SEOUL - Hyundai Motor Co, South Korea's top automaker, reported a smaller-than-expected 43 percent fall in quarterly net profit as a weak won cushioned it from higher marketing costs and drop in sales caused by the global crisis.

Hyundai said it expected to further expand its share in the key U.S. market, where its lineups of smaller, cheaper vehicles such as the Elantra compact and Sonata sedan have won more cost-conscious customers.

But neither Hyundai or its affiliate Kia Motors Corp are expected to remain completely immune to the industry's
worst-ever downturn, which has driven U.S. auto giants General Motors and Chrysler LLC to the brink of bankruptcy and is dragging Japanese rivals like Toyota Motor Corp into the red.

"Given the severity of the economic slowdown, Hyundai performed relatively well but that's largely thanks to the
windfall gains from a weak won," said Lee Jong-woo, research head at HMC Investment Securities.

Hyundai, the world's No.5 car maker along with Kia, sounded a bullish note on the quarters ahead.

"From the second quarter, we expect global governments' economic stimulus measures and support plans for auto industry to have some positive effect on the industry," Chung Tae-hwan, Hyundai's chief financial officer, told reporters and analysts.

From next month, South Korea's government will cut taxes by 70 percent to customers who replace their old cars with new ones.

Hyundai said its global market share rose to 4.7 percent in the first quarter, from 4 percent a year ago. It said it was
aiming to expand its U.S. market share to 5 percent for 2009, from 4.3 percent in March.

Aided in part by executives' bullish remarks, shares in Hyundai ended up 3.2 percent at 68,100 won (S$74.91), outperforming a 0.9 percent gain in the wider market.

Steep marketing costs

Hyundai posted a net profit of 225 billion won ($247.5 million) in the first quarter, beating a 205 billion won (S$225.5 million) forecast by 11 analysts in a Reuters poll.

That compared with a 392.7 billion won (S$431.9 million) profit a year ago.

The strong net result was in part due to contributions from Hyundai's Chinese and U.S. factories.

Hyundai's 153.8 billion won (S$169 million) operating profit was below a forecast for a 206.4 billion won (S$227 million) profit and its overall profit margin dropped to 2.5 percent in the first quarter from 6.5 percent as the recession pressured automakers to step upmarketing and reduce prices.

"This is a good time for South Korean automakers to be increasing their market share, and Hyundai Motor is doing the right thing in aggressively marketing its products," said Jang Huh, managing director at Prudential Asset Management.

Hyundai said the average cost of incentives in the United States rose to S$4,224 per vehicle from $3,319 in 2008, higher than major Japanese automakers. Hyundai grabbed attention earlier this year by allowing buyers to return vehicles if they lost their jobs within a year.

Bolstering Hyundai's price competitiveness, the won dropped over 30 percent against the dollar and almost 40 percent versus the yen in January-March from last year.

Analysts said a recovery in the won threatened to undo some of the recent gains South Korean automakers have enjoyed.

For all of 2009, Hyundai is expected to report a 4.8 percent fall in a net profit to 1.38 trillion won, according to
a poll of 22 brokers by Reuters Estimates.

The estimate contrasts with major rivals' expectations of massive losses for 2009, and reflects efforts by policymakers to spur demand in its higher-margin home market.

Reflecting the company's resilient outlook, shares in Hyundai rose 40 percent in January-March, beating the wider
market's 13 percent gain, but a recent won recovery is clouding the outlook for South Korean carmakers, some analysts said.