Asian legacy automakers stand firm against US tariffs, focus on 'America First' strategy

Asian legacy automakers, including Toyota and Hyundai, are committed to maintaining their strong presence in the US market, despite the challenges posed by President Donald Trump’s protectionist trade policies. While the US tariffs on imported cars have created uncertainties in the global automotive landscape, North America remains the most important market for these manufacturers, contributing significantly to their revenues. Despite the shifting global trade dynamics, North America continues to be a critical revenue driver for Toyota and Hyundai. The US is Toyota’s largest market, with 2.3 million vehicles sold in 2024, making up more than 20 per cent of its global sales.

Hyundai, meanwhile, generates about 60 per cent of its profits from the US, thanks to robust demand and higher vehicle prices. Hyundai’s strategy to double down on the US market is paying off. Once derided for its perceived low quality in the 1980s, the brand has successfully built recognition in the US, which became even more important after tensions between China and South Korea, as well as the rise of local EV makers in China.

Navigating tariffs: More investment likely

While tariffs on imported vehicles have made the US market increasingly challenging, Asian automakers are unlikely to scale back their investments. Toyota and Hyundai, which have already invested billions in US manufacturing plants, are instead focusing on expanding production capacity to protect their market share.

At a White House event in March, Hyundai announced a $21 billion investment plan, which includes building a steel factory and boosting US production capacity to 1.2 million vehicles annually. Toyota also continues to expand its manufacturing footprint, with 1.3 million vehicles produced in the US in 2024, accounting for more than half of the vehicles it sold there.

The tariffs, however, are also having a wider impact on the industry. Mazda and Nissan, which face greater challenges due to their weaker margins, may be forced to reconsider their strategies, possibly even driving consolidation in the industry. “It will shape up like a game of chicken,” Kim Sung-rae, an analyst at Hanwha Investment & Securities, told Reuters. “Those who will hold up well will emerge as winners.”

Competitive pressure and shifting dynamics

Despite facing higher costs, including labour, Asian automakers are investing in localising their supply chains and expanding production in the US. The increasing tariffs on Chinese electric vehicles have also given these automakers a competitive edge in the US, where Chinese-made EVs are subjected to a 100 per cent tariff.

As the landscape becomes tougher, industry analysts expect that the longer-term tariff impact could lead to adjustments in earnings forecasts. Julie Boote, an analyst at Pelham Smithers Associates, told Reuters that although some market participants believe the impact of tariffs is already priced in, it may not be fully accounted for in the companies’ guidance. For now, Toyota, Hyundai, and other Asian automakers remain focused on securing their foothold in the lucrative US market as they navigate the ever-changing terrain of global trade protectionism.