Hyundai Motor reports dismal earnings amid full-scale tariff shock

Headquarters of Hyundai Motor and Kia in Seoul / Courtesy of Hyundai Motor Group

Hyundai Motor reported a sharp drop in third-quarter earnings Thursday, as the automaker faced the full impact of U.S. tariffs despite strong vehicle sales in its key export markets.

In a regulatory filing, the Korean automaker reported an operating profit of 2.53 trillion won ($1.75 billion) in the July-to-September period, down 29.2 percent from the previous year. Its sales, however, increased 8.8 percent to 46.7 trillion won during the same period.

Hyundai Motor was significantly affected by the U.S. tariff, but the carmaker said it would continue to introduce measures to enhance its profitability by diversifying powertrains and reshaping production strategies.

The automaker said it reported an operating profit fall of 1.8 trillion won in the third quarter due to the 25 percent auto tariff imposed by the United States.

However, the carmaker breathed a sigh of relief after Korea reached a tariff settlement with the U.S., allowing Hyundai Motor to export its vehicles to the American market at a reduced 15 percent tariff.

This also allows the Korean carmaker to compete with its rivals from Japan and Europe on an equal footing in the U.S.

“The application of the 15 percent auto tariff in the U.S. comes with significance in that it has cleared away any tariff uncertainties,” Lee Seung-jo, executive vice president at Hyundai Motor, told investors during a conference call.

“The biggest effect is that we have now been able to engage in predictable management,” he said.

Hyundai Motor's Palisade SUVs / Yonhap

Despite the revenue fall, Hyundai Motor extended a winning streak in the number of total auto sales on the global market, buoyed by the solid performance of its eco-friendly lineups.

According to data from the carmaker, it sold more than 257,000 vehicles in the U.S. in the third quarter, up 2.4 percent from the previous year. The U.S. is the largest export market for Hyundai Motor.

The carmaker also achieved outstanding eco-friendly vehicle sales growth of 25 percent in the global market during the same period, driven by robust sales of electric vehicles and hybrid cars both in the U.S. and Europe.

Hyundai Motor plans to gradually increase the portion of U.S.-made vehicles to minimize the tariff shock. Under the drive, the carmaker will increase localized production of its popular models, such as the Tucson SUV, and is considering producing its Palisade hybrid SUV in the U.S.

Shares of Hyundai Motor surged Thursday morning on hopes of an earnings recovery in the fourth quarter, following the overnight tariff agreement between Korea and the U.S.

According to data from Korea’s alternative stock trading platform, Nextrade, Hyundai Motor shares soared to more than 13 percent at around 8 a.m.

The stock price of Hyundai Motor closed up 2.71 percent to 265,000 won per share on the same day.