U.S. President Donald Trump noted that he would impose high tariffs on imported automobiles, putting Hyundai Motor Company and Kia's U.S. sales in jeopardy. Many of the popular models sold in the U.S. are produced in South Korea and exported to the U.S. To maintain price competitiveness, local production must be increased, but this requires an agreement with the labor union.
Trump said during an executive order signing ceremony at the White House on April 14 (local time) in response to a question about the timing for the introduction of tariffs on imported cars, "It will be around April 2."
Hyundai Motor Company and Kia are producing vehicles for sale in the U.S. at plants in Alabama and Georgia, respectively. The eco-friendly vehicle-only production facility, MetaPlant America, which was newly created in Georgia, began operations last October. However, many of the models sold in large quantities in the U.S. are still made in South Korea and exported.
Last year, Hyundai Motor Company sold a total of 1,708,293 vehicles in the U.S. (Hyundai Motor Company 911,805 units; Kia 796,488 units), and the total number of vehicles produced in the U.S. was 715,732 units (Hyundai Motor Company 361,632 units; Kia 354,100 units).
Last year, the most sold model of Hyundai Motor Company in the U.S. was the Tucson, a mid-size sport utility vehicle (SUV), with a total sales figure of 206,126 units. The compact sedan Elantra sold 136,698 units, and the mid-size SUV Santa Fe sold 119,010 units, ranking second and third, respectively.
Kia's most sold model was the mid-size SUV Sportage, with 161,917 units sold. The compact sedan K3 and its successor K4 followed with a combined sales volume of 139,778 units, while the large SUV Telluride sold 115,504 units.
The internal combustion engine model of the Tucson is currently produced at Hyundai Motor Company's Alabama plant, while the hybrid model is produced at the Ulsan plant in South Korea for export. Last year, the Tucson hybrid saw a 65.9% increase in sales compared to the previous year, with 66,885 units sold. Although the demand for hybrid vehicles is rising in the U.S., the price competitiveness of Hyundai Motor Company's products will decline if tariffs are applied.
The Elantra, which is Hyundai Motor Company's second best-selling model in the U.S., is also produced at the Ulsan plant and exported to the U.S. For Kia, the K4 is the model exported to the U.S.
All models of Hyundai Motor Company's large SUV Palisade and luxury brand Genesis, except for the GV70 electric vehicle, are produced in South Korea and exported to the U.S. Last year, Genesis sold 75,003 units in the U.S.
If President Trump follows through with the imposition of tariffs on imported vehicles, it is expected to impact Hyundai Motor Group's sales in the U.S. To maintain price competitiveness, Hyundai Motor Company needs to increase production in the U.S., which requires the union's consent. In the collective agreement signed in 1999, Hyundai Motor Company included a clause stating that, "Any transfer of vehicle models to overseas factories or production of the same model overseas while currently being produced domestically must go through deliberation and resolution by the labor-management joint committee." Kia is also implementing a similar agreement.
The Metal Workers' Union, to which Hyundai Motor Company and Kia's unions belong, demanded in 2010 a limit on the production ratio of overseas plants. The Hyundai Motor Company union also called for agreements on production quantities and the introduction of production ratio systems in 2015 and 2019.
The overseas transfer of production volumes is a sensitive issue for Hyundai Motor Company and Kia unions. Recently, due to a temporary demand slowdown for electric vehicles and a shortage of new cars, domestic sales have been sluggish, so if production of popular models is reduced, bonuses and performance pay may decrease.
An official in the finished vehicle industry said, "Even if the labor and management reach an agreement on the local production of popular models in the U.S., there will be several procedures to go through, so if tariffs are imposed starting April 2, it will be difficult to avoid impact for the time being."