Hyundai Motor Co. reported a sharp drop in second-quarter operating profit, citing rising pressure from U.S. tariffs on vehicles and auto parts. The South Korean automaker, which, with affiliate Ki,a ranks as the world’s third-largest carmaker by sales, warned that the impact of the trade barriers will deepen in the coming quarter.
Tariffs Begin to Bite
The April-to-June operating profit fell to 3.6 trillion won ($2.64 billion), marking a 16% year-on-year decline from 4.28 trillion won a year earlier. The result, however, slightly exceeded a 3.5 trillion won estimate compiled by LSEG SmartEstimate. But the real concern lies ahead.
Hyundai said that U.S. tariffs cost the company 828 billion won ($606 million) in the second quarter alone. The burden is expected to grow in the third quarter as reciprocal tariff measures kick in after the August 1 deadline.
Korean Officials Under Pressure
The drop in Hyundai’s earnings comes as South Korean trade officials are under mounting pressure to strike a deal with Washington, especially after the U.S. and Japan finalized an agreement this week reducing tariffs on Japanese auto imports to 15%.
The disparity is triggering anxiety among South Korean exporters, who now face a 25% U.S. tariff—a level Hyundai’s CFO Lee Seung-jo said could “go down a little,” but remains unpredictable.
Talks between Seoul and Washington, initially scheduled for this week to address tariff concerns, have been rescheduled due to a scheduling conflict for U.S. Treasury Secretary Scott Bessent, further delaying any relief.
Investor Anxiety Grows
Hyundai’s shares dropped 2% following the earnings announcement. Analysts say investors are looking for stronger assurances from the automaker.
“It seems crucial for Hyundai Motor to reassure investors on whether it has effective tools to navigate ongoing tariff-related uncertainty,” said Shin Yoon-chul, analyst at Kiwoom Securities. “Remaining silent only deepens the unease among foreign investors.”
Hyundai isn’t alone. Volkswagen, GM, Tesla, and Stellantis have also reported financial hits due to tariffs this year, as U.S. levies on automotive imports, parts, and raw materials like steel and aluminum push costs higher across the board.
U.S. Market Still Strong, but Inventory Dwindling
Despite the tariff headwinds, Hyundai continued to gain ground in the U.S. market its most lucrative geography, accounting for over 40% of its global revenue. U.S. retail sales rose 10% in Q2 year-on-year, driven by price stability and strong product performance.
However, much of this was due to front-loaded shipments earlier in the year. Hyundai’s U.S. inventory is now thinning, leaving it vulnerable in the second half.
The company says it will adjust U.S. vehicle prices flexibly based on market conditions rather than directly responding to tariff hikes. Plans are also underway to explore alternative sourcing for components and to consider expanding U.S.-based production as a longer-term buffer.
Currency Cushions the Blow
One bright spot: a weaker South Korean won offered some relief, softening the overall impact of U.S. tariffs on the bottom line.
Despite the drop in profit, Hyundai’s Q2 revenue climbed 7% year-on-year to 48.3 trillion won, beating the market consensus of 47 trillion won.
The company has not revised its annual profit target yet, but hinted it will update forecasts after the August 1 tariff deadline.
As trade talks stall and cost pressures mount, all eyes are now on how Hyundai will adapt its pricing, production, and sourcing strategies in a rapidly shifting global trade environment.
