The race is on as Japanese brands join Hyundai, Kia in expanding U.S. production

Korean automakers have rushed to shift production to the United States in a bid to navigate tariffs and evolving trade rules, and they are not alone: Japanese brands are making moves of their own that are expected to intensify competition in the U.S. market, particularly in the hybrid SUV segment.

Toyota plans to invest $3.6 billion to expand a plant in San Antonio, increasing annual production capacity by 150,000 vehicles by 2030, according to the automotive industry on July 20.

Honda is also considering building another North American plant. Toshihiro Mibe, president of Honda, recently told the Japanese daily Yomiuri Shimbun that the company "needs one more production base in North America." Industry observers expect the new facility to be built in the United States, as Honda's seven existing North American plants are already operating near full capacity.

The expansion plans are widely seen as a response to the Donald Trump administration's tariffs on imported vehicles and its push to revise the FTA among the United States, Mexico and Canada by increasing the required share of U.S.-made components in automobiles.

Based on U.S. vehicle sales last year, Toyota ranked second among automaker groups, with Hyundai Motor Group in fourth place and Honda in fifth, according to U.S. market research firm Wert Intelligence and industry data.

Competition between Toyota and Honda and Hyundai Motor Group is expected to intensify further, with hybrid SUVs gaining momentum as demand for EVs has cooled.

Sales of conventional hybrid vehicles in the United States reached about 2.05 million in 2025, up about 28 percent from a year earlier. Industry experts say SUVs accounted for much of that growth. Hybrid SUVs also helped drive the Hyundai brands' sales growth in the United States last year and in the first half of this year.

The companies' efforts to expand production are expected to translate into fiercer competition for market share. Key hybrid SUV models include the Toyota RAV4, the Honda CR-V, the Hyundai Tucson and the Kia Sportage.

"Hyundai Motor Group's direct competitors in the hybrid SUV market are Japanese automakers," said Lee Hang-gu, an adviser at the Korea Automotive Technology Institute. "If they significantly expand production, competition is likely to intensify over the medium to long term."

Hyundai Motor Group is also accelerating its localization strategy. It has established an annual production capacity of roughly 1 million vehicles through its plants in Alabama, Kia's Georgia plant and Hyundai Motor Group Metaplant America. The company plans to increase the Metaplant's annual production capacity from 300,000 vehicles to 500,000 by 2028 while expanding its total U.S. production capacity to 1.2 million vehicles.

Competition is also intensifying to localize supply chains for key components such as batteries. Toyota is increasing local sourcing of hybrid batteries through its North Carolina battery plant, while Hyundai Motor Group plans to raise the share of locally sourced batteries through a joint venture with Korean battery maker SK On in Georgia to meet rules-of-origin requirements.

Analysts say, however, Hyundai Motor Group could face obstacles from its labor union. Under the company's collective bargaining agreement, issues affecting employment must be reviewed and approved by an employment stability committee that includes union representatives. The union has already argued that expanding U.S. production would reduce domestic output and affect job security in Korea.

"The Trump administration's protectionist trade policies are pushing automakers to complete not only vehicle production but also key parts supply chains within the United States," said Lee Ho-geun, a professor in the Department of Automotive Engineering at Daeduk University. "If the union opposes the localization strategy out of concern over lower domestic production, Hyundai Motor Group could face constraints in expanding U.S. production."

BY SUK GYEONG-MIN [[email protected]]