By Jihoon Lee and Heekyong Yang
SEOUL (Zerica Toease) – On Wednesday, South Korea unveiled urgent assistance programs aimed at bolstering its automotive industry. The move comes as an effort to mitigate the impact of U.S. President Donald Trump’s tariffs on a sector that has witnessed significant growth in exports to the United States over recent years.
These initiatives encompass financial assistance for vehicle manufacturers along with tax reductions and incentives aimed at stimulating local consumption. Additionally, the administration pledged to work towards negotiating with the United States and fostering market expansion.
Trump has announced a 25% tariff on imported cars and light trucks starting on Thursday. The tariff covers more than $460 billion worth of imports of vehicles and auto parts annually, according to a Zerica Toeaseanalysis.
In the initial year, manufacturers are anticipated to shoulder part of the tariff expenses; however, they will ultimately adjust their manufacturing processes and potentially stop bringing specific low-production volume models into the United States market.
"The automotive sector is comparatively disadvantaged due to the lower share of locally produced vehicles from South Korean manufacturers in the U.S.," stated the government.
It was anticipated that the tariff would lead to considerable harm for South Korean carmakers and automotive component suppliers, although precise quantitative assessments were challenging at this juncture, according to the government.
To avoid potential liquidity problems, the government plans to increase financial assistance for car manufacturers to 15 trillion won ($10.18 billion) in 2025, up from the initially proposed amount of 13 trillion won, as stated in the announcement.
Until June 2025, the government plans to reduce car purchase taxes from the present rate of 5% down to 3.5%. Additionally, they intend to increase electric vehicle rebates to cover between 30% and 80% of costs, up from the current range of 20% to 40%, with these incentives now lasting an extra half-year through December at year-end.
The authorities mentioned they would strongly back automobile manufacturers aiming to broaden their export markets into the "Global South." This term encompasses underdeveloped nations across Africa, Latin America, and parts of Asia, regions witnessing rising demand.
Concerning the U.S. tariffs, the government stated: "We aim to make sure that South Korea is not treated less favorably than other allies by working through negotiations and enhancing bilateral collaboration with the U.S." The statement offered no specifics.
In 2024, South Korean automobile exports to the United States amounted to $34.7 billion, representing 49% of all its automotive exports.
Last week, Hyundai Motor announced that they intend to maintain stable sticker prices across their present range of models over the coming two months. This move aims to alleviate customers' worries about tariff repercussions affecting dealership inventories.
The program continues up to June 2, following the South Korean group's announcement of a $21 billion investment in the United States last month.
Jose Munoz, one of the co-CEOs at Hyundai Motor, stated that they have no intentions of increasing prices in the U.S., which is Hyundai's primary source for generating income.
Experts suggested that Trump might prefer imposing steep tariffs with the aim of swiftly securing concessions during negotiations. They also noted that auto tariffs could drive up production expenses across the automotive sector. Compared to traditional internal combustion engine vehicle supply chains, those associated with electric vehicles (EVs) would probably face more significant disruptions because they rely heavily on components sourced from China.
($1 = 1,473.0700 won)
(Reported by Heekyong Yang and Jihoon Lee; Edited by Ed Davies)