U.S. Tariffs Cause 2.3%P Drop in Global Automakers’ Profit Margins [Click eStock]

Japanese Automakers Suffer the Most, European Firms the Least
Tariff Costs Expected to Rise in Q3 Due to Delayed Negotiations
"Gradual Increase in Car Prices Likely"

Due to the impact of the tariff policies implemented by the United States this year, the operating margin of global automobile manufacturers fell by 2.3 percentage points in the second quarter.

On August 28, Hana Securities analyzed the second-quarter results of ten global automakers (Hyundai Motor, Kia, Volkswagen, General Motors, Toyota, Ford, Tesla, Honda, Nissan, and Mazda) and reported that operating profit decreased by 29% compared to before accounting for tariff costs, and the operating margin also dropped by 2.3 percentage points.

The average proportion of U.S. sales among the ten major companies' global sales was 32%. Their combined revenue was approximately 581.6 trillion won, and combined operating profit was 32.1 trillion won. The operating margin was calculated at 5.5%. The costs related to U.S. auto tariffs (with a tariff rate of 25%) disclosed in each company’s second-quarter earnings announcement totaled 13.3 trillion won. This amount is equivalent to 2.3% of total revenue.

It was analyzed that, without the tariff costs, operating profit would have reached 45.4 trillion won and the operating margin would have been 7.8%. The effect of the tariffs resulted in a 29% decrease in operating profit.

By country, the decline in operating margin for Korean automakers was 2.1 percentage points. Japanese companies saw a larger drop of 3.2 percentage points, with Toyota experiencing the steepest fall at 3.7 percentage points.

U.S. automakers saw their operating margin decrease by only 1.8 percentage points. By company, General Motors’ margin dropped by 2.3 percentage points, Tesla’s by 1.3 percentage points, and Ford’s by 1.6 percentage points. Among European companies, Volkswagen had the smallest decline at 1.5 percentage points.

The companies whose operating margins fell by more than 2 percentage points included Mazda, Toyota, Kia, Nissan, and General Motors.

Operating Margins Expected to Fall Further in Q3

Although U.S. auto tariffs have been imposed at a 25% rate since April 2, the actual impact is estimated to have begun in May, considering logistics and local inventory. As a result, the second-quarter tariff costs only reflect about two months.

The U.S. government has negotiated with countries such as Korea and Japan to lower the auto tariff rate to 15%, but the implementation has been delayed. Negotiations with Mexico, Canada, and others have not yet been concluded. Accordingly, the average tariff rate for the third quarter is expected to exceed 20%, with tariff costs estimated to surpass 16 trillion won.

Song Sunjae, a researcher at Hana Securities, stated, "Automakers will respond to tariff costs by increasing local production in the U.S. as a long-term strategy, while in the short term, they will reduce local incentives or raise sales prices." He added, "To offset the tariff costs, an average price increase of about 5-7% will be necessary, but to avoid a decline in demand due to higher prices, companies will likely raise prices gradually over more than a year."