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Auto exports rise, but Trump-favored Japanese cars continue to loom

Published: 08 Sep. 2025, 17:22 Updated: 08 Sep. 2025, 17:55

Export-bound cars are lined up at Pyeongtaek Port in Gyeonggi on Sept. 4. [YONHAP]

Korea’s auto exports rose for a third consecutive month in August, driven by strong sales in Europe and Asia, even as shipments to the United States fell for the sixth month in a row, government data showed Sunday.

Exports totaled $5.5 billion in August, up 8.6 percent from a year earlier, extending the growth streak to three months, according to the Ministry of Trade, Industry and Energy.

Exports to the United States dropped as Korean automakers increased local production to cushion the blow from tariffs.

“Korean carmakers are ramping up U.S. production through local investments to minimize tariff impacts and are refraining from raising prices to protect market share,” a ministry official said. “Their strong performance in Europe, where demand for environmentally friendly vehicles is intensifying, also supported exports.”

Regional shifts

From January to July, shipments to the United States totaled $18.2 billion, down 15.1 percent from a year earlier. By contrast, exports to the European Union climbed 17.8 percent, those to Asia surged 40 percent, other European countries gained 24.4 percent and the Middle East rose 8 percent.

At the same time, Hyundai Motor and Kia are expanding U.S. production. Their combined U.S. sales in August hit 179,455 units, up more than 10 percent from a year earlier and a second straight monthly record.

Still, industry watchers warn that momentum may not last. Washington recently completed administrative procedures to cut tariffs on Japanese vehicles to 15 percent from 25 percent, creating new competitive pressure.

Containers and cars for shipment at Pyeongtaek Port in Gyeonggi are pictured on Sept. 4. [YONHAP]

Profitability squeeze

Korean automakers have prioritized market share in the United States at the cost of profitability. Hyundai’s second quarter consolidated revenue reached 48.3 trillion won ($34.7 billion), up 7.3 percent on year, its highest quarterly figure ever. But operating profit fell 15.8 percent to 3.6 trillion won, with margins sliding to 7.5 percent from 9.5 percent.

Brokerages estimate that if Korea remains subject to a 25 percent tariff while Japan enjoys 15 percent, Hyundai's third quarter loss could exceed 1 trillion won. SK Securities forecast tariff costs of 1 trillion won for Hyundai and 900 billion won for Kia in the July–September period alone.

Korea’s earlier price advantage in the U.S. market stemmed from tariff-free access under the Korea-U.S. FTA. Japanese and European rivals faced a baseline 2.5 percent tariff. But with tariff differentials shifting, Korean cars risk losing competitiveness.

The Hyundai Avante, sold in the United States as the Elantra, has a minimum manufacturer's suggested retail price of $22,125, slightly cheaper than Toyota’s Corolla at $22,325. If tariffs are factored in — 25 percent for Korea and 15 percent for Japan — the Elantra would rise to $27,656, making it more expensive than the Corolla at $25,674.

“If the tariff gap with Japan and the EU persists, Korean automakers will face mounting challenges,” an industry official said.

Push for a diplomatic solution

Calls are growing for a swift government response. Seoul sought to include a 15 percent tariff cap in the joint statement at last month’s Korea-U.S. summit, but talks collapsed. Washington demanded that Korea first specify how it would deploy its pledged $350 billion investment in terms of timing, financing and allocation.

“Germany and Japan are Korea’s biggest rivals in car exports. Since their tariff rates have already dropped to 15 percent, Korea urgently needs to formalize its own reduction," said Heo Yoon, professor of trade at Sogang University’s Graduate School of International Studies.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM WON [[email protected]]