The South Korean government has agreed to make available an additional KRW2trn (US$1.35bn) in public funds to support the domestic automotive industry, after the US government introduced a blanket 25% tariff on vehicles and components imported into the country last week.
South Korea exported almost 1.5 million vehicles to the US last year, worth an estimated US$38bn, with Hyundai and Kia accounting for 1.145 million of these, and with GM Korea, the local manufacturing unit of US automaker General Motors, accounting for most of the remainder.
Go deeper with GlobalData
The country’s Ministry of Trade, Industry and Energy confirmed that with this additional funding, the government aims to provide a total of KRW15trn (US$10bn) in policy financing to South Korean vehicle and component manufacturers this year.
Policy support will include new measures to stimulate the domestic vehicle market, such as increasing electric vehicle (EV) subsidies and extending tax discounts on new vehicle purchases.
The ministry said it expects the country’s main domestic automakers to experience a decline in output this year due to the US tariffs. This is expected to have a disproportionate effect on the country’s small and medium component manufacturers due to their dependence on domestic vehicle production.
The Ministry pointed out that South Korea’s main automakers are looking to diversify their export markets, with a stronger focus on the “Global South” regions including Asia, South America and the Middle East.
Hyundai Motor Group, comprising Hyundai and Kia, said it plans to create a separate financial support programme in collaboration with major domestic banks, worth around KRW1trn, to provide support for its domestic component suppliers.
