There was no doubt that new U.S. tariffs imposed in April would affect commerce in all sectors worldwide. The automotive industry, in particular, was dutifully concerned about the additional 25 percent fee increase on imports. What probably wasn’t on the bingo card was exactly what the fallout would entail and how bad it could be…for U.S. exports. At Hyundai’s only U.S. plant, the consequence was a monthly export of just 14 vehicles.
Yes, one-four. Fourteen. Total. According to the facility fact sheet, Hyundai Motor Manufacturing Alabama (HMMA) has the capacity to produce nearly 400,000 vehicles annually. Located in Montgomery, the assembly line almost reached that figure in 2013 with 399,500 units built.
However, due to a shift in strategy to prioritize U.S. sales, exports nosedived. In a chapter that might as well be titled Covid Continues, the Yonhap News Agency, South Korea’s version of the U.S.’ Associated Press, reports:
“Hyundai Motor Manufacturing Alabama (HMMA), a U.S. production unit of the South Korean automaker, exported just 14 vehicles in June, a sharp decline from 1,303 units in the same month last year and 2,386 in May, according to the data.
It marked the first time HMMA’s monthly exports fell below 100 units since April 2020, during the early stages of the COVID-19 pandemic.”
Uh, that’s a 99 percent year-over-year drop. For scale, the news agency says that HMMA exported 22,600 vehicles last year. Nevertheless, the plant continues to churn out vehicles as planned. According to AL.com, Alabama’s largest news site:
“The plant is still continuing to produce the same number of vehicles each month, according to numbers provided by Hyundai.
Through the first five months of the year, Hyundai produced 155,800 vehicles in six models — the Tuscon, Santa Fe hybrid, Santa Fe, Santa Cruz, GV70 EV and GV70.
Production totals for each month remained consistent, ranging from 27,500 in January to 32,400 in May. The overwhelming majority of those vehicles were meant for the U.S. market, which includes Puerto Rico and Guam.”
However, the 14-car export month might not just be a random blip but, rather, a small ripple of things to come. AL.com explains:
“But the effect of tariffs can be seen particularly in monthly totals produced for the Tuscon SUV. In March, 2,490 were produced for the Canadian market, with 2,311 in April. But in May, the plant only turned out 105 for Canada. For the Santa Fe SUV, the plant went from 1,356 produced for Canada in April to a total of 28 in May.”
If crossover SUV exports are tanking, is that a sign that maybe car buyers are finally shopping based on practicality and need instead of “I just don’t want a car/wagon/van/anything not ‘tall.”? Ha. Hell hasn’t frozen over just yet. For now, it seems the dropoff its more related to budgets, revenue, and possibly international consumer sentiment toward U.S. products.
To combat the tariff penalty, Hyundai has shifted production around. For example, some Tucson production transferred to Montgomery from Mexico, where the vehicle was built at the plant of corporate sibling Kia. AL.com says:
“Those effects can also be seen in production numbers in Mexico. Hyundai shipped about 2,100 units of the Tucson from there in February. That number plummeted to 522 in March and has stayed at zero since April.
The company was also reportedly moving production of Canada-bound cars, which had been made in the U.S., to the Mexico plant.”
In addition to production juggling, Hyundai is considering reverse-importing, a move that Toyota is also mulling. So, it’s likely this export problem isn’t exclusive to Hyundai and possibly affects all companies trying to ship things out. But to see such an effect just two months removed from when Washington’s new trade policies were implemented is eye-opening.
On the bright side, through May, Hyundai sales were up year-over-year with 369,578 vehicles sold. Also in May, HMMA celebrated its 20th anniversary.
Top graphic images: Hyundai Motor Manufacturing Alabama
Are we tired of “winning” yet? This is not doing the US balance of trade a bit of good.
I feel like I’m missing the “so what” with this article. The article says Hyundai has shuffled around production locations to avoid tariffs but the overall output at their Alabama plant remains the same. So… what are the implications of this in terms of economic impact for the plant, Hyundai and the US? I feel like this is an important question to answer (or even just acknowledge) in any story dealing with the follow-on effects of the tariffs.
So…
Hyundai reallocates monthly allocation of 2,000 U.S. built cars originally slated for export to domestic due to a shift in strategy to prioritize U.S. sales due to tariffs. No drop in production reported.
How does Hyundai get cars from Mexican plants to Canadian dealers without passing through the US and paying tariffs? Do they ship them by boat, or is there an exemption on tariffs for cargo that is just passing through?
Tariffs don’t apply to product transiting through a country. Only when being imported into a country for sale.
Thanks! I like knowing smart people!
Was this the Hyundai plant that was engaging in child labor? I have no love lost for Hyundai.
I hope my fellow residents, including part-time Alabamian Coach/Senator Tuberville, are taking notes on the actual cost of this lapdoggery.