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

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

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

Hyundai and affiliate Kia, which together are the world's third-biggest carmaking 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 unpredictable macroeconomic factors," Hyundai said.

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 US.

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

Later on Thursday, South Korea and the US agreed to craft a trade package aimed at removing new US tariffs before the pause on reciprocal tariffs is lifted in July.

Finance minister Choi Sang-mok said Seoul has asked for some exemptions from the tariffs and had highlighted the car sector, which is particularly vulnerable.

Hyundai's task force comes on top of a $21bn (R396.12bn) investment plan for the US announced last month by the wider Hyundai group with Trump at the White House. As part of the 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.

The shift of some Tucson production to its Alabama factory, while significant, is relatively small, with 16,000 vehicles 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 model lineup steady until June 2 and manage prices flexibly afterwards.

Favourable currency

Benefiting from a weaker South Korean won and a 40% surge in sales of hybrid vehicles, Hyundai booked an operating profit of 3.6-trillion won (R47.19b) for January to March, in line with estimates and a record for a first quarter.

The weaker currency contributed 601-billion won (R7.90bn) to its operating profit, offsetting the impact of increased sales incentives in the US and Europe and lower sales of higher-margin sport utility vehicles.

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

It kept its annual guidance provided in January of revenue growth of 3% to 4% and an operating profit margin of 7% to 8%.

Hyundai also said talks with General Motors to collaborate in some 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.