"U.S. Treasury Expands Tariff Compensation; Hyundai and Kia Expect 1.8 Trillion Won Profit Improvement"

The U.S. government has announced an extension of tariff compensation payments for locally assembled vehicles, which were originally set to be provided until April 2027, now extending them through 2030. As a result, profitability improvements are expected for major parts suppliers, including Hyundai Motor and Kia.

On the 24th, Yoo Jiwoong, a researcher at Daol Investment & Securities, stated, "Assuming an annual Manufacturer's Suggested Retail Price (MSRP) of $40,000 for Hyundai Motor and Kia, and a current production capacity of 880,000 units, it is estimated that approximately 1.8 trillion won in tariff compensation payments could be recognized annually."

Hyundai Motor Group Meta Plant America (HMGMA) located in Ellabell, Savannah, Georgia, USA. Yonhap News Agency

The Donald Trump administration recently extended measures to ease tariffs on parts for the domestic automotive industry. This system allows for the offsetting of import part tariffs by up to 3.75% of the MSRP of finished vehicles produced and sold in the United States. For example, if a car is priced at 1 million won, the system exempts part tariffs equivalent to 3.75% of that amount, or 37,500 won.

This system was initially set to end after two years, but with this announcement, it has been extended for an additional five years through 2030. The applicable rate of 3.75% will also be maintained.

Yoo explained, "Assuming a 50% local production ratio, the MSRP compensation policy corresponds to a tariff rate of about 4.5%. If additional production capacity for 400,000 units is secured through the operation of the Meta Plant (Hyundai Motor's Georgia electric vehicle plant), the amount of tariff compensation payments could increase by approximately 800 billion won annually."

Yoo added, "The benefit is greatest for finished vehicles when higher MSRP models are introduced, and it is expected that this will be used as an incentive to increase the local exchange rate."

He continued, "In particular, although the $7,500 tax credit for electric vehicles will disappear as of October, by utilizing this compensation, if the MSRP is $40,000, it would amount to about $1,500, effectively reviving incentives for electric vehicles. In the short term, the expected amount of compensation payments is likely to increase due to the localization of SUV HEV models by Hyundai Motor and Kia."

Yoo also anticipated a revaluation of the value chain for parts suppliers. He said, "Production capacity for local assembly of vehicles in the U.S. is expected to increase for major OEMs, including Hyundai Motor and Kia. It is necessary to pay attention to the quantitative growth cycle of the parts ecosystem."

He added, "Among parts suppliers, HL Mando, which primarily supplies Hyundai Motor Group, General Motors, and Tesla in the U.S., is considered the top pick. A mid- to long-term revaluation is also expected for parts companies such as Hyundai Mobis, SL, and Hwaseung, which are focusing on joint expansion with Hyundai Motor Group."

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