Trump Considers Allowing Chinese Automakers to Produce in the U.S.

Concerns are rising among domestic companies as the possibility emerges that the United States may allow Chinese automakers to produce vehicles locally. If Chinese firms bypass tariff barriers by manufacturing in the U.S., it could weaken the competitive edge of existing South Korean companies. Industries benefiting from local production, such as batteries and power equipment, are also closely monitoring the situation.

According to industry sources on September 14, President Donald Trump recently indicated that he might permit Chinese automakers to build factories and produce vehicles in the U.S. He stated, "I am not criticizing Chinese cars themselves, but the most important thing is that we employ our people."

Chinese electric vehicles have been blocked from entering the U.S. market due to various government regulations. Notable examples include a 100% tariff on domestic electric vehicles under Section 301 of the Trade Act and the prohibition of connected car sales by Chinese companies starting in 2027 under the Connected Car Rule.

If Chinese production in the U.S. becomes a reality, intensified price competition is inevitable. Chinese automakers could leverage some components sourced from their home country to launch low-cost offerings. Hyundai Motor Group is particularly vulnerable, as its models sold in the U.S. primarily fall within the mid- to low-price range of SUVs and compact cars, overlapping with the main offerings of Chinese competitors.

The U.S. is Hyundai Motor Group's largest market. Last year, the group sold 1,836,172 vehicles in the U.S., surpassing the 1,258,730 sold domestically. Losing market share to Chinese electric vehicles could significantly impact the group's overall performance.

Having already made substantial investments in the U.S., any easing of regulations on China could be detrimental. Professor Kim Pil-soo from Daelim University’s Department of Future Automotive Studies remarked, "Recently, at the groundbreaking ceremony for Hyundai Steel in Louisiana, it was effectively stated that they would produce cars using locally made steel, essentially promoting 'Made in USA.' If they open the door to China after such a large investment, it would be a direct hit."

Other industries are also watching developments closely. A representative from the battery sector noted, "Even if Chinese companies are allowed to build factories, it will take considerable time to establish production bases in the U.S., and the existing regulations on the battery supply chain from China remain in place, so the immediate impact on domestic companies will be limited."

Even if Chinese automakers begin production in the U.S., they will face significant regulatory hurdles in bringing in components from the Chinese supply chain. The most significant constraint is the Advanced Manufacturing Production Credit (AMPC) under the Inflation Reduction Act (IRA). Domestic battery manufacturers benefit from AMPC by producing battery cells and modules in the U.S., but Chinese companies will struggle to receive the same benefits even if they establish production facilities in the U.S. The tariffs incurred when importing battery materials and components from China also diminish their price competitiveness.

Another industry representative stated, "If Chinese companies enter the U.S. market in earnest, domestic firms will inevitably face increased competitive pressure, but due to U.S. regulations, it will be challenging for Chinese companies to secure price competitiveness in the local market."

Other sectors, such as power equipment and solar energy, also express concerns about intensified price competition if Chinese companies expand their presence in the U.S. However, many believe the immediate impact will not be severe. As the U.S. continues to maintain and strengthen regulations and tariff barriers on Chinese energy and power equipment, it remains to be seen whether Trump's comments will lead to a broader easing of regulations on Chinese manufacturing. A representative from the power equipment sector noted, "There are conflicting aspects between President Trump's remarks and the existing U.S. government's policy toward China, and with a U.S.-China summit still pending, we are closely monitoring how actual policies will be implemented."