Shares of both Hyundai Motor and its affiliate Kia Motors on Monday slid more than 5 percent as the weakening Japanese yen spurred concerns about the profitability of the top Korean carmakers.

Following Japan’s announcement of quantitative easing last week, the benchmark KOSPI tumbled 11.46 points, or 0.58 percent, marking its biggest daily percentage drop since Oct. 21.

Led by carmakers, manufacturing companies were especially hit hard as they compete with Japanese firms in overseas markets.

Hyundai, the nation’s largest carmaker, closed with a 5.88 percent decline at 160,000 won ($130). Kia also extended its fall, losing 5.57 percent at 49,200 won.

Unfavorable foreign exchange rates also affected the third-quarter earnings of the Korean duo negatively. They sold more cars but profits plunged.

Hyundai’s sales increased 2.2 percent to 21.28 trillion won from a year ago in the third quarter, but profits tumbled 18 percent to 1.65 trillion won.

Kia’s profits fell 18.6 percent to a two-year low of 567 billion won, even though the carmaker sold 13 percent more cars compared to the same period of last year.

In the meantime, an eroding yen has increased the value of Japanese carmakers’ earnings overseas. Toyota, the world’s largest carmaker, is expected to see a record 1.3 trillion yen in profits between April and September this year.

Industry watchers, however, voice more concerns about the future profitability and competitiveness of Hyundai and Kia.

“The direct impact from volatile foreign exchanges may be limited in the short term, considering now global carmakers have extended local productions,” said Im Eun-young, a stock analyst at Samsung Securities.

“The fundamental problem is that Japanese carmakers will be pouring more reserved resources into the development of futuristic and more profitable models like hybrid and electric vehicles to elevate its competitiveness in the global market.”

Toyota’s hybrid sales already exceeded the 7 million mark as of October, while the growth of the full-electric car market has been led by carmakers like BMW and Renault-Nissan currently.

Hyundai still focuses more on product quality and brand building rather than investments in the future car market. The market for hydrogen-fuel cars, in which Hyundai is one of the leading players, is unlikely to see profitability in the near future.

“With uncertainties growing in the global business environment, Japanese carmakers are upping the ante in the emerging markets with cheaper pricing,” said a Hyundai spokesperson.

“We will be producing more localized vehicles to meet different tastes of different markets. We will continue to capitalize on brand building and quality management to compete with Japanese rivals.”

As part of efforts to restore profits, Hyundai and Kia plan to cut production costs at global operations, while elevating sales of more profitable models like sport-utility vehicles and large sedans.

By Lee Ji-yoon (jylee@heraldcorp.com)