Hyundai Motor speeds up relocation of production amid tariff risks

Vehicles are parked for export in the nation's southwestern port city of Ulsan, April 2. Yonhap

Hyundai Motor is accelerating the relocation of some of its production from Korea to the United States to mitigate mounting tariff risks.

Starting on Tuesday, the carmaker will partially suspend operation for its production line in the southeastern city of Ulsan. The suspension will last for four days, during which period its production of the flagship IONIQ 5 electric vehicle (EV) and Kona Electric will be halted.

The production decline will be offset by its increased production in the U.S., as vehicles assembled there will be exempt from the country’s 25-percent auto tariff.

In particular, Hyundai Motor is ramping up EV production at its Hyundai Motor Group Metaplant America. According to company data, the factory produced more than 11,000 IONIQ 5 EVs in the first quarter of this year, following the start of vehicle assembly in October last year.

Hyundai Motor Group’s key auto brands — Hyundai Motor and Kia — plan to expand their U.S. production to 1.2 million vehicles in the future to counter the tariff shock.

The move is inevitable due to the carmakers’ heavy reliance on the U.S. for auto exports. Their combined auto exports to the U.S. reached 1.01 million last year. This accounts for some 46.6 percent of their total exports during the same period.

The strategy, however, does little to boost the Korean economy, as it will create fewer jobs locally, and the relocation of production itself poses a survival threat to the carmakers’ local parts suppliers.

According to data from the Federation of Korean Industries, Korean carmakers’ exports to the U.S. are projected to drop 7.9 percent this year from a year earlier under the scenario that the 25-percent auto tariff remains in place.

Industry officials said the drive looks unstoppable unless the Korean government succeeds in reducing and removing the massive tariff in the so-called July package deal.

Under the drive, Seoul seeks to win auto tariff exemptions from the U.S. by leveraging other keen trade agendas and helping resolve trade complaints raised by the country until July 8.

“The role of the government is rapidly growing for the carmakers to bring its local production to normalcy,” an auto industry official said.

“Any firm’s top priority is to ensure profitable growth, but the status quo makes it harder for most export-driven carmakers to do so unless they increase U.S. production even at the cost of shutting down local operations.”