With more competitive installment products and growing lease demand for high-value models, the operating profit increased by 14.9% year-over-year. While interest expenses increased due to sustained high interest rates, bad debt expense decreased 15.2% year-over-year and the operating profit increased 54.8% year-over-year. Overseas, we have seen profit and loss improve in Germany and Brazil, leading to a 280.9% increase year-over-year through equity method income. As a result, we saw a 112.2% increase of net income year-over-year. In the first half of 2024, we will see delayed and lower interest rates, and we will see uncertainties in the market. However, Hyundai Capital will continue to strengthen auto finance competitiveness and may [ cost more extensions ] to increase profitability. Hyundai Capital's delinquency rate remains under 1%, and we will continue to stabilize and improve our fundamentals. Also, we will strategically expand operations in Australia with Hyundai Capital Australia and ensure we strengthen auto finance and overseas HQ. Next is Hyundai Capital America, HCA. With continued strong demand from American consumers, we saw the acquisition rate increase 14.1 percentage point year-over-year and auto financing volume increased by 7.6% year-over-year. Improved sales mix led by SUVs and continuous increase of ASP caused financial assets to go up by 24.2% year-over-year. The growth of assets led by new model installment plans has led to installment profits increasing 65% year-over-year and operating profit increasing 32.5% year-over-year. As the U.S. continues to hold high interest rates, the operating cost increased by 34.1% year-over-year, but the operating profit increased 5.9% year-over-year. While there are concerns over asset soundness, the share of prime customers in HCA's portfolio still stands at 90%. The market price of used car shopping -- yet at a gradual pace. Lease assets are less than 30% of the portfolio, contributing to stable management of residual value. In 2024, continued high inflation and political events and issues in the U.S. is bound to lead to changes in the market, but HCA is expected to see sound asset growth. With strengthened procurement competitiveness and securing sound fluidity, we will continue our efforts to provide support for auto sales finance in the U.S. This is all for the presentation from finance. Thank you for your attention.

This concludes our presentation. Now we will move on to the Q&A.

[Foreign Language] The first question will be presented by Yongmin Kim from CGS International.

[Foreign Language] I'm Kim Yongmin from CGS International. First of all, my first question is about the sales insurance increase. Were there any other elements affecting this aspect? Or in the first quarter, were there any other subsidiary elements that affected the increase of sales insurance cost? And my second question is related with the finance segment. You said that there was an improvement in terms of cost reduction and standards or the criteria will be related with the market default rate decrease. And lastly, my third question is related with the offset between incentive increase and mix improvement. I believe that there are different types of vehicles that are affecting these two elements, so I would like to know what you see and how you view this aspect in the future.

[Foreign Language] First of all, let me answer your first question about the incentive costs. Quarter-on-quarter, there was an increase, and also year-on-year, there was an increase of cost. Well, we see that there's increase on the one-off cost issue, and there isn't specific reasons for this. But I would rather say that it was because of the FX rate issue. At the end of March this year, there was an increase of foreign exchange rate denominated liabilities that amount to us -- in one denominated, the amount was KRW 195 billion. In reverse, I would view that -- the year-end last year, there was a reverse effect of FX rates on liabilities because, in the third quarter, there was a provisional liability impact with the amount of KRW 380 billion. Also, compared to the first quarter last year, in accordance with the accounting standards, there was allowances that was reevaluated. So the residual value was about KRW 300 billion of write-back. So if we compare the profit and loss year-on-year, there was an impact of about KRW 60 billion decrease. So if we compare this in the amount of the write-back for the incentive costs year-on-year, then there will be actual reverse effect.

[Foreign Language] Let me answer your second question, I'm Lee Hyungseok of Hyundai Capital. About the press release on [ rate decrease ], I would say that it is not related with the market environment, rather it's because that our asset portfolio is more stabilized because we are increasing our automotive segment portion from 80.2% to 82.4% this year, which is up by 2.2 percentage points year-on-year. So in the finance segment, rather than finance segment, the automotive segment is highly profitable, so that's why we are stabilizing and also strengthening our asset portfolio. And in terms of the default rate as well, more than 30 days is being seen. And year-on-year, we are seeing the ratio from [ 1.2% to 0.91% ] increase.

[Foreign Language] Let me answer your third question about the incentive level because we are seeing a higher number as of now, but it's within manageable level overall. And if we see the different car segments, including SUVs, passenger vehicle and hybrid, the incentive level is actually lower than our plan. And in terms of EV, the incentive level is higher. And again, we are seeing that it is within the manageable level. And overall, because of the mix between the two different segments of vehicles, it seems like the incentive level is a little bit higher. I believe that this trend will continue for the time being. And in the meantime, we are going to increase the portion of SUV, which is highly profitable, and also between hybrid and EV. For hybrid, the profitability is higher, which is equivalent to the level of ICE, so we're going to increase the portion of hybrid and going to continue to monitor the mix between the two different segments. We're going to reduce the portion of EV as well. And again, I'm highlighting that the incentive level is within manageable level. And I would like to clarify that I mentioned we will reduce the portion of EV, but it's within our portfolio, not reducing our market share in the market. So our market share of EV will continue to be maintained.

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

[Foreign Language] Kyung Jae Hwang from Merrill Lynch Securities. I have three questions today. The first one is regarding your performance in the 1Q of 2024. You have an impressive gross margin of 20.7%, and I believe that it is because of hybrid mix increased, SUV mix and regional mix improvement. If you compare that to last year, the second half of last year, do you think that it has improved in the U.S. in terms of profit margins and profitability? Or do you think it is similar? My second question is about the hybrid profit operation margin. I would like to see if it has improved from the second half of 2023. And my third question goes to HCA. If you go to the HCA website, you can check the delinquency rates there. And I would like to know the background of why the portfolio has improved. Is it because you have more prime customers? Or is there something else?

[Foreign Language] So let me answer your first question regarding the profit margin rate of the U.S. You asked about the comparison between 1Q of 2024 and the second half of 2023. Yes, we have seen an incentive increase in EV, but we have also seen an increase in exports to the U.S., and we are seeing more favorable conditions in the FS trade as well, which is why we're seeing an offset. We can say that our margin rate is similar to the second half of 2023 or slightly better. Also for hybrids, our operating profit margin is similar because of the exchange rate. And also, we're seeing a decrease in raw material pricing, especially in lithium for EV. As you may be well aware, the raw material price decrease will be reflected in the next quarter. And I believe that this trend will continue on to the next quarter, into Q3.

[Foreign Language] The third question will go to SVP Hyungseok from Hyundai Capital.

[Foreign Language] Yes, to answer your third question, yes, you're correct, we are seeing a stable delinquency rate because of an increase of prime customers. If we look at the numbers, in 2020, we had an 80% prime customers; in 2022, 83%. And in the first quarter of 2024, we have reached 89%, which has contributed greatly to reducing and stabilizing our delinquency rates.

[Foreign Language] The next question will be presented by [indiscernible] from JPMorgan Asset Management.

I have 3 questions. So the first one is in regards to the recent news about UAW getting approval at one of your peers in the U.S. in the Southern states, how do you think that may impact your operation in the U.S.? And then the second one is it seems that in the U.S., your mix continues to improve despite concerns on higher rates and softening economy. So do you see that the plan will be sustainable? And the third question is, what was your net cash position for the auto division as of the end of first quarter?

[Foreign Language] Yes. This is Zayong Koo, Head of IR. Thank you for your questions. With regards to your first question about the UAW, yes, we have seen the news about the UAW approval in one of our peers in the Southern part. As of now, as far as we know, there are no plans yet of any UAW formation at our firm. But nevertheless, from a salary perspective, of course, the previous UAW increases and the wages have definitely had some impact on our overall. But the overall labor cost for our U.S. operation is relatively small, so it's not going to be very meaningful from that end. And your second question with regards to the improvement in the mix, yes, I mean, as you know, several years ago in the U.S., our SUV mix was about 50% or so. Now we are at about 75% to 80%, which is pretty much in line with the industry average. We do see the mix improvement in the sense that we will continuously increase our higher proportion of the SUVs, like the Genesis. So we do see that kind of trend sustaining over the next several years going forward. And your final question was on the net cash position. Ex finance, in the first quarter of 2024, was about $16 trillion, which slightly came down over the previous quarter of about KRW 17 trillion.

[Foreign Language] The next question will be presented by Eun Young Yim from Samsung Securities.

[Foreign Language] I'm Yim Eun Young from Samsung Securities. I have two questions today. The first one is about the EV incentives. You mentioned that you are seeing an increase in EV incentives and you're going to decrease the number of units. But I know that this year, you have plans to start operations in HMGMA and also next year for the Ulsan EV plant. I know that the demand will significantly increase until the next year, so do you think that increased investment will continue in the spend? Or do you think that the incentives are in controlled, more manageable space? Second is about the value-added projects. I know that this -- value-up projects, sorry. It's a very hot topic. And I know that you said that you are reviewing the value of projects. Can you tell us a little about the direction that you're headed towards, maybe about the dividend? Do you think that it will be regarding the treasury stocks? Or do you think that we will buy back or see cancellations of it? I know that in June that we have the CEO Investment Day, do you think that you will announce your plans then?

[Foreign Language] To answer your first question, yes, we will be operating the HMGMA maybe in the 4Q or in October. And you mentioned concerns about the incentive levels being heightened. But HMGMA is not an EV dedicated plant, and we will also be producing hybrids as well. We're currently investing in the facility and also we're installing new equipment to operate HMGMA with hybrid. If we operate HMGMA, we will be able to receive the $7,500 tax credits from IRA and that will not affect an increase in our incentives. As for hybrid, we are also investing in a system. We only had systems for large and midsized hybrids, but we're also trying to invest in compact size hybrids as well, and that will allow us to have systems for all type SUV hybrids. To answer your second question, we do understand the excitement for the value-up program. We are listening to a lot of voices, but the government has not provided us a detailed guideline. They said that they're planning to in the first half of this year. We're still undergoing reviews. And if there is a detailed guidelines set forth by the government, we will also come up with a concrete plan, and we will seek approval from the BOD. Only then can we really discuss it and announce it to the market. As for an exact date, it's very difficult to set the exact date as of now.

[Foreign Language] The last question will be presented by Seong-rae Kim from Hanwha Investment & Securities. Seong-rae Kim: [Foreign Language] I'm Kim Seong-rae from Hanwha Investment & Securities. I'd like to go back to Page 4 about the global sales status. And last year-end, we thought that in the U.S. and Europe market, or the major markets for HMC, we expected that demand will slow down a little bit. But rather than that, we saw that solid demand is continuing. So in that aspect, in those areas of EU and North America, how do you view the sales volume going forward? And in North America, as of now, we see the very solid figures. But in terms of the retail figures, there is a little bit of gap. And in the future, going forward, how do you view the overall volume? And would there be any impact on the market share as a whole? Because I have a little bit of concern about this. And also in the EU market, especially Volkswagen had seen an increase of their sales volume in the first quarter. Also in the North American market, the Japanese OEMs are expecting to increase their hybrid vehicles. So what are your strategies to respond to this market situation? And along with this, in terms of the hybrid strategy, I think that your number is pretty solid. But compared to the industry level and the industry demand level, first quarter results is about 13% increase for HMC sales number. Do you think that it's going to be increased in the future? And also for the global players, I think that the benefits from this market will not be so large for HMC compared to other hybrid makers. What do you think about this?

[Foreign Language] First of all, let me touch on the U.S. market. In the first quarter, for wholesale, the year-on-year number is increased by 9.7% to 240,000 units. And for retail, it increased by 0.7% to 200,000 units. And in terms of the market share, it is 5.4%; and a little bit of decrease, which is 0.2% year-on-year. However, you can see the trend as of March this year, the market share is actually 5.7%, and we expect that this trend of growing this number is continued. And I think that it is possible that we can meet the target for the market share in other market. And in terms of the U.S. market, we are seeing pretty solid growth in terms of -- we will be seeing pretty solid growth in Santa Fe and Creta facelift, which is going to be launched sooner or later. And from the second quarter from wholesale for these vehicles, it will be leads to retail. So I think they don't need to worry about the trend or the inventory level because of the difference between the wholesale and retail. In the European market as well, we see the similar trend, and we have the same thought because in March, the all-new Santa Fe will be launched and also Creta facelift as well will be launched. And then the gap between the retail and wholesale will be released. And on your last question about the hybrid strategy, yes, we are continuing to expand our hybrid volume. And in the first quarter, the sales unit was 97,000. And year-on-year, it was an increase of 17%. And we're going to increase that number to 480,000 units, increase by 28%, that is our business plan. And year-on-year number, the figure will be increased by 100,000 units. Since the market requests more demand and volume from our company, we will continue to increase our supply for a hybrid model. And for your reference, in the domestic market, the number of the vehicles that are on the backlog is 14,000 units, so we are trying really hard to meet the market demand. This will conclude the first quarter earnings results of HMC. Thank you for listening.

[Foreign Language] If you have any questions, please contact Hyundai Motor's IR team. Thank you very much for your attention. [Statements in English on this transcript were spoken by an interpreter present on the live call.]