SEOUL, March 12 (AJP) - South Korean automakers are navigating a precarious juncture as President Donald Trump’s aggressive "friend-shoring" policies send shockwaves through the global automotive landscape.
The administration’s decision to impose a 25 percent tariff on Canadian and Mexican imports has left South Korean auto giants scrambling to recalibrate their North American strategies.
The Alliance for Automotive Innovation, an industry group representing major manufacturers, including Hyundai Motor Company, sounded the alarm on March 4, warning that the tariffs would lead to significantly higher vehicle prices.
"All automakers will be impacted," said John Bozzella, the alliance’s president. "Most anticipate that the price of some vehicle models will increase by as much as 25 percent."
For Hyundai Motor Group, the stakes are particularly high.
American manufacturers — General Motors, Ford, and Stellantis — secured a temporary reprieve from the tariffs under the U.S.-Mexico-Canada Agreement, but South Korean automakers face immediate financial pressure.
Kia Corp., a Hyundai subsidiary, operates a manufacturing plant in Mexico with an annual production capacity of 400,000 vehicles, more than half of which are destined for the U.S. market. Analysts estimate that the new tariffs could add as much as $7,000 to the sticker price of Kia’s flagship K4 sedan.
"The best way for us to navigate tariffs is to increase localization," said Hyundai Motor CEO José Muñoz. "We decided to invest heavily in America as the most important market."
In response, Hyundai is accelerating the expansion of its Metaplant America in Georgia, a facility scheduled to begin operations in the first half of 2025.
Initially designed for an annual output of 300,000 electric vehicles, Hyundai executives now say the site could eventually produce up to 500,000 units. By 2025, the company aims to boost its total U.S. manufacturing capacity to 1.2 million vehicles annually.
Further adapting to the tariff pressures, Hyundai Motor Group and General Motors signed a memorandum of understanding in September 2024 for a wide-ranging supply chain alliance.
Under the agreement, Hyundai and Kia would utilize GM’s 11 U.S. production facilities for Complete Knock Down (CKD) assembly, while GM would gain access to Hyundai’s factories to re-enter European and Indian markets.
Beyond tariffs, South Korean automakers face additional headwinds in the electric vehicle sector. Recent changes to U.S. federal tax credits have reduced incentives for foreign manufacturers, impacting Hyundai’s ability to compete. In January, the company saw the number of its electric vehicle models eligible for federal incentives drop from five to two.
In response to these shifts, Hyundai underscored its long-standing commitment to the American market.
"For nearly four decades, Hyundai has been a driver of American growth and innovation," the company said in a statement. "Since entering the United States, Hyundai Motor Group has invested $20.5 billion, creating and supporting more than 570,000 American jobs."
The company added that it was "closely monitoring new U.S. policy developments and reviewing various business strategies."
As the American market grows increasingly unpredictable, Hyundai is looking to hedge its bets by strengthening its presence in China, where electric vehicles now command a 30.2 percent market share. The company’s luxury brand, Genesis, is spearheading the push, investing in collaborative research teams to develop locally produced EV models.
With uncertainty looming over the industry, automakers and policymakers alike acknowledge the challenges ahead.
As Honda stated following the tariff announcement: "You just can’t relocate automotive production and the supply chain overnight. That’s the challenge and the dilemma: auto tariffs in North America could end up increasing costs on consumers before jobs come back to the country."
John Bozzella of the Alliance for Automotive Innovation echoed similar concerns, emphasizing the scale of investment required to adjust to shifting trade policies.
"Automakers, battery makers, and suppliers are investing billions in American manufacturing to modernize the industrial base," he said. "But it’s worth remembering the sheer scale of the industry and the size of these automotive and advanced manufacturing facilities. They're massive."
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