Asia Essentials

Global light vehicle sales should grow 2.4% YoY to 90.4m units in 2017 asgrowth slows in mature markets and China. We expect Hyundai Motor Group todeliver 8.4% volume growth in 2017 with HMC growing 7.0% YoY to 5.18m unitsand Kia growing 10.6% to 3.33m units as they seek to maintain optimal levels ofutilization. However, profitability should remain depressed due to a high level ofincentive spending and R&D.

We expect only HMC to deliver positive earnings growth in 2017 thanks to 1)normalized domestic operation, 2) launch of high-ASP models, includingGenesis and Grandeur, and most importantly 3) a recovery in emerging markets(EM), large enough to offset rising developed market (DM) costs.