Hyundai Motor and Kia Pay 3.3 Trillion Won in U.S. Tariffs in First Half Alone

Hyundai Motor: 1.8 Trillion Won, Kia: 1.5 Trillion Won in Tariffs
No Refunds for Finished Vehicles: Subject to Itemized Tariffs, Not Retaliatory Tariffs
Rising Incentive Costs Amid Intensifying EV Competition
Responding to Market Demand wit

Hyundai Motor and Kia have paid a total of 3.3 trillion won in tariffs on finished vehicles and parts exported to the United States during the first half of this year, according to estimates. Despite achieving record-high quarterly sales, both companies were unable to avoid a decline in operating profit, with the ongoing tariff burden compounded by rising incentives to counter competition from Chinese electric vehicles.

According to industry sources on July 27, Hyundai Motor disclosed during its second-quarter earnings conference call that it paid approximately 900 billion won in tariffs for the second quarter. Adding the 860 billion won from the first quarter brings its first-half tariff total to 1.8 trillion won. During the same period, Kia paid 815 billion won in the second quarter and 755 billion won in the first quarter, bringing its first-half total to over 1.5 trillion won. As a group, the combined tariff burden exceeded 3 trillion won. The tariff costs increased in the second quarter compared to the first quarter, as tariff measures began to be fully reflected in results starting in the second quarter. The tariff burden, which persisted throughout last year, continued through the first half of this year and is expected to remain for the second half as well.

These tariffs are categorized as item-specific tariffs, not reciprocal tariffs, and are therefore excluded from rebate eligibility. Because they are automobile item tariffs imposed on finished vehicles, they fall outside the scope of the reciprocal tariff ruling. On February 20 of this year, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not grant the President the authority to impose comprehensive tariffs, deeming reciprocal tariffs illegal. As a result, Korean battery manufacturers such as LG Energy Solution were able to apply for rebates amounting to hundreds of billions of won. Since batteries are subject to reciprocal tariffs, rebates became possible, but this does not apply to finished vehicles. Thus, tariffs on finished vehicles are directly reflected in the cost of goods sold, eroding profitability. While rebates will be reflected in future financials for those eligible, Hyundai Motor and Kia—having paid item-specific tariffs—cannot expect such effects. With several hundred billion won in tariffs accumulating each quarter, the burden from exclusion on rebates will only grow heavier over time.

Tariffs are not the only factor pressuring results. As aggressive pricing by Chinese electric vehicle makers intensified market competition, the cost of sales incentives also increased. Chinese companies, led by low-priced EVs, are expanding their market share in Europe and emerging markets. As these incentives—which are promotional costs provided to dealers or consumers to boost sales—increase, the per-unit profit margin decreases. To counter low-cost competitors, Hyundai and Kia have lowered prices or increased promotional activities, which further hurt profitability. The sales incentive competition has been especially pronounced in the U.S. and European markets. In the second quarter alone, Hyundai Motor's incentive expenses increased by 400 billion won, while Kia incurred 723 billion won in additional costs from incentive spending and price reductions.

Seungjun Kim, Head of Finance at Kia, stated, "Our incentive spending in the United States increased by more than $400 and by over 1,000 euros in Europe compared to last year," adding, "In Europe, we responded to Chinese competitors by offering more incentives." He continued, "For the time being, even if we have to sacrifice some profitability, there is a need to increase our market share," and emphasized, "It was inevitable to boost incentives in order to strengthen our competitiveness in the affordable and mass-market electric vehicle segments in Europe."

Meanwhile, thanks to strong sales of electric vehicles (EVs) and hybrid electric vehicles (HEVs), Hyundai Motor and Kia saw their quarterly revenue surpass 80 trillion won for the first time in the first half. Electrified vehicles were a key driver underpinning their top-line growth during this period. Despite these cost pressures, sales momentum continued. Both companies plan to respond to market demand in the second half by introducing new models and vehicles tailored to local markets. They are also pursuing strategies to localize production in the U.S. in order to mitigate the impact of tariffs.

This content was produced with the assistance of AI translation services.