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

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By Hyunjoo Jin, Joyce Lee and Heekyong Yang

SEOUL (Reuters) -Hyundai Motor said on Thursday it has launched a task force to respond to U.S. tariffs, adding that production of some Tucson crossovers has now been shifted from Mexico to the United States.

It is also considering whether to move production of some U.S.-bound cars from South Korea to other locations, the automaker 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 automaking group by sales, are particularly vulnerable to U.S tariffs.

They generate about one-third of their global sales from the U.S. market and imports account for roughly two-thirds of their U.S. car sales, according to data from Korea Investment & Securities.

“We expect a challenging business outlook to continue due to intensifying trade conflicts and other various unpredictable macroeconomic factors,” Hyundai said in a statement.

The task force, launched this month, will seek to minimise the impact of U.S. tariffs on its finances and will craft plans to increase local sourcing of car components in the United States.

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

Later on Thursday, South Korea and the United States agreed to craft a trade package aimed at removing new U.S. 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 auto sector, which is particularly vulnerable.

Hyundai’s task force comes on top of a $21 billion investment plan for the U.S. announced last month by the wider Hyundai group with Trump at the White House. As part of that plan, Hyundai has pledged to boost production at its new Georgia factory, but any ramp-up in U.S. output will take time and tariffs could cost the group billions of dollars.

The shift of some Tucson production to its Alabama factory, while significant, is relatively small, with some 16,000 made in Mexico last year.

Other measures taken include frontloading some vehicle shipments to the U.S. which has led to 3.1 months of inventory in North America.

Hyundai plans to keep sticker prices on its current model lineup steady till June 2 and manage prices flexibly afterwards.

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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 ($2.5 billion) for January to March, in line with estimates and a record for a first quarter.

The weaker currency contributed 601 billion won to its operating profit, offsetting the impact of increased sales incentives in the United States and Europe as well as lower sales of higher-margin sport utility vehicles.

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

It kept its annual guidance provided in January of revenue growth of 3-4% and an operating profit margin of 7.0-8.0%.

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

($1 = 1,429.6600 won)

(Reporting by Hyunjoo Jin, Joyce Lee and Heekyong Yang; Editing by Miyoung Kim and Edwina Gibbs)