Hyundai Motor on Thursday revealed it has created a task force to contend with President Trump’s tariffs and shifted production of one its most popular models to the US to avoid hefty import taxes.
The South Korean automaker said manufacturing of some of its Tucsons will be moved from Mexico to its Alabama factory, and is weighing whether to shift some production of some US-bound cars from Seoul to other locations.
Despite facing 25% tariff in car imports, the company reaffirmed its earnings forecasts Thursday and reported 2% growth in first-quarter operating profit.
“We expect a challenging business outlook to continue due to intensifying trade wars and other various unpredictable macroeconomic factors,” Hyundai, which relies heavily on its US sales, said in a statement.
Its US sales to dealerships rose 1%, while its retail sales jumped 11% as shoppers flocked to showrooms to buy cars ahead of the levy on auto imports, which kicked in April 3. A 25% tariff on auto parts is slated to take effect on May 3.
Hyundai’s tariff task force, launched last month, will seek to minimize the impact of the taxes by working on ways to ramp up local sourcing of auto parts, launched last month, in the US.
Hyundai and affiliate Kia, which together are the world’s third-biggest automaking group by sales, are particularly vulnerable to U.S 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.
Last month, Hyundai pledged a whopping $21 billion investment into boosting production at its new Georgia factory – announcing the plan at the White House with Trump just days before he proposed the auto tariffs.
But production moves cannot be made overnight, and in the meantime, the tariffs could cost the company billions of dollars.
Like many other companies, Hyundai also rushed to import shipments to the US, stockpiling 3.1 months worth of inventory ahead of the tariffs.
Analysts have cautioned that the tariffs could send production costs soaring, since most major automakers lean on complex supply chains that weave through multiple nations. Those auto firms will likely be tempted to pass at least some of the added costs along to consumers.
The automaker said it plans to keep prices on its current model lineup unchanged until at least June 2, and then prices will become flexible.
A delegation from South Korea, which is a major auto exporter, is expected to meet with US counterparts in Washington on Thursday for an opening round of trade talks.
With Post wires
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