Hyundai Motor Company, Kia, and Hyundai Mobis Investment Rating Maintained as 'Buy'
According to an analysis by Hana Securities, domestic automakers including Hyundai Motor Company and Kia may have to bear a profit decrease of approximately 8 million KRW per vehicle if they fully absorb the 25% import tariff imposed by the Donald Trump administration in the United States. However, since the tariff issue has already been largely priced into recent stock prices, the investment rating for Hyundai Motor Company, Kia, and Hyundai Mobis was maintained as 'Buy'.
On the 28th, Song Seon-jae, a researcher at Hana Securities, stated in the report titled "Automobiles - Impact of U.S. Import Tariffs on Automobiles" that "there will be negative effects in terms of volume and profit during the process of imposing tariffs by the U.S. government."
First, Researcher Song explained that the Trump administration announced it would impose tariffs of up to 25% on automobiles imported into the U.S. starting from the 2nd of next month, noting that "the tariff rate could rise from an initial 2.5% to 25%," and that "not only automobiles but also key automotive parts such as engines and transmissions will be subject to tariffs, with the possibility of expanding the tariff targets if necessary." He also added, "The country-specific reciprocal tariffs to be decided in April could have additional impacts."
Accordingly, it is analyzed that negative repercussions are inevitable for Korean automakers. Researcher Song pointed out that in 2024, Korea's automobile exports to the U.S. (1.43 million units) account for 51% of total exports (2.78 million units) and 35% of total production (4.13 million units), estimating that "with an average export price of $23,000, if a 25% tariff is imposed and the cost cannot be passed on to the sales price but must be fully absorbed as a cost, a profit decrease of about 8 million KRW per vehicle will have to be borne." Looking at exports to the U.S. by company, Hyundai Motor Company and Kia export 1.01 million units, and Korea GM exports 410,000 units.
He predicted that "finished car manufacturers will respond to the tariffs by raising sales prices in the short term and expanding local production in the medium to long term." In this process, he also pointed out the possibility that demand in the U.S. may decrease due to rising prices of imported cars. Regarding automotive parts suppliers, he diagnosed that "tariffs imposed on key parts groups could weaken local price competitiveness, and depending on whether finished car exports decrease, there could be negative impacts on supply volumes."
However, Researcher Song also noted that the automobile tariff issue has already been largely priced into domestic stock prices. He said, "It is important to remember that related issues have persisted for several months, during which finished car stock prices have fallen by 15% to 20%, reflecting the tariff concerns," adding, "Although the short-term profit momentum weakening is regrettable, stock prices are expected to recover as market concerns are reflected in low valuations and as the automobile industry's responses (such as expanding local production and raising prices) and technological advancements become visible." He maintained a 'Buy' investment rating for Hyundai Motor Company, Kia, and Hyundai Mobis, setting target prices at 280,000 KRW, 140,000 KRW, and 310,000 KRW respectively.
On the same day, Lee Byung-geun, a researcher at LS Securities, stated, "This tariff measure will negatively affect the profits and losses of all finished car manufacturers, including U.S. companies," and added, "Considering that during Trump's first term there were repeated threats and withdrawals of tariffs and that tariffs have increased losses for U.S. finished car manufacturers, this is not considered a sustainable tariff policy, but short-term volatility expansion is inevitable." He evaluated that "Hyundai Motor Company and Kia will face negative effects of about 7 trillion KRW and 4 trillion KRW annually," but also noted, "Given the current exchange rate level, an annual exchange rate effect of about 1.5 to 2 trillion KRW is expected, which could partially offset the negative effects of tariffs."
KB Securities presented an analysis titled "Indiscriminate tariffs might actually be better." Kang Sung-jin, a researcher at KB Securities, said, "The likelihood that the tariff burden will be passed on to U.S. consumers has increased," and added, "For companies localized in the U.S., the reflective benefits from price increases could outweigh the tariff burden. Hyundai Motor Group could reduce related damages and gain benefits by increasing production at HMGMA (Hyundai Motor Group Meta Plant America)."
He analyzed that "the operating profit decrease for Hyundai Motor Company and Kia due to tariffs is expected to be 3.4 trillion KRW and 2.3 trillion KRW annually," but "as HMGMA's production volume increases, the damage will decrease. If HMGMA's production increases to 500,000 units, tariffs could actually be advantageous." HMGMA is Hyundai Motor Group's strategic production base in the U.S. and a key hub for the $20.1 billion investment in the U.S. announced earlier by Hyundai Motor Group Chairman Chung Eui-sun during his meeting with President Trump.
Previously, Korea Ratings, at the seminar titled ‘Trump 2.0 - Macro and Major Industry Impact and Outlook,’ stated that "the tariff impact will vary among global finished car manufacturers," citing key variables influencing this as global sales volume and dependence on the U.S. market, the proportion of U.S. import volume, U.S. excess production capacity (Capa), regional composition of import volume, and exchange rates.
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