Auto Exports to U.S. Plunge in April Due to Tariffs... Local Sales Face Critical Test Starting June

April Auto Exports to U.S. Down 16% Year-on-Year
Hyundai and Kia Set Monthly Sales Records for 7th Consecutive Month
Tariff Impact Expected After June as Inventory Runs Out
Challenges in Building Local Production Supply Chains in the U.S.

The Trump administration in the United States has imposed tariffs on imported automobiles, causing South Korea's automobile exports to the U.S. in April to plummet by 16% compared to the previous year. During the same period, Hyundai Motor and Kia achieved record-high U.S. sales for the seventh consecutive month on a monthly basis, but there are concerns that the impact of tariffs will hit hard starting in June, when inventory depletion becomes significant.

According to the Ministry of Trade, Industry and Energy on May 2, South Korea's automobile exports to the U.S. from April 1 to 25 amounted to $2.51 billion, a 16.6% decrease from the same period last year. While exports of high value-added models have slowed due to a temporary demand stagnation for electric vehicles (the so-called "EV chasm"), the burden was compounded by the U.S. government imposing a 25% tariff on imported finished vehicles starting from April 3.

Although the impact of tariffs has started to be reflected at the export stage, the effects have not yet reached local sales in the U.S. Last month, Hyundai Motor and Kia set new records for the highest monthly sales in the U.S. for the seventh consecutive month. On May 1 (local time), Hyundai Motor America announced that it sold 81,503 units in the U.S., a 19% increase from the same period last year.

Major models such as the Tucson (up 41%), Elantra (up 30%), Santa Fe (up 28%), and Palisade (up 15%) all saw balanced growth in sales. In particular, hybrid vehicle sales increased by 46% year-on-year, driving overall performance.

During the same period, Kia also recorded sales of 74,805 units, a 14% increase from the previous year. This was the highest April sales figure in Kia's history, and the company also set a new record for the seventh consecutive month. Major SUVs such as the Carnival MPV (up 79%), Telluride (up 21%), and Sportage (up 18%) broke monthly records, while eco-friendly vehicle sales rose by 21% compared to a year earlier.

Kia Carnival. Provided by Kia

Industry experts believe that while Hyundai Motor and Kia have steadily increased their market share with a focus on hybrids and other eco-friendly vehicles, the Trump administration's imposition of a 25% tariff on finished vehicles since last month has also stimulated consumer purchasing sentiment. It is analyzed that consumers, concerned about vehicle price hikes due to high tariffs, have rushed to purchase cars.

Hyundai Motor and Kia have declared that there will be no price increases in the U.S. at least until June. However, once the inventory stockpiled before March is depleted, a decline in profitability appears inevitable. In a conference call last month, Hyundai Motor stated it held three months' worth of inventory, while Kia reported two months' worth.

To avoid the tariff shock, Hyundai Motor and Kia have proposed increasing local production as a countermeasure. They plan to expand the production capacity of their new plant in Georgia, the Hyundai Motor Group Metaplant America (HMGMA), from the originally planned 300,000 units to 500,000 units. However, it is virtually impossible to shift export volumes from Korea to local U.S. production in a short period, as this requires not only building various facilities and local parts supply chains but also considering the operating rates of domestic plants.

For now, establishing a parts supply chain is the biggest challenge. In response, the Trump administration has taken a step back, announcing that it will grant a two-year exemption on tariffs for imported auto parts, considering the practical difficulties faced by automakers. For one year, parts equivalent to 15% of the value of vehicles assembled in the U.S. will be exempt from tariffs, and for the following year, parts equivalent to 10% of the vehicle's value will be exempt.

Furthermore, on May 1, the scope of tariff exemptions was expanded to include parts covered by the United States-Mexico-Canada Agreement (USMCA). From the perspective of automakers, this means that, for the time being, parts produced in Mexico and Canada can also be procured without tariffs. Cho Chul, a senior research fellow at the Korea Institute for Industrial Economics and Trade, stated, "Even if parts from Mexico and Canada are exempt from tariffs, there will be little improvement for Korean exports. This is merely a means to give automakers time to increase local production in the U.S."

This content was produced with the assistance of AI translation services.