Hyundai Motor has launched a dedicated task force to address the growing threat of U.S. tariffs on automobiles and auto parts, as the company braces for a turbulent trade environment and seeks to protect its American market share.
In a statement, the South Korean automaker confirmed it has already shifted production of some Tucson crossover SUVs from Mexico to its Alabama factory in the United States. This move, while impacting a relatively small number about 16,000 units were made in Mexico last year is seen as a strategic response to intensifying trade tensions and signals a broader shift in the company’s manufacturing footprint.
The new task force, established this month, is focused on minimizing the financial damage from recently announced U.S. tariffs. The group will develop strategies to increase local sourcing of auto components and reevaluate production locations for U.S.-bound vehicles, potentially shifting some manufacturing from South Korea to alternative sites.
Hyundai’s announcement comes as the U.S. administration, under President Donald Trump, imposed 25% tariffs on imported automobiles starting April 2. A second round targeting auto parts is expected by May 3. These tariffs, aimed at boosting domestic production, risk inflating car prices and weakening consumer demand, which could significantly impact Hyundai and its affiliate Kia. Together, the two firms form the world’s third-largest automaking group by sales.
According to Korea Investment & Securities, nearly one-third of Hyundai and Kia’s global sales are derived from the U.S., with imports accounting for around two-thirds of their U.S. vehicle sales leaving them particularly exposed to protectionist trade policies.
“We expect a challenging business outlook to continue due to intensifying trade conflicts and other various unpredictable macroeconomic factors”, Hyundai said in its quarterly earnings statement.
Despite these challenges, Hyundai reported a 2% year-on-year increase in operating profit for the first quarter, reaching 3.6 trillion won ($2.5 billion). The results were driven by a favorable exchange rate and a 40% surge in hybrid vehicle sales. A weaker South Korean won added 601 billion won to the company’s operating profits, partially offsetting lower sales of high-margin SUVs and increased discounting in the U.S. and European markets.
The company’s U.S. vehicle shipments to dealerships in the first quarter rose by 1%, while retail sales jumped 11% as American consumers rushed to purchase cars before tariff-induced price hikes take effect.
Hyundai has pledged to keep its current vehicle prices steady through June 2 and will adopt a flexible pricing strategy afterward. To cushion potential supply chain shocks, the company has also frontloaded shipments, resulting in 3.1 months of inventory across North America.
Last month, Hyundai Motor Group announced a $21 billion investment plan for the U.S., unveiled during an event with President Trump at the White House. The plan includes scaling up operations at its new Georgia factory, although executives noted that such expansions will take time to impact production volumes.
Meanwhile, Hyundai is in ongoing discussions with General Motors regarding collaboration in various areas. While no specifics have been disclosed, the company said the talks are closely tied to strategies aimed at navigating the evolving U.S. tariff landscape. Reuters reported in March that Hyundai and GM were exploring joint efforts in electric commercial vans and pickup trucks for the North American market.
On the diplomatic front, South Korea is scheduled to hold trade talks with the U.S. on Thursday, aiming to negotiate relief from the auto tariffs. However, Kim Chang-ho, an analyst at Korea Investment & Securities, warned that a swift resolution is unlikely unless Seoul offers substantial concessions. “I see more tariff risks to autos than to other items”, he said.
Despite the uncertainties, Hyundai has maintained its annual guidance of 3-4% revenue growth and a 7.0-8.0% operating profit margin. With trade pressures mounting, the company’s ability to adapt its production and supply chain strategies will be key to sustaining its U.S. market position in the months ahead.
