More than 90% of GM's Korea-produced cars are exported to US, driven by cost competitiveness
US President Donald Trump’s repeated warnings of 25 percent tariffs on auto imports have put General Motors Korea in a conundrum as the American automaker’s Korean production depends heavily on shipments to the US.
Trump told reporters on Tuesday that he will “probably” announce the tariffs on auto imports on April 2, adding that the tariffs will be “in the neighborhood of 25 percent.”
If Trump’s threat of tariffs on auto imports is implemented, it could put GM Korea’s business here at serious risk of closing, said experts and industry watchers on Wednesday.
GM Korea sold 499,559 vehicles last year, the most since 2017, thanks to its highest overseas sales since 2014, at 474,735 units. About 90 percent of the overseas sales went to the US, led by the popularity of SUV models such as the Chevrolet Trax and the Trailblazer.
Despite the upbeat exports, GM sold only 24,824 cars in the Korean market last year, accounting for approximately 1.5 percent of the total. The figure fell by 35 percent from 2023’s domestic sales of 38,755 units.
According to GM Korea’s audit report for 2023, released in April last year, the US automaker’s Korean office logged 13.73 trillion won ($9.5 billion) in revenue and 1.35 trillion won in operating profit for the year. Although the audit report for 2024 has not yet been published, GM Korea is expected to have posted higher revenue and profits last year than in 2023 as it sold more vehicles.
“If (Trump’s auto tariffs) take effect, GM has no reason to do business in Korea and it could possibly give GM a reason to pull out of Korea,” said Lee Ho-geun, an automotive engineering professor at Daeduk University.
“GM might think that closing its Korean business is not a bad card to play. Think about the price of GM’s Bupyeong plant in Incheon. They could sell it off and wrap up the Korean site … If the US imposes auto tariffs on Korea, they could just announce that it's impossible to keep their Korean business going and leave because they have no reason to keep operating the Korean production site given their current market share.”
According to real estate data from the Ministry of Land, Infrastructure and Transport, the government-assessed land value of GM’s Bupyeong plant was calculated to be 1.81 million won per square meter at the beginning of 2024. With about 893,000 square meters of land, the Bupyeong site is estimated to be worth 1.6 trillion won.
“GM is currently producing only two models in Korea and does not seem to have a plan to assign the production of new vehicles to its Korean plants,” said an auto industry official, referring to the Chevy Trax and Trailblazer being rolled out at the Bupyeong and Changwon plants, respectively.
Despite the voices of concern, a GM Korea official said the Korean office and the global headquarters are “closely monitoring the situation” and that Korea remains a very important place for GM, without elaborating further. GM has invested about 9 trillion won in Korea and rolled out over 26.5 million vehicles since its launch in 2002.
Auto industry on high alert
Meanwhile, Korea’s leading auto giant Hyundai Motor Group and battery makers such as LG Energy Solution, Samsung SDI and SK On are reviewing various scenarios for dealing with Trump’s tariff threat.
Hyundai Motor Group’s three auto brands -- Hyundai Motor Company, Kia and Genesis -- shipped about 2.26 million vehicles to overseas markets last year. Of them, 1.06 million headed to the US.
“Hyundai and Kia can operate their US plants at full capacity to minimize losses (in case of tariffs) and achieve flexibility, but Genesis could be impacted more and incur losses because it does not produce cars in the US,” said Kim Pil-su, an automotive engineering professor at Daelim University.
LG Energy Solution CEO Kim Dong-myung told reporters that the fallout from Trump’s auto tariffs on the battery industry was expected and was part of the projected scenarios, speaking on his way to the general assembly of the Korea Battery Industry Association in Seoul on Wednesday.
Kim, who has served as the chair of the KBIA since February last year, added that LG Energy Solution is looking to focus on optimizing efficiency regarding its US investments in line with the scenarios it has planned for.
hwkan@heraldcorp.com
