South Korea Implements Emergency Measures for Auto Sector Amid U.S. Tariffs

SEOUL - In response to the impending tariffs announced by the U.S. government, South Korea has unveiled a series of emergency support measures aimed at bolstering its auto industry. These steps are designed to mitigate the impact of a 25% tariff on imported cars and light trucks, which is set to take effect imminently.

The South Korean government is providing financial assistance to local automakers, alongside tax reductions and subsidies intended to stimulate domestic demand. Additionally, the administration has pledged to engage in negotiations with the U.S. to ensure that South Korean manufacturers are not placed at a disadvantage compared to other allied nations.

According to government officials, the tariff could inflict considerable harm on South Korean auto manufacturers and parts suppliers, although quantifying the exact financial damage remains challenging at this stage. The government plans to increase policy financing support for the auto sector to 15 trillion won (approximately $10.18 billion) in 2025, a notable rise from the previously allocated 13 trillion won.

To further support the industry, tax on automobile purchases will be reduced from 5% to 3.5% until June 2025. In addition, subsidies for electric vehicles will see a substantial increase, ranging between 30% to 80% of price discounts, up from the current 20% to 40%. This extension of benefits will now last until the end of the year.

The government is also focusing on helping automakers explore export opportunities in developing markets across Africa, Latin America, and Asia, where there is growing demand for vehicles. Through these initiatives, officials expressed their commitment to ensuring fair treatment for South Korean manufacturers in relation to their global counterparts.

While the auto industry has generally welcomed these measures, there is a prevailing concern regarding whether the proposed support will be sufficient to address the challenges posed by the new tariffs. An industry representative, requesting anonymity, indicated that further discussions regarding additional tax incentives to boost domestic consumption are essential.

In the previous year, South Korea's automobile exports to the United States reached $34.7 billion, representing nearly half of the country's total auto exports. In light of the new tariffs, Hyundai Motor has announced plans to maintain current pricing for its vehicle lineup over the next two months, aiming to alleviate customer concerns regarding potential price increases due to tariff impacts. This initiative follows Hyundai's recent $21 billion investment in the U.S. market.

Hyundai's co-CEO has confirmed that there are no intentions to raise prices in the United States, which is the company's most significant revenue market. Analysts have noted that aggressive tariff proposals may be a strategy to secure concessions during negotiations, suggesting that the auto tariffs could elevate input costs across the industry, particularly affecting the electric vehicle supply chain, which relies heavily on components sourced from China.