[NewsSpace=JeongYoung Kim] Thanks to the popularization of imported cars and the phenomenon of car inflation, last year, domestic subsidiaries of imported car companies reported record-high performances one after another. However, Tesla Korea was the only company whose sales and operating profits decreased compared to the previous year, and it received a "qualified" opinion from the external auditor due to improper accounting treatment.   

According to electronic disclosure systems on the 13th, domestic subsidiaries of imported car companies reported record-high performances through audit reports. Mercedes-Benz Korea recorded sales of KRW 7.535 trillion and operating profits of KRW 281.7 billion, both of which were record highs. BMW Korea also recorded the highest sales and operating profits ever, with KRW 5.7893 trillion and KRW 144.8 billion, respectively.

Audi Volkswagen Korea turned to profit for the first time in seven years. Audi Volkswagen Korea had seen consecutive operating losses for six years from 2016 to 2021 since the diesel gate scandal in 2016, but succeeded in turning to profit last year, recording operating profits of KRW 294 billion. Sales were KRW 2.279 trillion. Porsche Korea recorded a new sales record of KRW 1.2075 trillion and operating profits of KRW 361 billion.

Volvo Car Korea also recorded its highest sales ever last year, with sales of KRW 76.87 billion and operating profits of KRW 7.6 billion. Stellantis Korea, which sells Jeep and Peugeot, also recorded record-high sales and operating profits, partly due to the acquisition of Hambur Motors in early last year. Sales were KRW 5.749 trillion, and operating profits were KRW 223 billion. Ford Sales Service Korea recorded its highest operating profit of KRW 42 billion, with sales of KRW 484 billion.

The background behind the record-high performances of domestic subsidiaries of imported car companies is the increase in sales and prices. According to the statistics of the Ministry of Land, Infrastructure and Transport, the total number of imported cars registered in the country as of last month was 3,233,313, accounting for 12.6% of the total number of registered vehicles, 25,646,614. 12 out of 100 cars on the road are imported cars.

The proportion of imported cars in the total number of registrations has been steadily increasing, from 8.4% in 2017, 9.6% in 2018, 10.4% in 2019, 11.3% in 2020, and 12.1% in 2021. In addition, car inflation, which has continued since the outbreak of COVID-19, raised the average selling price (ASP) per unit, and an unusual supply-demand imbalance was formed due to the backlog of new car deliveries, leading to a simultaneous increase in operating profits.

Tesla Korea was the only company among the top 10 imported car brands in South Korea to experience a decline in both sales and operating profit. Sales decreased by 7.2% to KRW 1.58 trillion, while operating profit also fell by 7.2% to KRW 150 billion compared to the previous year. This is the first time that Tesla Korea's sales have declined since the company released its audit report in 2020, and it is also the first time that its operating profit has decreased compared to the previous year. According to data from the KAICA research center, the company's domestic sales decreased by 18.3% year-on-year, with 10,571 units sold in 2021 compared to 17,828 units sold in the previous year.

Tesla Korea was given a "qualified" audit opinion by external auditors as it failed to properly reflect corporate tax penalties and fines in its financial statements. The company was penalized KRW 251.15 billion in corporate taxes after a tax audit in 2021, but it recorded this amount as accounts receivable instead of expenses to be recognized in the current period. In addition, the Fair Trade Commission imposed a penalty of KRW 28.53 billion on the company for exaggerating the maximum driving range and charging speed of its vehicles in advertisements in 2021, but this was also recognized as other expenses in the current period.

Taesung Accounting Firm pointed out that "if the management had treated the corporate tax penalties and fines as expenses in the current period in accordance with the accounting standards for general companies, the current period's expenses and liabilities at the end of the period would have increased by KRW 279.68 billion, and the current period's net income and capital at the end of the period would have decreased by KRW 279.68 billion." The firm also stated that it was unable to obtain sufficient and appropriate audit evidence regarding the asset quality of the receivable for the refunded amount of the corporate tax penalties.

A ‘qualified’ audit opinion is issued when the auditor is unable to obtain sufficient evidence or when the company's accounting practices do not comply with the principles of accounting. If a listed company receives a ‘qualified’ audit opinion, it may be designated as a management target, and if it receives two consecutive qualified opinions, its listing may be terminated.