US-Japan Tariff Disparities May Reshape Market Dynamics
Recently, the US government is considering reducing the tariff rate on Japanese automobiles from the current 27.5% to 15% on the 16th of this month. Once this measure is implemented, Japanese brands like Nissan and Toyota will gain a greater price advantage in the US market. In contrast, due to stalled tariff negotiations between South Korea and the US, Korean car brands still face a 25% tariff burden. Experts point out that this disparity could directly undermine the competitiveness of Korean cars like Hyundai and Kia, placing their pricing strategies in a difficult position.
Rising Demand for Hybrid Cars Expected
With US electric vehicle subsidies nearing expiration, market demand for hybrid models is generally optimistic. However, Korean automakers are evidently lagging. Currently, Hyundai Motor Group does not have a local HEV production line in the US, and all models rely on exports from Korean factories. This means that even with strong demand, Korean brands will still need to fully bear high tariffs, making it difficult to convert cost advantages into market competitiveness.
Price Disparities May Alter Consumer Choices
Industry estimates indicate that if tariff disparities are fully passed on to retail prices, Korean model prices will exceed those of similar Japanese products. For instance, the price of the Kia Sportage Hybrid after tariffs will surpass that of the Toyota RAV4 Hybrid, making consumers more inclined to choose Japanese brands at similar price points. Industry insiders note that Hyundai can only maintain market share by compressing profit margins to avoid excessive pricing, which will further erode profitability.
Capacity Constraints Limit Mitigation Measures
Although Hyundai has announced plans to build an HEV production line in Georgia, USA, this project will not start production until 2025 at the earliest, providing little short-term relief from export pressures. Meanwhile, the battery plant jointly constructed by Hyundai and LG New Energy is also facing delays, with production expected to be postponed by 2 to 3 months. This delay not only affects battery supply but may also postpone the launch of some new models, further weakening the company's competitiveness in the North American market.
Risk of Market Share Erosion
According to Words Intelligence data, as of January-August 2025, Toyota dominates the US HEV market share, leading by more than half, with Honda in second place. Korean brands rank third but still lag significantly. If the tariff disadvantage persists for an extended period, Korean cars will not only struggle to narrow the gap but might also face a loss of market share. Analysts believe that Japanese cars will further consolidate their market position through price and capacity advantages.
Strategic Choices Under Multiple Pressures
Faced with dual challenges of tariffs and capacity, Korean automakers face difficult decisions. On the one hand, they need to maintain price competitiveness in the short term to stabilize sales; on the other hand, they must accelerate the construction of domestic production lines in the US to mitigate future policy and supply chain risks. Automotive experts point out that without timely improvements in supply and cost structure, Korean brands may lose leverage in the next round of hybrid car competition.
