SEOUL, October 15 (AJP) - Hyundai Motor could face massive annual costs of more than 8 trillion won if the U.S. maintains a 25-percent tariff on exports of its vehicles, according to a report by NICE Credit Rating.
The report estimated Hyundai's annual tariff burden at 8.4 trillion won if South Korea remains subject to a 25-percent rate, compared to 15 percent for the European Union and Japan. This would make Hyundai's costs the highest among major global automakers, surpassing GM (7 trillion won), Toyota (6.2 trillion won), and Volkswagen (4.6 trillion won).
The tariffs could also squeeze Hyundai's operating profit margin from 9.7 percent to 6.3 percent.
GM trails Hyundai in tariff costs and declining profits, partly due to its manufacturing facility in South Korea, which shipped about 420,000 vehicles to the U.S. last year.
If South Korea's tariff rate is reduced to 15 percent and implemented as initially agreed in July, Hyundai's tariff costs would fall to 5.3 trillion won, with an operating margin of 7.5 percent, suggesting that a swift reduction in tariffs is necessary.
Despite these challenges, the report remains optimistic about Hyundai's ability to manage tariff burdens, citing its strong profitability and financial flexibility, but also warns that competitors with lower tariff rates could gain ground in the U.S. market.
The potential downturn in the U.S. auto market next year makes tariff reductions more urgent, as current demand fueled by tariff-related price hikes could decline, affecting overall sales.
The report concludes that declining sales in major markets combined with increased incentives would further erode automakers' profitability.
* This article, published by Aju Business Daily, was translated by AI and edited by AJP.
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