On Wednesday, South Korea based Hyundai Motor Co posted a drop of 39% in income for the fourth quarter, which was its lowest in the past seven years, hit hard by weaker demand at home and in the U.S. and higher overall costs from sale incentives and strikes.

The automaker announced that its net profit for October thru December reached 1 trillion won equal to $859 million in comparison with 1.6 trillion won for the same period one year earlier.

The result posted by the automaker fell short of forecasts. Analysts were expecting net income of over 1.5 trillion won.

The results were also less than the third quarter, when Hyundai posted its smallest profit in over 6 years after it adopted the international financial standards for reporting.

Sales were lower by 1% to end the quarter at 24.4 trillion won or $21 billion. At the same time, operating income fell 33% to end the quarter at 1 trillion won.

The automaker cited a strike during its July thru September quarter that pushed production costs up and cost it 95,400 autos worth of output. Hyundai was also hurt by lower sales of cars at home in South Korea.

For its full year, the carmaker’s net income for 2016 fell by 12% to end at 5.7 trillion won. Hyundai sold 4.86 million autos in 2016, which was 2% less than during 2015.

Hyundai’s slowness in responding to the increasing popularity of SUVs while the demand for its sedans declined affected sales in its important markets.

At home in South Korea, car sales for the fourth quarter were down 6% compared to the same quarter one year earlier, while in the U.S. sales for the quarter fell 14%.

Annual sales were lower in South Korea due to buyers flocking to Volkswagens and Toyotas rather than the Genesis and Sonata sedans.

Hyundai increased incentives for buyers of cars and raised its spending on marketing of Genesis, which in turn increased the overall costs.

The automaker announced plans to increase its SUV production in models such as the Tucson and Santa Fe, this year in both China and the U.S.

Hyundai is aiming for 5.08 million vehicles sold during 2017 an increase of 5% over 2016.

It predicted a difficult business environment for the car market in the U.S. during 2017 and said that hikes in interest rates might hurt auto financing.

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