On Thursday, Hyundai Motors created a task force to combat President Trump’s tariffs, shifting production of its most popular model to the US to avoid heavy import taxes.
The South Korean automaker said some of its Tuxon production will move from Mexico to its Alabama plant, and is considering whether to shift production of some of its US-bound cars from Seoul to elsewhere.
Despite facing 25% tariffs on automobile imports, the company reaffirmed its revenue forecast on Thursday, reporting a 2% increase in operating profit for the first quarter.
“We expect the challenging business outlook to continue due to the strengthening of the trade war and various other unpredictable macroeconomic factors,” says Hyundai, which relies heavily on US sales.
US sales to dealers increased by 1%, while retail sales increased by 11% as shoppers gathered in showrooms and bought cars before car imports kicked on April 3. The 25% tariff on auto parts is expected to take effect on May 3rd.
Hyundai’s Customs Task Force, launched last month, will try to minimize the tax impact by working on ways to strengthen local sourcing for auto parts launched last month.
Hyundai and affiliate KIA are the third largest sales group in the world, particularly vulnerable to US tariffs.
According to data from Korea’s investment and securities, they generate about a third of global sales from the US market, while imports account for about two thirds of US car sales.
Last month, Hyundai vowed A whopping $21 billion investment Boost production at the new Georgia plant – he announced plans at Trump and the White House just days before he proposed car rates.
However, production moves cannot be made overnight, and in the meantime, tariffs could cost the company billions of dollars.
Like many other companies, Hyundai has been rushing to import shipments to the US, stockpiling 3.1 months’ worth of stock prior to customs duties.
Analysts warn that tariffs could skyrocket production costs as most major automakers leaned towards complex supply chains that incorporate multiple countries. These auto companies will be tempted to pass at least some additional costs to consumers.
The automaker said it plans to change prices for its current model lineup until at least June 2nd, making it flexible.
The delegation from South Korea, a major auto exporter, is expected to meet with its Washington counterparts on Thursday.
With post wire
