SEOUL (Reuters) - Hyundai Motor Co (>> Hyundai Motor Co) said third-quarter net profit fell 23 percent from a year earlier, missing forecasts, as the South Korean automaker soaked up the impact of slowing China sales and aggressive discounting campaigns.

Hyundai, ranked fifth in global auto sales together with affiliate Kia Motors (>> Kia Motors Corporation), said July-September net profit slid to 1.2 trillion won ($1.1 billion) from 1.5 trillion won a year earlier. That was below an average forecast of 1.5 trillion won from 12 analysts polled by Thomson Reuters I/B/E/S.

The firm has been hit by lackluster sales in China and the United States, its two largest markets, and the weak earnings marked its seventh straight quarterly profit drop. Both Hyundai and Kia slashed prices of sport-utility vehicles in China after sales were hit especially hard in a sharp slowdown in the world's largest auto market.

Competition, driven by currency moves, has also intensified for Hyundai. "During the third quarter, Japanese companies utilized the weak yen to focus marketing in the U.S. market. We increased (sales) incentives in response," Chief Financial Officer Lee Won-hee said during a conference call.

Lee said during the call that Hyundai's China sales will rebound in the fourth quarter, fueled by new model launches. But he said a drop in emerging market currencies and the euro in the third quarter offset the benefit to Hyundai of the won's own drop versus the U.S. dollar - a 12.2 percent fall from a year earlier in average value terms.

Korea Investment & Securities analyst Kim Jin-woo said Hyundai's marketing expenses and incentives exceeded expectations in the quarter.

He said he expects a better fourth-quarter performance thanks to new model launches and tax cuts on cars in South Korea and China, as well as the continued positive impact of the weakness of the won against the dollar.

Hyundai's CFO said he did not expect Hyundai to see much of a windfall from Volkswagen AG's (>> Volkswagen AG) diesel emissions scandal, as the company competes predominantly with Japanese automakers. But he said the company would step-up research and development of "eco-friendly" cars, saying trust in "clean diesel" vehicles has been hurt by the scandal.

Hyundai's shares ended down 0.61 percent after the earnings were released, compared with a 0.98 percent drop in the broader index.

($1 = 1,137.0000 won)

(Editing by Edwina Gibbs and Kenneth Maxwell)

By Sohee Kim and Joyce Lee

Stocks treated in this article : Volkswagen AG, Hyundai Motor Co, Kia Motors Corporation