A Victim of Trade War
The Hyundai Motor Group is in a serious situation in China. Hyundai Motor and Kia Motors began to recover at the beginning of the year after sustaining a direct hit from China’s trade retaliation for the deployment of the terminal high altitude area defense (THAAD) system in South Korea last year. Yet their sales plummetted again last month.
There is also concern that Hyundai and Kia will face the worst situation if the US imposes a 25 percent tariff on imported cars in September as the Chinese consumer sentiment has been weakening due to the trade war between the US and China.
According to the automobile and financial investment industries on August 6, Hyundai Motor sold about 30,000 vehicles in China last month. Considering the fact that 50,000 units were sold in the same month of last year, its sales plunged 40%. Kia was also reported to have sold 19,000 to 20,000 units in the Chinese market last month. This sales volume is a 30% decrease from 27,000 units in the same month of last year.
Sales of Hyundai and Kia dropped sharply in China in the first half of last year due to China’s retaliation for the deployment of the THAAD system in South Korea. However, the two carmakers’ earnings started to soar at the beginning of the year when the retaliation disappeared. Hyundai's sales volume doubled to 70,000 units in April, and in June, hit 87,000 units, recovering to its level before the retaliation. Kia Motors also cruised, surpassing 30,000 units in sales in April and May. However, Hyundai's sales fell to 30,000 units, while Kia's sales fell short of 20,000 units last month.
In particular, some experts say that the aftermaths of the US-China trade war get into full force, weakening Chinese consumer sentiment. The purchase management index PMI of the manufacturing industry in China fell to 51.2 in July, the lowest level in five months. Manufacturers immediately responded negatively to the hefty US tariff.
The problem is that it is quite a challenge to predict the future of the US market. Hyundai Motor is recovering sales after introducing an autonomous management system by region in the US this year. However, US President Donald Trump is likely to strap a 25% tariff on imported cars for the November midterm elections.
China (18%) and the US (15%) account for 33% of Hyundai Motor's total sales. Therefore, Hyundai and Kia are desperate to keep the Chinese market without any hefty tariff risk.