Hyundai Motor warned on Thursday of slowing demand and intensifying competition, but stuck to its 2024 earnings target after reporting a 7% fall in third-quarter operating profit, sending its shares down more than 5%.

“The business environment for the car industry is worsening,” Hyundai Motor’s CFO, Lee Seung-jo said during a conference call, also citing growing policy uncertainties and geopolitical risks globally.

Hyundai Motor, which together with affiliate Kia Corp is the world’s third-biggest automaker by sales, reported an operating profit of 3.6 trillion won ($2.6 billion) for July to September, compared with 3.8 trillion won in profit in the same period a year earlier.

The result was also lower than a 3.9 trillion won average of 20 analyst estimates compiled by LSEG SmartEstimate, which is weighted towards estimates from analysts who are more consistently accurate.

The earnings were hurt by warranty costs of 320 billion won for its Santa Fe SUV engines in the United States and increased sales incentives as a global slowdown in car demand weighed.

Hyundai, however, maintained its 2024 target of achieving an operating margin of 8% to 9% this year. Hyundai has posted an operating margin of 8.9% from January to September this year.

Hyundai Motor’s share price extended its decline on Thursday, falling 3.7% after the earnings announcement.

Major European carmakers including Volkswagen Mercedes-Benz and BMW have flagged a worsening outlook for auto demand as well as rising costs, wiping billions of euros off the sector’s market value.

Hyundai Motor’s global retail sales fell 5% in the third quarter from a year earlier, as a decline in sales in Europe offset sales increases in the United States and South Korea.

While Hyundai’s sales of electric vehicles fell, sales of hybrid EVs, which garner double-digit profit margins, jumped more than 40% from a year earlier, Hyundai said.

Hyundai said in August that it planned to double its hybrid vehicle line-up to counter a slowdown in global electric vehicle demand, while cutting targets for EV sales and delaying the development and launch of some EV models.

Indian IPO

Hyundai said proceeds from the public listing of its India unit would primarily be invested to bolster its competitiveness in the Indian market. It added it would communicate its shareholder return policy in South Korea this year after reviewing its investment plans.

Some analysts said its stock price decline on Thursday reflected disappointment about the lack of a shareholder return policy following the Indian IPO.

Hyundai Motor India shares also fell 7.2% on their market debut on Tuesday after retail investors gave a lukewarm reception to the country’s biggest initial public offering (IPO) amid concerns about lofty valuations and an industry slowdown.

Hyundai said its new U.S. factory in Georgia will increase output gradually since it started production early this month, adding that EVs to be made at the factory will be eligible for U.S. federal tax credits.

In September, Hyundai Motor and General Motors announced a non-binding deal to explore future collaboration across areas including potential joint vehicle development, supply chain issues and clean-energy technologies.