By Lee Hyo-sik
Hyundai Motor and its affiliate Kia Motors face growing pressure to produce more cars in the United States, with many of their global rivals rushing to announce multibillion-dollar investment plans in the world’s largest car market, analysts said Tuesday.
Ford and General Motors, but also Volvo, Toyota and other non-American companies have given in to threats from U.S. President-elect Donald Trump who is demanding carmakers make vehicles in the United States if they want to sell them to American consumers.
Trump has threatened to slap a “border tax” on vehicles imported from Mexico to discourage carmakers from building new plants there.
“There is no doubt that Hyundai and Kia are increasingly concerned about the incoming Trump administration, which will certainly increase tariffs on imported vehicles and take other steps to force carmakers to produce cars in the United States,” Shinhan Financial Investment analyst Jung Yong-jin said. “The companies will not make a hasty decision but closely monitor the situation in the United States.”
Hyundai operates a manufacturing facility in the U.S. state of Alabama, capable of producing 370,000 cars annually, while Kia manufactures 340,000 a year at its Georgia plant. Last September, Kia also opened a plant in Monterrey, Mexico, capable of producing 400,000 vehicles a year. It manufactures the K3 compact sedan and other popular models, most of which are shipped to and sold in the United States.
“Hyundai and Kia will not hastily announce plans to construct new automotive plants in the United States because it costs hundreds of millions of dollars,” Jung said. “In addition, U.S. carmakers are not expanding as fast as they used to so the idea of increasing production has become less attractive. It is also risky to bet too much on Trump because his presidency may end in only four years.”
However, if the Trump administration imposes high tariffs on cars imported from Mexico and elsewhere, this would seriously hurt Kia’s Mexico plant, forcing the company to come up with an alternative plan, the analyst said.
“Given Hyundai-Kia’s management style, the carmakers will not likely take action preemptively. But if Kia’s Mexico plant cannot function as a production base for the U.S. market, they will then do something about it,” Jung said.
Despite growing concerns over Trump’s protectionist moves against global carmakers, Hyundai and Kia said nothing has been decided yet as to whether they would build a new plant or expand existing facilities in the United States.
“We haven’t decided what we will do in response to changes in U.S. politics,” a Hyundai Motor Group official said. “It is not that we need new facilities for the North American market. We believe our three plants can sufficiently meet the demand.”
He said Hyundai and Kia differ from their global competitors, adding that Kia already completed construction of its Mexico plant.
“Ford, General Motors, Toyota and others canceled plans to build new plants in Mexico and instead decided to produce cars in the United States, following Trump’s hostile rhetoric against them. Given this view, Hyundai and Kia are different,” the official said. “But if Kia’s Mexico plant cannot function as a production base for the U.S. market because Trump imposes tariffs on imported vehicles, we will then think about how we will meet the car demand in the United States.”
On Monday (local time), Toyota said it will invest $10 billion in the United States over the next five years, in response to Trump’s hostility toward import cars. The Japanese carmaker had initially planned to produce its Corolla sedans for the U.S. market in Mexico.
Fiat-Chrysler also said it will invest $1 billion into two manufacturing plants in Michigan and Ohio to produce three Jeep models, while Swedish carmaker Volvo plans to make its next generation of S60 mid-sized sedans in the United States in 2018.
Last week, Ford canceled a 1.6 billion plan to build a plant in Mexico and instead decided to expand operations in Michigan. General Motors decided not to stop importing cars from Mexico.