Korea's auto parts industry faced falling exports and worsening profitability last year due to high U.S. tariffs. As U.S. President Donald Trump recently signaled he would restore the tariff on automobiles and other items to 25%, industry concerns are growing.
According to the Korea Auto Industries Cooperative Association on the 8th, Korea's auto parts exports to the United States last year totaled $7.666 billion (about 11.23 trillion won), down 6.7% from a year earlier. It was the first time since 2020 ($5.494 billion), when exports fell 11.5% from a year earlier due to COVID-19, that shipments to the United States recorded a decline.
This was due to the United States imposing a 25% tariff on imported auto parts starting in May last year. As global automakers, including Hyundai Motor and Kia, expanded local parts sourcing, exports fell. Although the rate was cut to 15% from Nov. 1 under a bilateral agreement, the industry could not avoid the hit.
With exports to the United States, the largest market, declining, the drop in total auto parts exports also widened. Total auto parts exports were $22.963 billion in 2023 (down 1.5% from a year earlier) and $22.533 billion in 2024 (down 1.8%), posting a decline in the 1% range, before plunging 5.9% to $21.2 billion in 2025.
Last year's auto parts exports to Mexico also plunged 10.4% from a year earlier to $1.93 billion. For Korean parts makers operating in Mexico, some volume had involved sourcing parts from Korea, reprocessing them locally, and exporting them to the United States, but that scale shrank due to the impact of U.S. tariffs.
Weak exports also hurt profitability in the domestic auto parts industry. A comprehensive survey by the association of the top 100 listed auto parts companies, excluding Hyundai Mobis (80 first-tier suppliers and 20 second-tier suppliers), found that cumulative sales for the first through third quarters last year rose 6.7% on-year to 74.7726 trillion won, but operating profit fell 6.6% to 2.8166 trillion won.
As a result, the cumulative operating margin for the third quarter fell by 0.5 percentage points, from 4.3% to 3.8%. The number of companies in the red increased from 14 a year earlier to 16.
There is also speculation that unlisted firms, including third- and fourth-tier suppliers not among those surveyed, saw a greater deterioration in profitability last year, given their smaller size and capital capacity compared with larger corporations.
A parts industry official said, "Sales increased due to higher unit prices and domestic sales, but U.S. tariffs were the biggest drag on profitability," adding, "With the tariff rate cut to 15%, we thought there might be some breathing room this year, but the signal of a restoration to 25% is raising concerns."