Despite tariffs, it's still America first for Asia's legacy carmakers
Trump's tariffs on imported automobiles have upended the outlook for the global industry, yet the US remains by far the most important market for Japan's Toyota, South Korea's Hyundai and Asian rivals, including Honda and Nissan.
North America accounts for at least 40 per cent of the revenue at both Toyota and Hyundai, filings show.
The market's importance was unlikely to change any time soon, said industry insiders and analysts, especially with China, now the world's biggest auto market, dominated by homegrown electric vehicle makers such as BYD.
Those Asian legacy carmakers with more robust margins and a strong hybrid line-up — such as Toyota, Hyundai, Kia Corp and to a lesser extent Honda — were more likely able to weather the US tariffs storm, and potentially take market share from weaker players like Nissan, analysts said.
"The environment that we're in now is becoming increasingly harsh and uncertain, starting with US tariffs," Mazda executive officer Noriyuki Takimura said.
Mazda aimed to strike a balance between "defensive" measures like cost-cuts and "offensive" ones like strengthening its product line-up, he said.
Two Hyundai insiders and two Japanese auto executives separately said they had no intention of downsizing their US businesses in response to tariffs, even as they acknowledged the difficulties ahead.
The US is Toyota's biggest market in terms of vehicles. It sold 2.3 million vehicles there in 2024, including its Lexus brand, accounting for more than a fifth of its global total.
As a source of revenue, North America was second only to Japan in the last financial year.
Hyundai's North American revenue was the highest in almost a decade last year. Kim Chang-ho, an analyst at Korea Investment & Securities, estimated it generated around 60 per cent of its profits from the US, thanks to higher vehicle prices.
"After years of putting in effort, our brand is finally gaining recognition in the US," said one Hyundai insider. "So we will not take our hands off the US." The US has seen a surge in demand for hybrids as consumers have become more concerned about the battery range, price and charging hassles of electric vehicles.
Fuel-efficient models such as hybrids would be a key driver to gaining market share, said Morningstar analyst Vincent Sun. Toyota, Hyundai and Kia have particularly strong hybrid offerings.
So far, most legacy Asian carmakers had avoided raising prices in the US and stronger players were likely to continue to hold off doing so, despite lower profitability, said analysts.
Instead, the focus would likely be on taking market share from lower-margin rivals like Nissan and Stellantis, they added.
Over time, tariffs could be a catalyst to help drive consolidation in the industry, or at least deepen existing tie-ups.
Investors wonder if tariffs could push Nissan to revive merger talks with Honda that fell apart this year.
Mazda, which is 5.1 per cent owned by Toyota, and Subaru, which is 21 per cent owned by Toyota, could become more reliant on the bigger company.
While Hyundai and Kia have three US factories, they still import about two-thirds of the vehicles sold there.
Toyota manufactured 1.3 million vehicles in the US last year, equal to 54 per cent of the vehicles it sold there.
Japanese carmakers have invested more than US$66 billion in US manufacturing since the 1980s, building some two dozen plants, according to the JAMA auto lobby group.
At a White House event attended by Trump in March, Hyundai announced a US$21 billion investment plan, including a new steel factory, and a plan to boost US production capacity to 1.2 million vehicles a year.
The tariffs were likely to encourage Japanese and South Korean carmakers to invest more into expanding production capacity and localising supply chains to protect their positions, said Justinas Liuima of research firm Euromonitor International.
They would also continue to benefit from one aspect of US protectionism: higher tariffs on Chinese EVs, which means they don't face the same Chinese competition in the US that they do in emerging Asian markets, he said.
The writers are from Reuters
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