Hyundai Motor launches tariff task force, shifts some Mexico output to US

Hyundai Motor said on Thursday it has launched a task force to respond to US tariffs, adding that production of some Tucson crossovers has now been shifted from Mexico to the United States. 

It is also considering whether to move production of some US-bound cars from South Korea to other locations, the automaker said as it reported a 2 per cent rise in first-quarter operating profit and reaffirmed its annual earnings targets. 

Hyundai and affiliate Kia, which together are the world's third-biggest automaking group by sales, are particularly vulnerable to US tariffs. 

They generate about one-third of their global sales from the US market and imports account for roughly two-thirds of their US car sales, according to data from Korea Investment & Securities. 

"We expect a challenging business outlook to continue due to intensifying trade conflicts and other various unpredictable macroeconomic factors," Hyundai said in a statement. 

The task force, launched this month, will seek to minimise the impact of US tariffs on its finances and will craft plans to increase local sourcing of car components in the United States. 

US President Donald Trump's administration has slapped 25 per cent tariffs on automobiles since April 2 and plans to impose tariffs of 25 per cent on auto parts no later than May 3, which threaten to hike vehicle prices and cut car sales. 

The task force comes on top of a $21 billion investment plan for the US announced last month by Hyundai Motor Group with Trump at the White House. As part of that plan, Hyundai has pledged to boost production at its new Georgia factory, but any ramp-up in US output will take time and tariffs could cost the group billions of dollars. 

The shift of some Tucson production to its Alabama factory, while significant, is relatively small, with some 16,000 made in Mexico last year. 

Other measures taken include frontloading some vehicle shipments to the US which has led to 3.1 months of inventory in North America. 

Hyundai plans to keep sticker prices on its current model lineup steady till June 2 and manage prices flexibly afterwards. 

FAVOURABLE CURRENCY 

Seoul will hold trade talks with Washington later on Thursday, hoping for a speedy resolution to tariffs on autos, one of South Korea's key exports and a major reason for the country's trade deficit with the United States. 

Kim Chang-ho, an analyst at Korea Investment & Securities, is not optimistic about a quick deal on auto tariffs unless South Korea makes big concessions. 

"I see more tariff risks to autos than to other items," he said. 

Benefiting from a weaker South Korean won and a 40 per cent surge in sales of hybrid vehicles, Hyundai booked an operating profit of 3.6 trillion won ($2.5 billion) for January to March, in line with estimates and a record for a first quarter. 

The weaker currency contributed 601 billion won to its operating profit, offsetting the impact of increased sales incentives in the United States and Europe as well as lower sales of higher-margin sport utility vehicles. 

Its US vehicle sales to dealerships rose 1 per cent in the first quarter, but retail sales jumped 11 per cent as consumers rushed to buy vehicles ahead of the auto tariffs. 

It kept its annual guidance provided in January of revenue growth of 3-4 per cent and an operating profit margin of 7.0-8.0 per cent. 

Hyundai also said talks with General Motors to collaborate in various areas are underway, but it wasn't able to share details because the discussions are linked to their responses to tariff policy. 

It hopes to announce detailed plans "in the not-too-distant future." 

Reuters reported last month that Hyundai and GM are in talks to cooperate in electric commercial vans and pickup trucks in North America.  (Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)