Hyundai Motor Flags Larger Tariff Impact After Profit Drops — Update

Hyundai Motor posted the equivalent of a $602 million operating loss stemming from elevated U.S. import duties on finished cars and auto parts for the April-June period, executives said in an earnings call. "The [tariff] impact is expected to be greater in the third and fourth quarters," said Chief Financial Officer Lee Seung-jo.

Despite steady sales growth, profitability weakened on higher expenses for marketing and labor amid intensified competition, the executives said. Operating margin narrowed to 7.5% in the second quarter from 9.5% a year earlier.

The South Korean carmaker hasn't passed on the higher tariff costs to customers by raising vehicle prices in the U.S. CFO Lee said that Hyundai doesn't want to be the first to raise car prices. Instead, Hyundai adopts "a fast-follower strategy" to adjust car prices flexibly according to market conditions, he said.

The automaker's results could add pressure on Seoul to rush to clinch a trade deal with Washington, which agreed with Tokyo earlier this week to lower duties on Japanese cars shipped to the U.S. Hyundai has, since early April, been subject to President Trump's 25% levy on foreign-made vehicles. Other import duties are also darkening the company's business outlook.On Thursday, the company reported a 22% drop in net profit to 3.250 trillion won, equivalent to $2.36 billion, for the three months ended June. Analysts had expected a shallower decline, to 3.421 trillion won, according to a FactSet-compiled consensus estimate.

Revenue for the period rose 7.3% to 48.287 trillion won, while operating profit fell 16% to 3.602 trillion won.Vehicle sales increased in the second quarter as the automaker front-loaded shipments to beat tariffs, with wholesale car sales rising 3.3% in the U.S. and 0.8% globally.

But a cloud remains over Hyundai's future performance due to Trump's erratic trade policy. The South Korean company is heavily exposed to the U.S. market, which accounts for roughly one-quarter of its global wholesale car sales. In March, Hyundai announced a $21 billion U.S. investment plan, including a $5.8 billion steel mill construction in Louisiana, to help mitigate the impact of Trump's sweeping tariffs.

Trump--who has already imposed a tariff on auto, steel and aluminum imports--is threatening to slap levies on more foreign-made products. He has also warned trading partners to reach a deal with Washington by Aug. 1 or face separate so-called reciprocal duties.U.S. and South Korean officials are set to resume tariff negotiations in Washington later this week as Seoul seeks to avoid or lower the 25% blanket U.S. tariffs on South Korea.hares in the Korean automaker ended 2.0% lower after the results, trimming gains this year to 2.6% compared with the benchmark Kospi's 33% rise.

Source: TradingView