---
endpoint: analytics
pattern: Autos
status: done
latency_ms: 223408
conversation_id: d0215737-fc2b-4436-9639-d5b8ad56e453
citations: 8
created: 2026-05-31 19:09:43Z
---

# What’s the bull case bear case for Kia?

# Kia (000270 KS) — Bull Case / Bear Case

*Synthesis of CLSA's internal research (latest covered note: 16 May 2025) and Kia's own commentary on its Q4 2025 / FY2025 results call (held in late Jan 2026 ahead of CEO Investor Day in early April).*

---

## Sell-side anchor (CLSA, transferred to Brian Lee, May 2025)

| Metric | Value |
|---|---|
| Rating | **O-PF (Outperform)** [21] |
| Current price (16-May-25) | ₩92,000 [21] |
| Target price | **₩105,000** (+14% upside) [21] |
| Valuation method | 1-yr fwd PE @ **5.0x** — a 17.5% discount to HMC's 6.0x because Kia's TSR (30%) trails HMC's (35%) [11] |
| Implied 2025 total return (HMC sector note) | ~12% (7.9% shareholder return + 4.3% capital gains, post ₩500bn buyback) [16] |

Coverage was handed from Dohyoung Kim to Brian Lee on 16 May 2025; the published rating/TP has not changed since [21]. The corpus does not contain a post-transfer fundamental refresh — "latest CLSA view" is the inherited stance.

---

## Bull Case

### 1. Best-in-class OPM among global legacy OEMs — and the market is pricing in a collapse that hasn't happened

- Kia's **2025E OPM at 11.4% places it as the #1 most profitable global legacy OEM** on Bloomberg consensus, ahead of Toyota (9.6%), Tesla (9.0%) and HMC (8.2%), and 4 percentage points above the legacy-OEM average of 7.3% [20].
- Q4 2024 OPM came in at 10.0% despite a ₩420bn warranty FX translation headwind — "well ahead of the average for global legacy OEMs trending in mid-single digits" [9]. Even Kia's "conservative" 2025 guidance of **11.0% OPM** (vs. 11.8% in 2024) sits above the entire peer group [9].
- The actual 2026 plan: revenue **₩122.3tn (+7.2% YoY), OP ₩10.2tn (+1.1tn YoY), OPM 8.3%** — explicitly absorbing a 15% US tariff for the full year and rising incentives [1].

### 2. Valuation below dividend yield = mispricing of "existential risk"

- The Feb-2025 thesis: "Hyundai Motor's & Kia's current dividend yields of 6.8% and 6.7% are based on announced DPS… we believe the market is pricing in 'existential' risk for HMC and Kia… there is still time for select automakers to be relevant. We believe HMC and Kia are highly likely to fall into the relevant camp" [13].
- Kia trades sub-5x PE with a **+6% DPS yield as a buffer** [9]. CLSA's investment thesis: peak-out concern and competitive xEV landscape are over-discounted; "as we believe Kia can sustain its operating margin at a high level… and maintain decent market share in the EV space, we expect the stock to eventually rerate" [10].
- Historical analog: Korean financials previously traded with PE < DPS, then re-rated meaningfully when business cycles turned and shareholder returns rose [18].

### 3. Cash returns are committed and increasing through the cycle

- Management reaffirmed **35% TSR for three consecutive years from 2025**, framed as a commitment that should hold "regardless of these external headwinds." DPS raised from ₩6,500 → **₩6,800** for FY25 [2].
- Combined with a ~₩500bn buyback assumption, total 2025E shareholder return = 7.9% [16].

### 4. 2026 product pipeline is the strongest in years — and skewed to high-margin segments

- **Telluride full-model change** for the first time in 7 years: US volume planned to scale **120k → 180k units (+50%)**, alongside a new Telluride hybrid trim [4]; the Telluride is "Kia's biggest profit model" and the anchor of NA earnings recovery [4].
- **US hybrid push**: HEV sales targeted to grow **~90% YoY in the US (+120k units to >250k)** as Kia rotates mix away from EVs into HEVs/ICE following IRA subsidy expiry [1].
- **Europe EV full-lineup**: with EV2 launching in early 2026 plus the existing EV3/EV4/EV5/PV5, Kia targets **>60% EV growth in Europe and ~10%+ regional volume growth** as EVs offset declining ICE [1]. Q4 2025 was the first quarter Kia's European EV sales outpaced gasoline [8].
- **India momentum**: Q4 2025 India sales **+40.9% YoY**, market share to 5.7%, driven by Sonet/Carens post-GST cuts [7].

### 5. Tariff risk is already absorbed in numbers and being mitigated

- 2025 tariff burden was **~₩2.9tn**, 2026 expected ~₩3.3–3.5tn at the new 15% US rate (vs. 25% for 8 months in 2025) [5].
- The 3.75% MSRP refund for core parts has been finalized — "the framework has been confirmed… core parts tariff burden is effectively zero" — and price pass-throughs from Georgia plant vendors are already 100% reflected [5].
- CLSA scenario work: at full Georgia ramp (200k for HMC, 100k for Kia), Kia's 25% tariff hit narrows from 18% of 2024 OP to **7% of 2024 OP** [17].
- Even on CLSA's worst-case tariff-adjusted EPS (~20% below consensus), HKMC trades at a 20–25% discount to peers [18].

### 6. Optionality from robotics / autonomous (HMG group asset)

- Kia is a co-investor with HMC in the group's autonomous driving (SDV launch targeted 2027 with L2++) and humanoid robotics (Atlas program, Google DeepMind collaboration), with commercial POCs starting 2H26 — currently not in earnings, hence "free" optionality.

---

## Bear Case

### 1. Tariffs are still the dominant earnings drag and a structural margin reset

- **US tariffs reduced Q4 2025 OP by ₩1.022tn in a single quarter** [3]; the 2026 plan still absorbs ₩3.3–3.5tn at the new 15% rate, which is **larger in won terms than the 25% partial-year 2025 burden** because of full-year impact + higher US volume [5].
- The bear pivot: 2026 OPM target of **8.3% is ~3 percentage points below the 11.0% 2025 guide and ~3.5pp below 2024A**, marking the loss of Kia's "best-in-class" premium and validating the "OPM peaked in 2024" thesis the market was pricing [6].
- CLSA risk framework explicitly flags: "if the US decides to impose tariffs on auto imports… at 20%, this would lead to a bigger tariff burden than what we are modelling for. In addition, US auto demand declining by more than 1%-2% next year could lead to more downside" [13].

### 2. Chinese OEM competition is squeezing pricing in every non-US geography

- Management acknowledged on the Q4 2025 call: "The price difference between us and Chinese OEMs is quite large. However, we are not thinking of offsetting all of their impact through giving more incentives" [6] — meaning Kia accepts share loss in some emerging markets.
- **Per-unit incentive +KRW 200,000 (~+10%) in 2025 vs. 2024**, with another similar step-up baked into the 2026 plan [6]. Europe is now competing against Chinese AND European OEM aggression simultaneously.
- Q4 2025 Europe wholesales **-10.2% YoY to 119k units** despite EV3 strength, hit by Ceed discontinuation, EV2 launch transition, and "heightened competition" [7].

### 3. EV strategy faces a US/Europe split that increases execution risk

- US: IRA EV subsidy ended Sept 2025; Kia's pivot is to ICE/HEV — but this collides with capacity allocation (Georgia EV plant utilization risk).
- Europe: bet is that EV2/EV5 ramp can fully offset ICE decline. 2024 already saw "negative" growth because EV lineup couldn't make up for falling ICE [1]; if EV2 ramp disappoints, Europe goes negative again.

### 4. FX is a knife that cuts both ways — KRW strength is a binary risk

- CLSA explicit risk: **₩1,250–1,300:US$1 average** (vs. assumed ₩1,325) would meaningfully cut OP forecasts [13]. The won has historically been a single-largest swing factor for Korean OEM earnings, and Kia's 2025 guidance was framed around a conservative ₩1,320 [9]. Persistent KRW strength flips Kia from "consensus beat" to "guidance miss."

### 5. Cash flow under pressure from tariffs + elevated capex + robotics ambitions

- 2025–27 capex plan: **₩5.7tn / ₩5.6tn / ₩5.0tn** (capex/revenue declining from 5.1% → 4.3% → 3.5%) [5], on top of robotics and autonomous investment commitments. Management itself flagged free cash flow only recovers to "pre-tariff" levels "around 2026" [5].
- Q4 2025 net profit **-15.5% YoY to ₩1.471tn**, with pretax profit -13.6% [3], underscoring the earnings reset narrative.

### 6. Domestic weakness and incremental costs not fully appreciated

- Q4 2025 domestic sales **-5.9% YoY** with the individual consumption tax cut extension pulling forward demand [4] and intensifying domestic incentive competition.
- Warranty provisions ratio rose due to (a) heavy 2025 new-model launches (eight) and (b) higher EV mix where warranty burden exceeds ICE — both structural rather than transient.

### 7. The "rerate" thesis is open-ended

- CLSA's bull case admits the model lineup payoff "will be more towards 2H25 or in 2026" [9] — i.e., the cheap PE has already been cheap for a year. With Q4 2025 results showing **OP down YoY** [3] and 2026 OPM guidance stepping down, the rerate catalyst has been deferred and the dividend-yield-above-PE setup persists not as an anomaly but as a justified discount for a structurally lower-margin business.

---

## How Kia's own framing maps onto the debate

Kia's CFO on the Q4 2025 call: "Our trough was in Q3 2025, but we have turned around in our recovery stage for Q4 2025" [4] — explicitly framing the bull narrative (trough behind us, Telluride/HEV/EV2 lineup drives 2026 recovery, ₩10.2tn OP/+12% YoY) [1]. The bear counter is that the recovery is gated on (a) US tariffs not stepping back up, (b) China-OEM incentive intensity not escalating, (c) the won staying weak, and (d) EV2 in Europe actually selling — four exposures that have all moved against Kia over the past 18 months.

---

## Verdict / Setup Today

The CLSA stance (O-PF, ₩105,000 TP, +14% upside) is essentially a **deep-value re-rating call** anchored on (a) sub-5x PE vs. >6% dividend yield, (b) #1-in-peer-group OPM even after the tariff reset, and (c) committed 35% TSR [11][12][13]. The Q4 2025 print confirmed both sides — OPM defended above peers but absolute OP down, with the 2026 plan stepping down OPM to 8.3% [1]. The bull case requires Telluride/HEV ramp + EV2 Europe traction to deliver; the bear case requires only "tariffs stay, China stays cheap, won strengthens."

---

**Sources**

[1] Kia Q4 2025 Earnings Call — 2026 BP: revenue ₩122.3tn, OP ₩10.2tn, OPM 8.3%; EV2 Europe; Telluride hybrid
[2] Kia Q4 2025 Earnings Call — DPS ₩6,500→₩6,800, 35% TSR for 3 years
[3] Kia Q4 2025 Earnings Call — Q4 tariff hit ₩1.022tn OP; net profit -15.5% YoY
[4] Kia Q4 2025 Earnings Call — Telluride 120k→180k +50%; trough Q3 2025 / recovery Q4 2025; domestic -5.9%
[5] Kia Q4 2025 Earnings Call — 2025 tariff ₩2.9tn / 2026 ₩3.3–3.5tn; FCF recovery 2026; capex plan
[6] Kia Q4 2025 Earnings Call — Chinese OEM price gap; incentives +10% in 2025, similar in 2026
[7] Kia Q4 2025 Earnings Call — NA +2.5% / Europe -10.2% / India +40.9% in Q4 2025
[8] Kia Q4 2025 Earnings Call — Electrified sales +13.2% to 186k; Europe EV outpaces gasoline for first time
[9] CLSA — Kia O-PF (Double-digit OPM defended), 30 Jan 2025 (Dohyoung Kim) — 607949007LinqAlpha.PDF
[10] CLSA — Kia O-PF (Double-digit OPM defended) — investment thesis
[11] CLSA — Korea Autos (PEs below dividend yields), 3 Feb 2025 — Kia valuation 5.0x PE
[12] CLSA — Kia O-PF — Kia 4Q24 W2,716bn OP; 10% OPM
[13] CLSA — Korea Autos (PEs below dividend yields) — investment risks (US tariffs, demand, won)
[14] CLSA — Korea Autos (PEs below dividend yields) — Kia: O-PF, TP ₩105,000, +9.3% upside
[15] CLSA — Korea Autos (2025 outlook: Playing the range; redux), 4 Jan 2025 — 2025 total return table
[16] CLSA — Korea Autos (If not now, when?), 20 Feb 2025 — Tariff scenario table
[17] CLSA — Korea Autos (If not now, when?) — Tariff risk priced in; HKMC discount 20–25%
[18] CLSA — Korea Autos (PEs below dividend yields) — Korean financials historical analog
[19] CLSA — Korea Autos (PEs below dividend yields) — Sector TP table
[20] CLSA — Korea Autos (PEs below dividend yields) — 2025/26 OPM consensus table
[21] CLSA — Korea autos (Transfer of coverage), 16 May 2025 (Brian Lee) — Kia: O-PF, TP ₩105,000 — 607959723LinqAlpha.PDF

## Citations

- [1] **Kia Corporation, Q4 2025** · external
- [2] **Kia Corporation, Q4 2025** · external
- [3] **Kia Corporation, Q4 2025** · external
- [4] **Kia Corporation, Q4 2025** · external
- [5] **Kia Corporation, Q4 2025** · external
- [6] **Kia Corporation, Q4 2025** · external
- [7] **Kia Corporation, Q4 2025** · external
- [8] **Kia Corporation, Q4 2025** · external

