April 29 (Bloomberg) -- Hyundai Motor Co., South Korea's largest automaker, posted a slower profit growth in the first quarter as a slump in consumer spending damped sales of its Sonata sedans and Santa Fe sport-utility vehicles at home.

Net income rose 11 percent to 463 billion won ($397 million), from 417.6 billion won a year earlier, Hyundai Motor said in a statement distributed to reporters in Seoul. Profit rose 81 percent in the fourth quarter last year.

Hyundai Motor, which along with affiliate Kia Motors Co. is aiming to become one of the world's top five automakers by 2010, is focusing on exports after a credit binge left one in 13 South Koreans three months or more behind in debt payments at the end of last year. President Park Hwang Ho said profit and vehicle sales will be ``significantly better'' in the second quarter.

``Things may get better from the third quarter this year, as domestic demand recovers,'' said Yang You Sik, who manages 400 billion won in equities including Hyundai Motor shares, at LG Investment Trust Management Co. in Seoul. ``Still, the company will face increased competition from foreign competitors at home and abroad.''

Hyundai Motor's shares fell 3.6 percent to trade at 44,750 won, as of 1:35 p.m. in Seoul. They've fallen 11 percent this year. Profit was in line with a median estimate of 457 billion won by eight analysts surveyed by Bloomberg News.

Sales rose 2 percent to 6.2 trillion won. Exports rose 15 percent to 274,094 units, while domestic sales fell 30 percent to 127,405. Domestic sales may also be spurred by a cut in the luxury tax on cars between March and the end of the year, Park said.

New Models

``We're seeing a steady recovery in demand, helped by the temporary reduction in luxury tax and the introduction of our Tucson SUV,'' he told a press conference.

Hyundai Motor and Kia are betting the introduction of new models will encourage more South Koreans to buy new cars this year. Hyundai Motor started selling its new Tucson sport-utility last month and plans to update its Sonata passenger cars in July.

Sales in the U.S. fell 5 percent to 88,293 units, while those in western Europe rose 20 percent to 80,400 units. The company ships more than half of its vehicles overseas.

U.S. sales suffered as competition from Toyota Motor Co. and other Japanese automakers increased. At the same time, a J.D. Power & Associates study ranked the Sonata first in the entry mid- sized car category. The survey also found that the number of complaints per 100 vehicles for Hyundai cars in the U.S. fell to 102 from 143.

Improvement in U.S.

``We expect sales in the U.S. to improve as we continue our efforts to improve the quality of our products and introduce new models,'' Park said.

Park said Hyundai Motor expects to start production at its new plant in Montgomery, Alabama, in March next year. The company plans to introduce new models every six months in the U.S., he said.

The company is also selling more vehicles in China, India and Turkey, where it has production plants. Sales from the three plants combined more than doubled to 89,689 vehicles in the first three months of the year.

A strengthening won helped boost earnings in the first quarter. The local currency was at 1,146.45 won to the U.S. dollar at the end of March, 4 percent higher than at the end of last year. The local currency weakened 5.5 percent in the first quarter of 2003.

Contributions from Hyundai Motor's affiliates including Kia Motors Corp., South Korea's second-largest automaker and its car loans unit Hyundai Capital Services Inc. also lifted profit.

Operating profit fell 27 percent to 461 billion won.

To contact the reporter on this story: Kyunghee Park in Seoul kpark3@bloomberg.net.

Last Updated: April 29, 2004 00:42 EDT