As the United States plans to impose a 25% tariff on all imported cars starting next month, South Korea is expected to face relatively significant damage among major automobile-producing countries. The local production ratio of Hyundai Motor Company and Kia in the U.S. is lower than that of foreign competitors such as Toyota. Concerns are also raised regarding the possibility of GM Korea withdrawing from producing cars for sale in the U.S.

U.S. President Donald Trump signed an executive order on the 26th (local time) that imposes a 25% tariff on imported cars starting on the 2nd of next month. He noted, "The automobile tariff is permanent. 100% it is."

Chung Eui-sun, Chairman of Hyundai Motor Group, meets with reporters on Jun. 26 (local time) in Elba, Georgia, after the completion ceremony of Metaplant America, explaining about the invitation from U.S. President Donald Trump to the White House. /News1

Last year, the combined sales volume of Hyundai Motor Company and Kia in the U.S. market was 1,708,293 units. Hyundai sold 911,805 units, while Kia sold 796,488 units. Of these, the total number of cars produced in the U.S. was 715,732 units (with Hyundai at 361,632 units and Kia at 354,100 units), accounting for 41.9% of total sales. The remainder is made domestically and exported to the U.S., making them subject to tariff.

A considerable portion of domestically produced vehicles consists of models that are popular in the U.S. For instance, last year's best-selling Hyundai model in the U.S., the Tucson, is manufactured as a hybrid vehicle at the Ulsan plant for export. The second best-selling model, the Avante, is also made at the Ulsan plant.

While overseas competitors are also facing unavoidable impacts, their situations are somewhat better compared to Hyundai Motor Company and Kia. Major automobile corporations have already produced over half of the vehicles sold in the U.S. locally.

According to S&P Global Mobility, Toyota's local production ratio in the U.S. was 56% of all vehicles sold in the U.S. as of 2023. Toyota operates 10 factories in total: five for finished vehicles and five for parts in the U.S. Other Japanese brands like Honda and Nissan have local production rates exceeding 60%.

The domestic production ratio of the three major U.S. automakers, General Motors, Ford, and Stellantis, also exceeds 60%. While U.S. companies, including GM, have established several plants overseas in places like Mexico to reduce expenses, they still produce a significant volume domestically. Additionally, analyses suggest that moving overseas production back to the U.S. is relatively easy.

The share of U.S. production for Mercedes-Benz of Germany is also around 60%. Ola Källenius, CEO of Mercedes-Benz, stated at an investor meeting last month, "It takes at least 2 years to a maximum of 4 years to relocate production lines. We aim to bring forward the timeline to raise our U.S. production ratio to 70% by 2027."

A panoramic view of Metaplant America, which Hyundai Motor Group has constructed in Georgia, USA, and began operations in October last year. /Provided by Hyundai Motor Group

Last October, Hyundai Motor Group built the Meta Plant America in Georgia, which is capable of producing 300,000 eco-friendly vehicles annually. Consequently, the U.S. production volume for Hyundai Motor Company and Kia is expected to expand to around 1 million units per year.

However, due to the recent chasm in electric vehicles, the electric vehicle market is thought to be in a prolonged slump, making it difficult to gain immediate benefits from the operation of the Meta Plant America.

In the domestic automobile industry, concerns are rising regarding the possibility of GM's withdrawal from Korea, in addition to Hyundai Motor Company and Kia. GM Korea is currently exporting over 80% of its domestic production to the U.S. If the tariff on automobiles remains, as President Trump mentioned, it may be difficult for GM to continue operating its plants in Korea.

The waiting area for vehicles at the former GM Korea Gunsan plant. Weeds abound on the empty land behind the tightly closed rusty iron gate, with a faded Chevrolet logo visible in the distance. GM suspended operations at the Gunsan plant in 2018 and sold it the following year. /Jin Sang-hoon, reporter

If GM's withdrawal from Korea materializes, the domestic parts industry is also likely to suffer. According to the Korean GM cooperative organization, as of last year, there were 276 first-tier suppliers for GM Korea. Including second and third-tier suppliers, the estimate rises to around 3,000.

An official in the finished car industry stated, "While reciprocal tariffs can be adjusted through negotiations between countries, automobiles fall under item-specific tariffs, making immediate adjustments unlikely. There are concerns about the hollowing out of the domestic automobile industry."