NICE Investors Service: "Hyundai Motor Group Can Maintain Solid Profitability Despite Tariff Burden"

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Nice Investors Service (NICE Investors Service) has projected that Hyundai Motor Group will be able to achieve solid profits compared to its competitors, despite the burden of tariffs.

On September 17, Park Seyoung, Managing Director at NICE Investors Service, stated at the 'NICE Credit Seminar 2025' held at the Korea Exchange, "Hyundai Motor Group has strong capabilities to respond to profitability declines, thanks to its excellent sales region mix and product portfolio."

NICE Investors Service analyzed that, following the imposition of a 25% tariff on imported cars in the United States in April this year, major automakers are facing tariff burdens ranging from 1.5 trillion to 2 trillion won. He evaluated, "Due to the impact of tariff burdens, the operating profitability of major automakers declined in the first half of this year."

However, he anticipated that the extent of profitability deterioration would vary depending on each company's strategy. The share of Hyundai Motor Group's sales in advanced markets, which stood at 55% in 2018, rose to 65% in the first half of this year. He explained, "Hyundai Motor Group responded to reduced sales in the Chinese market by expanding sales in the North American market, thereby increasing its share of sales in high-margin markets. In contrast, Volkswagen (VW) maintains a high proportion of sales in the Chinese market, where price competition is intense."

He also predicted that Hyundai Motor Group's establishment of a production base in the United States would help defend profitability. He said, "About 60% of Hyundai Motor Group's U.S. sales are from locally produced vehicles, resulting in a higher tariff burden compared to competitors. However, by increasing the utilization rate of new factories, the company will be able to reduce its tariff burden going forward."

Last month, South Korea and the United States agreed to lower the automobile tariff rate to 15%. As a result, he expected that the deterioration of Hyundai Motor Group's profitability could be mitigated. However, he also anticipated that intensified competition in the U.S. market would inevitably lead to a decline in profitability.

He noted, "The application of the reduced tariff rate is being delayed," and added, "Since Japan, a competing country, has already lowered its tariff rate, the decline in operating performance could be greater than expected." He further emphasized, "Due to investments in current U.S. factories, an increase in inventory burden will also be unavoidable."