Hyundai Forms Tariff Task Force, Boosts U.S. Production in Response

By Hyunjoo Jin, Joyce Lee, and Heekyong Yang

SEOUL (The News Pulse) – Hyundai Motor announced on Thursday that they have established a task force to address U.S. tariffs. The company also stated that production for certain Tucson crossover models has been moved from Mexico to the United States.

The company is also contemplating shifting the manufacturing of certain vehicles destined for the U.S. market from South Korea to other sites, according to their statement accompanying the announcement of a 2% increase in first-quarter operating profits and confirmation of their yearly financial goals.

Hyundai and its subsidiary Kia, which collectively form the globe’s third-largest automobile manufacturing consortium based on sales, are especially susceptible to American tariff measures.

Approximately one-third of their worldwide sales come from the U.S. market, with around two-thirds of these American vehicle sales being imported, as per information provided by Korea Investment & Securities.

"We expect a challenging business outlook to continue due to intensifying trade wars and other various unpredictable macroeconomic factors," Hyundai said in a statement.

This month, a new task force was initiated with the aim of reducing the financial strain caused by U.S. tariffs. Additionally, they plan to develop strategies for boosting domestic procurement of automobile parts within the country.

The administration of U.S. President Donald Trump has implemented a 25% tariff on cars starting from April 2nd and intends to enforce a similar 25% tax on automotive components by no later than May 3rd. These measures could lead to increased vehicle costs and potentially reduce automobile sales.

The task force addresses a $21 billion investment strategy for the U.S., which was unveiled last month by the Hyundai Motor Group with President Trump present at the White House. Part of this initiative involves Hyundai’s commitment to increase manufacturing at its recently opened facility in Georgia; however, increasing production stateside will require considerable time. Additionally, tariffs have the potential to incur multibillion-dollar expenses for the company.

As part of these efforts, some vehicle deliveries to the U.S. have been moved up to bypass tariffs, resulting in an inventory level of 3.1 months in North America.

Hyundai has stated that it intends to maintain the suggested retail prices for its present range of models until June 2, after which they will adjust prices as needed.

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Seoul plans to engage in trade discussions with Washington later today, aiming for a swift resolution on auto tariffs. These taxes affect one of South Korea’s primary exports and significantly contribute to the nation’s trade imbalance with the U.S.

Kim Chang-ho, an analyst at Korea Investment & Securities, remains skeptical about a swift agreement regarding auto tariffs without significant compromises from South Korea.

He stated that auto tariffs pose greater risks compared to those for other products.

Thanks to a depreciated South Korean currency and a significant rise in hybrid vehicle sales by 40%, Hyundai reported an operational gain of 3.6 trillion won ($2.5 billion) from January through March, which met market expectations and set a new high for a quarterly period.

The underperforming division added 601 billion won to its operational profitability, counterbalancing the adverse effects from heightened promotional expenditures in both the U.S. and European markets along with reduced sales of high-profit margin sports utility vehicles.

In the initial three months, the company’s car deliveries to dealers in the U.S. increased by 1%. However, retail sales surged by 11%, as buyers hastened to purchase vehicles before the anticipated automobile import duties took effect.

It maintained its yearly forecast presented in January, expecting a revenue increase of 3-4% along with an operating profit margin of 7.0-8.0%.

Its shares ended down 0.6% after earnings compared with a 0.1% decline for the wider market.

($1 = 1,429.6600 won)

(Reported by Hyunjoo Jin, Joyce Lee, and Heekyong Yang; Edited by Miyoung Kim and Edwina Gibbs)