SEOUL: Hyundai Motor said on Thursday it has launched a task force to respond to U.S. tariffs, adding that production of some Tucson crossovers has now been shifted from Mexico to the United States.
It is also considering whether to move production of some U.S.-bound cars from South Korea to other locations, the automaker said as it reported a 2% rise in first-quarter operating profit and reaffirmed its annual earnings targets.
Hyundai and affiliate Kia, which together are the world’s third-biggest automaking group by sales, are particularly vulnerable to U.S tariffs.
They generate about one-third of their global sales from the U.S. market and imports account for roughly two-thirds of their U.S. car sales, according to data from 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.
The task force, launched this month, will seek to minimise the impact of U.S. tariffs on its finances and will craft plans to increase local sourcing of car components in the United States.
U.S. President Donald Trump’s administration has slapped 25% tariffs on automobiles since April 2 and plans to impose tariffs of 25% on auto parts no later than May 3, which threaten to hike vehicle prices and cut car sales.
The task force comes on a $21 billion investment plan for the U.S. announced last month by Hyundai Motor Group with Trump at the White House. As part of that plan, Hyundai has pledged to boost production at its new Georgia factory, but any ramp-up in U.S. output will take time and tariffs could cost the group billions of dollars.
Other measures taken include frontloading some vehicle shipments to the U.S. to avoid tariffs, which has led to 3.1 months of inventory in North America.
Hyundai has said it plans to keep sticker prices on its current model lineup steady till June 2 and will manage prices flexibly afterwards.
Favourable currency
Seoul will hold trade talks with Washington later on Thursday, hoping for a speedy resolution to tariffs on autos, one of South Korea’s key exports and a major reason for the country’s trade deficit with the United States.
Kim Chang-ho, an analyst at Korea Investment & Securities, is not optimistic about a quick deal on auto tariffs unless South Korea makes big concessions.
“I see more tariff risks to autos than to other items,“ he said.
Benefiting from a weaker South Korean won and a 40% surge in sales of hybrid vehicles, Hyundai booked an operating profit of 3.6 trillion won ($2.5 billion) for January to March, in line with estimates and a record for a first quarter.
The weaker won contributed 601 billion won to its operating profit, offsetting the negative impact of increased sales incentives in the United States and Europe and lower sales of higher-margin sport utility vehicles.
Its U.S. vehicle sales to dealerships rose 1% in the first quarter, but retail sales jumped 11%, as consumers rushed to buy vehicles ahead of the auto tariffs.
It kept its annual guidance provided in January of revenue growth of 3-4% and 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.
