Hyundai Motor, which launched a new tab on Thursday, forecast slower sales growth this year owing to weak demand and economic risks such as interest rates and inflation, posing further obstacles to the car sector. 

Hyundai, the world’s third-largest carmaker in terms of sales, announced a 31% increase in fourth-quarter earnings, falling short of analysts’ expectations owing to unfavorable exchange rates and one-time expenditures associated with the sale of its Russia factory in December. “Hyundai Motor expects the business environment will remain difficult to predict, due to macro uncertainties centered on emerging markets and a downturn in the real economy,” the firm said in a press release.

Hyundai recorded a net profit of 2.2 trillion won ($1.7 billion) for the October-December period, up from 1.7 trillion won the year before. That was less than the 2.9 trillion won average expected by LSEG SmartEstimate, which favors projections from experts who are more consistently correct. Hyundai announced in December that it will suffer a 287 billion won ($219 million) loss on the sale of its facility in Russia, where activities have been frozen since March 2022, the month after Russia invaded Ukraine.

Hyundai expects revenue growth of 4.0 to 5.0 percent this year, with a 4.9 percent increase in North American car sales but reductions of 3.7% in China and 0.6% in Europe. It expected an operational profit margin of 8.0 percent to 9.0 percent, consistent with last year. “It appears that pent-up demand for vehicles from limited supplies has been disappearing as high-interest rates eat away car buyers’ willingness to purchase,” said Lee Jae-il, an analyst at Eugene Investment & Securities.

Hyundai would most likely manage its car inventory more strictly than in past years, Lee said, since the loss of pent-up demand, combined with surplus stocks, has harmed profitability. Another source of concern is electric cars (EVs), where Hyundai and Kia lag behind EV powerhouse Tesla for the largest market share in the United States. Elon Musk, CEO of Tesla, warned on Wednesday that sales growth will drop sharply this year.

Hyundai’s global EV sales are likely to increase by 12% this year to about 300,000 vehicles, according to Zayong Koo, the automaker’s senior vice president. “The EV market has been slowing down,” Koo said on a conference call after Hyundai released its results. “It won’t be a linear increase. We will undoubtedly experience some hiccups or ups and downs, but we will persevere. Hyundai shares dipped 2% on Thursday, as the benchmark KOSPI (.KS11) remained steady.”