In 2025, Korea's industries saw mixed fortunes by sector. Automakers and petrochemicals struggled under the weight of high U.S. tariffs and the fallout from the Russia-Ukraine war, while shipbuilding and defense enjoyed a boom as global demand rose. We examine the key issues that will drive the global economy in 2026 and forecast the sector-by-sector impact. [Editor's note]
On the afternoon of the 4th on the previous month (local time), at the Genesis showroom in the Hudson Yards mall in Manhattan, New York. Half a dozen visitors were checking out several Genesis models, including the midsize sedan G70, and sales staff were busy attending to them. Staff said inquiries from customers who expect prices to rise have increased noticeably recently.
An employee we met at the showroom said, "Most 2026 models have recently risen about $2,000 (about 3 million won) in price," adding, "Reflecting the tariff, prices are set to rise again next year (2026), so we are recommending buying now." The employee added, "Not only Hyundai Motor and Kia brands, including Genesis, but also Japanese and German companies are likely to pursue gradual price hikes to make up for weak results this year due to tariffs."
After a tough year for domestic automakers due to high U.S. tariffs, they are aiming for a rebound in 2026. In particular, Hyundai Motor and Kia are expected to see improved results as tariff-related uncertainty disappeared with the Oct. 2025 conclusion of a Korea-U.S. trade agreement, and sales of hybrid vehicles have been rising quickly.
However, fierce competition with Chinese automakers is expected in Europe, Latin America, and Southeast Asia. In Europe especially, there is a view that as Chinese electric vehicle makers begin operating local plants in 2026 and supply surges, domestic companies will struggle.
Changes are also expected in research and development (R&D). Hyundai Motor Group has been catching its breath in the Autonomous Driving technology race recently, but there are expectations that, helped by its collaboration with Nvidia, it will post notable results in 2026.
◇ Earnings rebound on eased U.S. tariff burden and strong hybrid sales
The Korea Automobile & Mobility Association (KAMA) projected in a report published on the 8th on the previous month that Korea's auto industry will see both domestic sales and exports increase year over year in 2026.
For 2025, domestic sales are expected to reach 1,677,000 units, up 2.5% from a year earlier, helped by a cut in the special consumption tax on cars and a recovery in electric vehicle sales, while exports are expected to fall 2.3% to around 2.72 million units due to high U.S. tariffs.
Domestic sales in 2026 are expected to rise 0.8% from the previous year to 1.69 million units on expanded demand for eco-friendly cars, including EVs, and new model launches. Genesis will unveil the GV90, a large flagship sport-utility vehicle (SUV), this year. Hyundai Motor will roll out new versions of the Avante and Tucson, while Kia plans to target Korean consumers with new models, led by the recently launched Seltos.
Exports are expected to grow by a larger margin. KAMA predicted that as uncertainty related to U.S. tariffs eases and demand rises overseas centered on eco-friendly cars, exports in 2026 will increase 1.1% year over year to 2.75 million units.
The U.S. administration of Donald Trump imposed a 25% tariff on imported cars starting in April last year. In October, during the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju, Korea concluded a trade deal with the United States to reduce auto tariffs to 15%. Accordingly, auto market experts expect Hyundai Motor and Kia to gradually reflect the adjusted tariff in U.S. retail prices and improve their 2026 results.
Demand for hybrid vehicles is also expected to continue rising. For Hyundai Motor and Kia, combined U.S. hybrid sales through November 2025 jumped 49% year over year to 36,172 units. With the United States ending tax credits for EVs in September last year, the EV market is expected to remain sluggish in 2026, but Hyundai Motor, Kia, and Japanese automakers are seen defending results by expanding hybrid sales.
Yoo Min-gi of Sangsangin Investment & Securities said, "Hybrids account for less than 15% of Hyundai Motor and Kia's total U.S. sales, lower than Toyota (44%) and Honda (26%)," adding, "They will actively work to expand the share of hybrids in their product lineups." Yoo added, "If 100,000 existing sales are replaced by hybrids, an additional annual profit of 400 billion won is expected."
Yoo Ji-ung of DAOL Investment & Securities also said, "Hyundai Motor Group's current situation is similar to the early 2000s when Toyota gained an edge in the U.S. by leading with the eco-friendly Prius." Yoo said, "Hyundai Motor and Kia have added hybrid models to the large SUVs Palisade and Telluride and launched them as new models," projecting, "Annual U.S. sales of the two models will each exceed 200,000 units."
◇ Tough competition with China in Europe and Southeast Asia… Focus likely on India
However, many expect U.S. new-car demand to remain sluggish. Hyundai Motor Securities forecast that U.S. new-car demand in 2026 will total 15.84 million units, up just 0.1% from a year earlier. As a result, Korean automakers, including Hyundai Motor and Kia, are likely to focus on regions where new-car demand is expected to grow more than in the United States.
Southeast Asia is an emerging market that has shown strong growth in recent years. Hyundai Motor Securities expects new-car demand in the six ASEAN countries—Indonesia, Malaysia, Thailand, the Philippines, Vietnam, and Singapore—to reach 3.12 million units in 2026, up 3% from the previous year.
In Southeast Asia, Japanese cars have long dominated market share, but Chinese makers have been making rapid gains recently. As EVs take a larger share in Southeast Asia, demand for Japanese cars centered on internal combustion and hybrids is gradually declining, while sales of Chinese EVs are rising.
According to PwC, Japanese makers' market share in the auto markets of the six ASEAN countries fell from an average of 77% in the 2010s to 62% in the first half of 2025. Meanwhile, Chinese automakers increased their share to 5%, led by EVs.
Korean makers still have only a small share in Southeast Asia. In Indonesia last year, Hyundai Motor's share was just 3.6%, and its efforts in Thailand and Malaysia remain in the early stages. Hyundai Motor and Kia are expected to continue tough competition with Japanese brands, which have long dominated the internal combustion market, and with Chinese brands emphasizing value for money in the EV market.
In Europe, too, Chinese makers' offensive is expected to intensify. Hyundai Motor Securities projected that new-car demand in Western Europe will rise 1.5% year over year in 2026 to 15.13 million units, a scale similar to the U.S. forecast for next year.
The European Union (EU) has imposed additional countervailing tariffs on Chinese-made EVs since October 2023, but Chinese makers are expanding their share in Europe centered on plug-in hybrids, which are excluded from the tariffs. In addition, BYD's plant in Türkiye is set to start operations in 2026, increasing supply.
However, as in the United States recently, Europe's retreat from eco-friendly car support policies could be a variable. The EU recently scrapped its previous policy to end sales of internal combustion cars entirely from 2035. Many analysts say this will favor Hyundai Motor and Kia, which produce a variety of models beyond EVs, including internal combustion and hybrids, more than Chinese makers, whose lineups are largely concentrated in EVs.
The market Korean makers such as Hyundai Motor and Kia are watching most closely in 2026 is India. Hyundai Motor Securities projects India's new-car demand in 2026 at 5.31 million units, up 5% from a year earlier.
The leader in India is Maruti Suzuki, the local subsidiary of Japan's Suzuki, with about 40% share. Hyundai Motor and Kia rank second with a combined share of about 20%. To step up its push in India, Hyundai Motor recently appointed Tarun Garg, an Indian national and the chief operating officer (COO), as CEO of its Indian unit.
Jang Moon-su of Hyundai Motor Securities said, "In India, consumer sentiment has improved recently thanks to base rate and tax cuts, and growth will be strong in 2026," adding, "Hyundai Motor has started operating the Pune plant in addition to its existing Chennai plant, so production is expected to increase further."