Kia India profit down 25% in FY22 as tax outgo slams the brakes

Kia India, the local arm of the South Korean carmaker, saw its net profit drop by a fourth in 2021-22 (FY22) over the year-ago period, notwithstanding an operationally strong year. An increase in the total tax outgo during the year dented the company’s earnings.

Kia is one of the few unlisted global carmakers in India that saw a contraction in profits. It was a year of record net profit for the India arms of Toyota Motor Corporation, Honda Motor Company, Renault SA, Bayerische Motoren Werke AG (BMW), and Mercedes-Benz, to name a few.

This was led by a combination of factors, including strong demand, sharp increase in car prices on the back of high input costs, and an improved model mix, leading to an increase in profits. Stringent cost curtailment and rationalisation measures, too, helped.

The narrative at Kia would have been the same, but for the higher tax outgo.

Driven by a sharp jump in deferred taxes — Rs 243.6 crore in FY22, from Rs 232.5 crore in 2020-21 — the company’s total tax expenses increased to Rs 454.9 crore in FY22, from Rs 71.6 crore in the year-ago period. This crimped net profit for the maker of the Carnival and the Seltos models by 25.6 per cent to Rs 825.4 crore in FY22, according to the financial statements reviewed by Business Standard.

In contrast to a 25.6 per cent fall in net profit (profit after tax), the company’s profit before tax rose by 23.1 per cent to Rs 1,280 crore in FY22.  

Kia India did not respond to queries sent by Business Standard on its fall in net profit in FY22. The South Korean automotive major, which rolled out its first Seltos in the country in August 2019, sold 186,787 units domestically, up 20 per cent year-on-year (YoY), in FY22. It also exported 50,864 units — an increase of 25.77 per cent YoY — in FY22. 

“Our directors are confident of achieving higher growth in sales in the ensuing years," Kia India said in its financial statement. 

Like most other carmakers, the company’s input costs — cost of materials consumed — jumped 29.36 per cent to Rs 19,729.1 crore in FY22. These drove the total expenses of the company to Rs 24,123.5 crore in FY22.

In a market where various global carmakers have struggled to grab even 5 per cent share of the market despite long-standing presence, Kia’s share at the end of FY22 stood at 6.12 per cent within a span of two years. It has emerged the top utility vehicle (UV) maker by sales.

According to the data by industry body Society of Indian Automobile Manufacturers, Kia India sold 131,962 UVs in the first half of 2022-23, compared with 88,383 UVs sold in the first half of FY22.