Hyundai Motor Co is likely to struggle to replicate its record quarterly profit as the benefits from a weaker won and government stimulus fade but the popularity of its small, cheap vehicles will help it gain share in a weak global market.

South Korea's largest automaker expects overall sales to rise 8 percent this year and its U.S. market share to grow further in the second half, buoyed by an improving brand image and heavy spending on marketing.

That throws down the gauntlet to larger competitors such as Toyota Motors Corp, whose market share has been trending down and who reported a 35 percent drop in overall U.S. sales in June.

But with the global economy still struggling, the won edging higher and automakers reliant on government stimulus packages to boost demand, analysts questioned whether Hyundai's strong performance could be replicated in the second-half.

Hyundai's earnings came out quite strong, but that was also helped by government's stimulus plans, said Nara Lim, a market analyst at Hanwha Securities.

As global economies, including that of the United States, are still weak, investors are wondering if second half numbers will post as strong as seen in the second quarter.

Hyundai shares fell 3 percent, having jumped more than a third in the quarter ended on June 30, outpacing the wider market's 15 percent gain.

STIMULUS, CHINA HELP

As with governments elsewhere, South Korea has introduced measures such as tax incentives and easier consumer financing to boost domestic car sales, where Hyundai dominates and achieves higher margins.

Hyundai, the world's No.5 car maker with its Kia Motors Corp unit, said contributions from overseas affiliates, especially in China and India, helped the strong numbers.

China and India are two bright spots in an otherwise grim auto market and earlier this month, Hyundai raised it 2009 sales target in China for a second time.

Also on Thursday, Maruti Suzuki, India's top carmaker, reported an unexpected 25 percent rise in quarterly net profit as it rode on higher sales, new product launches and a drop in raw material prices. Japan's Suzuki Motor Corp holds 54.2 percent of Maruti.

To support its ambitions, Hyundai is counting on older standby models along with newer cars such as the i30 wagon and the Genesis coupe.

It can take heart from the successful launch of its Genesis sedan, which J.D. Power and Associates ranked as the most smoothly launched vehicle for this year.

Hyundai also launched successful incentive programs in the U.S., such as the deal allowing buyers who lost their jobs to return just-purchased new cars.

The maker of the Elantra compact sedan doubled its overseas marketing expenses to 3.6 percent of its sales in the first half.

Hyundai posted a net profit of 811.9 billion won ($649.9 million) in the second quarter, soundly beating a 456 billion won forecast by 10 analysts in a Reuters poll.

Its operating profit during the quarter ended on June 30 was 657.3 billion won, well above a forecast for a 496.5 billion won profit. The company's operating profit margin was 8 percent, its highest level in 5 years, it said.

The average value of the won in the second quarter was down 20.8 percent against the dollar from a year earlier although it rose 10.3 percent from the first quarter, according to Reuters calculations.

Sales in the April-June period rose to 8.08 trillion won from 6.03 trillion won in the prior quarter but fell from 9.11 trillion won a year before.

For the whole of 2009, Hyundai's net profit is expected to fall 5 percent to 1.38 trillion won, a Reuters Estimates poll of 20 brokerages shows.

Japanese makers are faring worse, struggling with weaker demand and a firmer yen. Toyota is seen reporting a 354 billion yen ($3.76 billion) net loss in fiscal 2009/10.

($1=1249.1 Won=94.16 Yen)

(Writing by Marie-France Han; Editing by Lincoln Feast)

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