This photo provided by the Incheon Port Authority on March 18, 2024, shows newly manufactured automobiles waiting to be shipped overseas. (Image courtesy of Yonhap)
SEOUL, Nov. 7 (Korea Bizwire) – The global automotive industry faces significant changes and uncertainties following Donald Trump’s election as the 47th president of the United States on November 6.
Hyundai Motor Group, which has relied heavily on U.S. exports for its performance, is particularly on alert as Trump has promised to prioritize domestic industries, strengthen measures against China, eliminate or reduce Inflation Reduction Act (IRA) subsidies, and increase tariffs.
The election is expected to dramatically reshape the global trade environment, with the automotive industry particularly vulnerable given America’s position as the world’s largest car market. The administration’s “America First” policies and intensified stance against China could adversely affect Korean automotive companies.
The immediate concern is the implementation of universal tariffs. During his campaign, Trump pledged to impose a 10-20% universal basic tariff on all imports and a 60% tariff on Chinese imports.
According to the Ministry of Trade, Industry and Energy, Korea’s automotive exports reached $70.9 billion last year, with North American exports accounting for $37 billion.
Even a 10% tariff would result in billions of dollars in additional costs. Korean vehicles have previously enjoyed duty-free benefits under the Korea-U.S. Free Trade Agreement (FTA).
About six months before the US presidential election, the automotive industry, including South Korea’s Hyundai Motor Company, was already preparing for a Trump administration. This was because there was a high probability that Trump’s green energy and electric vehicle policies would be overturned. This photo provided by Hyundai Motor shows the company’s Ioniq 5 EV model. (Image courtesy of Yonhap)
Hyundai and Kia sold 1.65 million vehicles in the U.S. market last year, with more than half of their U.S. sales coming from Korean-manufactured vehicles. High-value models are primarily produced in Korea, making them particularly vulnerable to tariffs.
Industry observers estimate this could add monthly costs of 200-400 billion won for Hyundai and 100-200 billion won for Kia.
While some suggest that U.S. measures against China could benefit Korean companies if American manufacturers switch to Korean parts, most experts believe the long-term outlook is concerning.
Chinese manufacturers, pushed out of the U.S. market, might flood emerging markets with low-priced vehicles, potentially undermining Korean manufacturers’ price competitiveness.
The transition to eco-friendly vehicles may also need adjustment. Trump has promised to eliminate electric vehicle mandates and ease emissions standards. His pledge to repeal the IRA could reduce electric vehicle subsidies, affecting profitability.
While this won’t reverse the overall electrification trend, it necessitates a diversified strategy for the U.S. market. American automakers have already been slowing their eco-friendly vehicle transition in anticipation of political changes.
Hyundai and Kia recorded their highest-ever hybrid vehicle sales in the U.S. last month, selling 147,613 vehicles with hybrids accounting for 14.7% of sales. An industry official noted, “We must adapt our response according to each export market’s environment.”
To manage these rapid changes, experts suggest cooperation with other major U.S. trade surplus countries like Japan and Germany, along with regular public-private information sharing to minimize policy impact.
Some recommend emphasizing Korean companies’ contributions to U.S. employment and economic growth through investments and market presence.
A Korea Automobile & Mobility Industry Association official stated, “Sudden trade policy changes like tariff increases could hurt management and exports. We need to reduce and diversify our supply chain and export dependencies.”
Kevin Lee (kevinlee@koreabizwire.com)
