Hyundai, Kia plan US production boost to reduce 25% tariff risk

Hyundai Motor and Kia are revising their production and sales strategies in the United States due to a potential 25% tariff on imported vehicles.

The tariffs are expected to take effect later this year and may pressure earnings in the second quarter and beyond.

Hyundai Motor Group has formed a task force to create contingency plans for its US operations.

“We will prepare the contingency plan to shape our ideal production strategies by regions and vehicles,” said Lee Seung-jo, Hyundai Motor’s executive vice president, during a conference call.

The company plans to increase local production of vehicles and auto parts in the US over the long term.

🔗 Source: The Korea Times

🧠 Food for thought

1️⃣ Auto tariffs drive unprecedented investment in US manufacturing

Hyundai Motor Group’s recent $21 billion US investment represents one of the most aggressive localization strategies in the automotive industry, directly triggered by tariff pressures.

The investment aims to increase the group’s US production capacity to 1.2 million vehicles annually across its brands, effectively transforming its manufacturing footprint1.

This massive capital commitment includes $9 billion specifically for automotive production capacity and another $6 billion dedicated to localizing parts production, including critical electric vehicle components1.

The scale of this investment shows how tariffs can reshape global manufacturing strategies, with Hyundai-Kia now poised to create over 100,000 direct and indirect jobs in the US by 20281.

This aligns with historical patterns seen during previous tariff threats, when multiple automakers accelerated US production plans to mitigate trade risks.

2️⃣ Vertical integration emerges as tariff mitigation strategy

Beyond simply building more vehicles in the US, Hyundai is pursuing vertical integration by constructing its own steel mill in Louisiana to produce low-carbon steel for its vehicles1.

This represents a shift in automotive manufacturing strategy, as automakers traditionally rely on external suppliers for raw materials rather than producing them directly.