Furthermore, the automaker indicated that it is currently evaluating the feasibility of relocating some production of vehicles destined for the US market from its home base in Seoul to alternative global locations.
Despite the imposition of a significant 25% tariff on car imports, Hyundai reaffirmed its earnings forecasts for the current period on Thursday, reporting a modest 2% growth in first-quarter operating profit.
In an official statement, Hyundai acknowledged the increasingly challenging business environment, citing "intensifying trade wars and other various unpredictable macroeconomic factors" as key concerns. The company relies heavily on its sales performance in the United States market.
Interestingly, Hyundai's sales to US dealerships experienced a 1% increase during the first quarter, while its retail sales surged by an impressive 11%. This spike in retail sales is attributed to consumers flocking to showrooms to purchase vehicles in anticipation of the auto import levy, which officially took effect on April 3. An additional 25% tariff on auto parts is scheduled to come into force on May 3.
Hyundai's newly established tariff task force, initiated last month, will focus on developing strategies to minimize the financial impact of the tariffs. A key objective of the task force will be to explore and implement ways to significantly ramp up the local sourcing of auto parts within the United States.
Hyundai and its affiliate Kia, collectively ranking as the world's third-largest automotive manufacturing group by sales volume, are considered particularly vulnerable to the newly imposed US tariffs. Data from Korea Investment & Securities indicates that approximately one-third of their global sales are generated from the US market, with imports accounting for roughly two-thirds of their car sales in the United States.
Notably, just last month, Hyundai made a substantial pledge of $21 billion towards boosting production at its new manufacturing plant in Georgia. This significant investment plan was announced at the White House, with President Trump in attendance, mere days before he unveiled his proposal for the auto tariffs.
However, the logistical complexities of shifting production on a large scale mean that these changes cannot be implemented overnight. In the interim, the imposed tariffs have the potential to cost the company billions of dollars in increased import duties.
Mirroring the actions of many other companies facing similar tariff pressures, Hyundai also reportedly accelerated its import shipments to the US, building up a substantial inventory equivalent to 3.1 months' worth of supply in anticipation of the tariffs taking effect.
Industry analysts have cautioned that the tariffs could lead to a significant surge in production costs for automakers, given the intricate and multinational nature of most major automotive supply chains. Consequently, these auto firms will likely be compelled to pass on at least a portion of these added costs to consumers in the form of higher vehicle prices.
Hyundai stated its current intention to maintain the prices of its existing model lineup unchanged until at least June 2, after which pricing will become more flexible in response to market conditions and tariff impacts.
Adding another layer to the unfolding trade situation, a delegation from South Korea, a major global auto exporter, is scheduled to meet with their US counterparts in Washington on Thursday. This meeting will mark the opening round of crucial trade talks aimed at addressing the implications of the new tariffs and exploring potential avenues for resolution.