The Donald Trump administration's 25% tariff on imported cars has taken effect, and domestic automakers such as Hyundai Motor and Kia are expected to face inevitable impact. There are opinions in the automobile industry that suggest producing popular models locally in the U.S. and advancing the production schedule for hybrid vehicles as a response. Some also argue that the government should support domestic sales by providing tax incentives.
The 25% tariff imposed on all imported cars by the United States took effect at 1:01 p.m. on the 3rd Korea Standard Time. This tariff applies to all imported cars, but it does not significantly change the competitive landscape in the U.S. market. Nevertheless, many forecast that Hyundai Motor and Kia, with a local production ratio of only 41.9% among the vehicles they sell in the U.S., will face greater challenges than those from other countries. Japan's ratio exceeds 50%.
As a result, the industry suggests that Hyundai Motor and Kia should consider shifting the production of popular models sold in the U.S. from Korea to local production. Last month, the top three models sold in the U.S. were Tucson (23,631 units), Avante (14,461 units), and Santa Fe (13,543 units). Among these, the Tucson Hybrid and Avante are produced in Korea and exported to the U.S.
Kia produces the best-selling Sportage (16,872 units) and the third best-selling Telluride (11,473 units) in the U.S., but the Sportage Hybrid model is produced domestically. The second best-selling K4 (13,719 units) is produced at a plant in Mexico and imported to the U.S.
Hyundai Motor Group has been operating the Metaplant America (HGMMA) in Georgia, U.S., capable of producing 300,000 eco-friendly vehicles annually, since last October. Currently, this plant manufactures pure electric vehicles such as the Hyundai Ioniq 5 and Ioniq 9.
Hyundai Motor and Kia's electric vehicle sales in the U.S. dropped 12.6% year-on-year last month, reflecting poor performance. In contrast, hybrid vehicle sales surged 61.1% during the same period. Consequently, many believe that to mitigate the impact of the tariff, Hyundai Motor and Kia should expedite the timeline for introducing hybrids at HGMMA, which is scheduled for next year.
An official in the automobile industry noted, "Hyundai Motor and Kia have strong competitiveness in hybrid vehicles, but the only model made locally in the U.S. is the Santa Fe Hybrid," and said that "if a 25% tariff is imposed, leading to price increases, the growth of hybrid vehicles could also be stunted."
There is also a growing call for the government to prepare support measures, such as extending the reduction of the special consumption tax on automobiles, as the likelihood of reduced exports of finished vehicles to the U.S. has increased. It is necessary to provide support to offset the decrease in domestic sales. The reduction of the special consumption tax on passenger cars was initially terminated in June 2023 but has been reinstated since the 3rd of last month to stimulate domestic sales. The tax reduction is applicable to vehicles released by the end of June this year. The finished vehicle industry is advocating for an extension of this measure.