As the won-dollar exchange rate climbed into the 1,430-won range per dollar for the first time in five months, Hyundai Motor Group is poised to ease some of the pain from the U.S. tariff (25%). Because cars sold in the United States are paid for in dollars, a higher exchange rate boosts results. Securities analysts say that if the current exchange rate holds, about 30% of the tariff hit could be offset.
According to FnGuide on the 13th, Hyundai Motor's third-quarter operating profit consensus (the average of securities firms' estimates) came to 2.6775 trillion won. That is down 25.2% from a year earlier. Fourth-quarter operating profit is projected to edge down 2% to 2.7651 trillion won. Kia's third-quarter operating profit is also expected to fall 16.6%, but the decline in the fourth quarter is forecast to narrow to 9.55%.
The securities industry expects Hyundai Motor Group to feel the peak impact of tariffs in the third quarter. Hyundai Motor took an 828.2 billion won loss from tariffs in the second quarter, and that figure could swell to as much as 1.5 trillion won in the third quarter. Kia, which booked a 786 billion won tariff loss in the second quarter, is expected to lose 1.23 trillion won in the third quarter. The United States decided to lower the tariff on Korean-made cars to 15% from 25%, but with working-level talks delayed, it is still imposing 25%.
In the fourth quarter, the benefit from a strong dollar is expected to partially offset the tariff damage. The won-dollar exchange rate averaged 1,375.22 won in July and 1,389.66 won in August, then entered the 1,400-won range in late September. The rate jumped to as high as 1,434.0 won intraday on this day. That is the highest level in a little over five months since May 2 (1,440.0 won).
The auto industry is a representative beneficiary of a strong dollar. That is because payments are made in dollars for cars exported from Korea as well as those produced and sold locally. As the won weakens, export vehicles gain price competitiveness.
Im Eun-young, Head of Team at Samsung Securities, said, "When the exchange rate moves 1%, the operating profit volatility for Hyundai Motor and Kia is 3.3% and 3.4%, respectively," adding, "If the current exchange rate holds, 30% of the tariff impact can be offset by the exchange rate." Hyundai Motor also enjoyed more than 600 billion won in exchange-rate gains in the first quarter, when the average won-dollar rate was 1,453 won.