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As automakers restructure under tariff pressure, workforce at home may pay the price

Published: 07 Apr. 2025, 17:38 Updated: 07 Apr. 2025, 21:29

Cars waiting to be exported are parked at a port in Pyeongtaek, Gyeonggi, on April 3. [YONHAP]

U.S. President Donald Trump’s renewed push for steep tariffs on imported vehicles is accelerating a global restructuring of supply chains among major automakers, raising concerns that automakers like Hyundai Motor and Toyota may be forced to reduce employment at home.

Companies are ramping up production in the United States while shifting focus to markets like Europe, where tariff risks are lower.

According to Japanese news outlet Nikkei and other sources on Monday, Toyota announced plans to produce 15 electric vehicle models by 2027, with new manufacturing bases not only in Japan but also in the United States and Argentina. Nikkei noted that amid global economic fragmentation and Trump’s plan to impose a 25 percent tariff on imported cars, automakers like Toyota are moving to decentralize their supply chains.

Hyundai, Toyota face tough decisions

Toyota’s supply chain will undergo a significant realignment. While the initial shift affects only electric vehicle production, analysts warn that if trade tensions persist, hybrids and other models may also be made overseas. Last year, Toyota sold 2.33 million vehicles in the United States, with around 530,000 — roughly 20 percent — exported from Japan. To avoid tariffs, local production will need to increase.

Some observers say this could put Toyota’s long-standing commitment to producing 3 million units annually in Japan under pressure. The automaker works with about 60,000 domestic suppliers, including many small- and mid-sized firms. According to Nikkei, the 3 million-unit domestic output strategy has been regarded as a "last line of defense" to preserve employment, maintain the local supply chain and sustain manufacturing expertise.

An EVgo fast electric vehicle charger charges a Chevy Bolt in Encinitas, California, on Oct 17. [REUTERS/YONHAP]

Hyundai Motor Group faces a similar dilemma. The group achieved record-high U.S. sales of 1.71 million vehicles last year, about 1 million of which were produced in Korea and exported. To reduce tariff risks, Hyundai plans to expand capacity at its Georgia-based Hyundai Motor Group Metaplant America to 500,000 units annually.

Production of some Genesis models is also expected to be localized, prompting concern from Hyundai’s labor union over potential job losses at domestic plants. While the company has not commented on employment adjustments, industry watchers anticipate some level of workforce reshuffling if production volumes are reallocated.

“It’s not realistic to completely replace exports with local production immediately,” said Lee Ho-geun, professor of automotive studies at Daeduk University. “The government should consider negotiating with the United States for tariff exemptions, possibly under a quota system.”

Kia's Niro electric vehicle [HYUNDAI/KIA]

Refocus on European markets

In addition to restructuring supply chains, Hyundai Motor Group is revising its sales strategy, with renewed efforts in Europe and India — markets where it sold 1.06 million and 860,000 units, respectively, in 2023, collectively surpassing U.S. sales of 1.71 million units.

Although European sales declined by around 4 percent last year, the group expects a rebound in demand for eco-friendly vehicles in 2025. Hyundai plans to expand its electric vehicle lineup, following up on the Casper Electric with the launch of the Ioniq 9, a large electric SUV. Kia will introduce the EV4, a compact electric sedan aimed at the European market.

The group is also investing heavily in India after a successful IPO last year secured additional capital.

In January, Hyundai launched an electric version of the Creta, one of India’s best-selling compact SUVs. The company plans to install around 600 fast-charging stations across the country to build out its electric vehicle infrastructure and solidify its foothold in India’s growing green car market.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.

BY PARK YOUNG-WOO [[email protected]]