Following the start of the Trump administration’s second term, the tariff landscape facing Korea’s automotive industry has once again entered a period of heightened volatility. Toward the end of 2025, Korea secured a temporary reduction in tariffs on Korean-made vehicles from 25% to 15%, contingent on bilateral negotiations with the US and the fulfillment of investment commitments—offering the industry a measure of relief. However, in January 2026, Trump stated that tariffs could be restored to 25% due to delays in the implementation of agreed commitments, bringing tariff uncertainty back to the forefront.
The key issue in this phase is not the possibility of a tariff increase itself, but the precedent that tariff regimes can swing rapidly between easing and re-tightening. Even when a waiver exists, the perception that its durability can be undermined by political judgment has begun to affect how automakers design their medium-term production strategies. Tariffs are increasingly viewed not as a one-off risk, but as a structural condition that must be managed on an ongoing basis.
This shift in perception is reinforced by the recent financial performances of Hyundai and Kia. In 2025, Hyundai recorded an annual revenue of approximately $143 billion, having achieved its highest-ever sales total, while Kia also posted a record high of around $88 billion. Despite this top-line growth, the cost burden stemming from US tariffs was clearly reflected in earnings. Under the 25% tariff regime applied during 2025, Hyundai’s operating profit declined by $2.9 billion, while Kia incurred tariff-related costs of $2.2 billion. Although the rate was reduced to 15% from November 2025, the effective relief was limited through year-end due to dealer inventory levels and the timing of tariff application. This underscores the difficulty of resolving tariff-related risks in the short term.
As the possibility of renewed tariff escalation has re-emerged, the expansion of local US production has once again entered discussions. This, however, should be interpreted less as an indication of an immediate, large-scale production shift and more as a signal that the relative attractiveness of strategic options is changing.
Hyundai and Kia’s major North American production bases are already operating at high utilization levels. Hyundai Motor Manufacturing Alabama (HMMA), with an annual capacity of 360k units, produced 333k vehicles between January and November 2025, representing a utilization rate of over 90%. Meanwhile, Kia’s Georgia plant, with an estimated annual capacity of around 340k units, recorded a utilization rate of approximately 101% in Q3 2025. These figures indicate that existing North American Internal Combustion Engine (ICE) production sites have entered a high-utilization phase, leaving limited room to absorb additional volumes in the short term.
In addition, Hyundai Motor Group Metaplant America (HMGMA), a new Electric Vehicle (EV) production base, began operations in October 2024 and continued its ramp-up through 2025. As of Q3 2025, utilization remained at around 70%, suggesting that it is still premature to view the facility as a stable supply base capable of immediately replacing Korean production volumes. Nonetheless, with strategic EV models such as the IONIQ 5 and IONIQ 9 allocated to the plant, HMGMA’s role in the group’s North American electrification strategy is expected to expand over the medium term.
Note: Hyundai Motor Group consists of Hyundai, Kia, and Genesis brands. Source: GlobalData (Global Light Vehicle Production Forecast, January 2026).
Another important signal emerges from how tariff costs are being managed. Hyundai and Kia have prioritized price protection in the US market rather than immediately passing tariff-related cost increases on to consumers. This does not imply aggressive price cuts or intensified discounting. Instead, it reflects an approach centered on minimizing increases to Manufacturer’s Suggested Retail Price (MRSP) or effectively holding prices steady for key models, while absorbing higher costs internally. Through adjustments to incentive structures and tighter cost management, tariff impacts have been internalized within the profit and loss structure, materializing as lower operating profit rather than changes in vehicle pricing. This highlights that tariffs are not merely a policy risk, but a structural variable capable of influencing profitability on a multi-billion-dollar scale.
These dynamics extend beyond the automakers themselves. Domestic production facilities and supplier networks linked to US-bound exports are also exposed to the volatility of the tariff regime. As tariff uncertainty persists, reassessments of the efficiency and utilization of Korean production assets are becoming increasingly unavoidable. The phrase “an environment where planning is difficult,” frequently cited in recent remarks from Hyundai and Kia, reflects the growing recognition that the current tariff issue is not a short-term earnings concern, but a factor shaping the broader industrial structure.
Taken together, the confirmed trends in North American localization investment, production automation and robotics deployment, as well as adjustments to electrified and hybrid portfolios, suggest that Hyundai and Kia’s production strategies are gradually moving beyond short-term tariff responses toward a phase of medium-term structural realignment. In an environment where tariff regimes repeatedly demonstrate instability, policy risk avoidance is likely to become a more decisive criterion in production location and model allocation decisions than flexibility alone.
Core models and incremental volumes targeted at the North American market are increasingly likely to be reviewed for allocation to US-based or nearby production sites rather than Korean plants. This does not imply a sharp contraction of Korean production, but it does suggest that the strategic priority assigned to Korean facilities in future capacity expansion or new model allocation decisions may become more conservative than in the past. Ongoing investments in automation and robotics at North American plants should be viewed not merely as cost-saving measures, but as part of a medium-term effort to enhance the structural competitiveness of local production.
From a portfolio perspective, a mixed strategy combining electrification and hybrids is likely to gain importance in the North American market, rather than a singular focus on Battery Electric Vehicles (BEVs). Amid heightened volatility in EV demand, leveraging local production to expand offerings centered on hybrids and higher-margin SUVs could serve as an effective way to mitigate both tariff and demand risks. In this process, Korean production is expected to continue playing a complementary role in global supply, while its position as the default base for North American market supply may gradually diminish.
Note: Hyundai Motor Group consists of Hyundai, Kia, and Genesis brands. Source: GlobalData (Global Light Vehicle Production Forecast, January 2026).
Overall, Hyundai and Kia’s production strategies are unlikely to undergo abrupt changes in the near term. Instead, they appear to be entering a phase where incremental shifts are accumulating, driven by investments in localization, automation, and portfolio rebalancing that are already underway. While tariffs remain a policy variable, their recurring and unpredictable nature is increasingly being internalized as a baseline assumption in production planning. Under these conditions, a continued shift in the center of gravity for production location and model allocation toward North America over the medium term cannot be ruled out.
By Hoonho Bae, Manager, Korea Automotive Forecast, GlobalData
“Tariffs as a structural constraint: How US trade volatility is reshaping Hyundai and Kia’s production strategy” was originally created and published by Just Auto, a GlobalData owned brand.
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