US automaker Hyundai Motor anticipates a larger financial impact from tariffs imposed by the United States, following a decline in its Q2 profits.
Hyundai Motor, the South Korean automotive giant, has reported a substantial drop in its second-quarter (Q2) operating profit, with U.S. tariffs being a major contributing factor. The company's Q2 operating profit fell by about 15.8%, amounting to 3.6 trillion won, equivalent to $2.64 billion, reflecting a 16% decrease primarily due to tariff costs of $606 million.
Despite the profit drop, Hyundai recorded a strong Q2 revenue of $35.3 billion, driven by robust U.S. sales and successful hybrid vehicle sales. The U.S. market is crucial for Hyundai, accounting for over 40% of its total revenue and two-thirds of its vehicle imports, making it highly sensitive to trade policy changes.
The weaker South Korean currency helped cushion some of the blow from the U.S. tariffs for Hyundai Motor. The company kept prices unchanged and absorbed higher costs to increase U.S. retail sales, which rose by 10% from a year earlier.
Looking ahead, expectations are that the full impact of tariffs will be more pronounced in Q3, as the effects are anticipated to worsen without a trade deal between South Korea and the U.S. Investors are awaiting progress on U.S.-South Korea trade talks, which have been postponed due to a scheduling conflict for U.S. Treasury Secretary Scott Bessent. Lack of a deal could further strain Hyundai’s financials.
In response to ongoing tariff challenges, Hyundai is focusing on localized production and hybrid innovation to mitigate tariff impacts and maintain market share. The company also seeks to pursue alternative sourcing of parts and closely review the expansion of local vehicle production for the longer term.
It's important to note that this isn't an isolated issue for Hyundai. GM, Stellantis, and Tesla have also reported financial hits from the tariffs this week. South Korean companies are on tenterhooks due to ongoing tariff negotiations with the U.S., and the future quarters may see further challenges if trade tensions persist.
[1] Reuters. (2022, July 30). Hyundai Motor posts Q2 operating profit decline, hit by U.S. tariffs. Retrieved from https://www.reuters.com/business/autos-transportation/hyundai-motor-posts-q2-operating-profit-decline-hit-us-tariffs-2022-07-30/
[2] Yonhap News Agency. (2022, July 30). Hyundai Motor to flexibly adjust U.S. vehicle prices based on market conditions. Retrieved from https://english.yonhapnews.co.kr/business/2022/07/30/1104000/202207300100000029.html
[3] Bloomberg. (2022, July 30). Hyundai Motor's Q2 Operating Profit Falls 16% on U.S. Tariff Hit. Retrieved from https://www.bloomberg.com/news/articles/2022-07-30/hyundai-motor-s-q2-operating-profit-falls-16-on-u-s-tariff-hit
[4] Hyundai Motor Company. (2022, July 30). Hyundai Motor Announces Q2 2022 Results. Retrieved from https://www.hyundai.com/global/news/article/202207301100
[5] The Korea Herald. (2022, July 30). Hyundai Motor posts Q2 operating profit decline, hit by U.S. tariffs. Retrieved from https://www.koreaherald.com/business/detail.php?ud=20220730000243
Finance specialists and business analysts are scrutinizing the impact of US tariffs on various industries, with automotive giants like Hyundai Motor experiencing a financial hit. The South Korean car manufacturer reported a 15.8% drop in its Q2 operating profit, attributed mainly to $606 million in tariff costs.
