Nissan, Hyundai warn of worse to come on trade woes

By BLOOMBERG

TOKYO • Nissan Motor Co and Hyundai Motor Co warned of more consequences from the ongoing titfor- tat tariff war between the US and its trade partners including China, joining a chorus of negative voices from the Detroit automakers.

Car prices would rise with additional tariffs by the US, Nissan Corporate VP Joji Tagawa told reporters in Yokohama yesterday. He also said the risks of a conflict between the US and the European Union haven’t been completely eliminated. An extended dispute would have the potential to weaken car demand, Hyundai VP Koo Zayong said in Seoul.

The Asian companies add to a growing list of downbeat reports from carmakers, with General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles NV all reducing profit forecasts this week amid global trade tensions. Already dealing with sputtering demand in the US, the automakers face an uncertain future in which President Donald Trump is considering tariffs on imported vehicles and parts.

“We can’t absorb the increase by hiking car price, and we can’t stop selling cars” in the US, Nissan’s Tagawa said. “We will continue to work on localisation and we are ready to take any action required.”

Tagawa said that additional tariffs in the US could have a “significant impact” by boosting the cost of cars brought in by about US$6,000 (RM24,360) on average, and also making locally produced vehicles more expensive. Hyundai’s Koo said the trade dispute could weigh on economic growth, intensifying competition among automakers in China.

“The external and internal business environment in the second half is expected to be tough,” Hyundai CFO Choi Byung-chul said on a call. The carmakers’ increased focus on China may provide some shield.

Hyundai’s sales in China are slowly recovering after a political dispute last year, and Nissan is benefitting from rising demand for models such as the Sylphy compact sedan and the X-Trail SUV. Still, Nissan’s US vehicle sales slumped more than 9% in the three months through June, offsetting gains in China.

Hyundai is trying to minimise risks from a potential 25% tariff by the US on imported cars and parts, Choi said. Its actions may include increasing local production of SUVs, he said.

The carmaker has previously warned that the US tariffs would be “devastating”, saying that the tax would push up its production costs by 10% a year at its Alabama plant, which manufactures about half of Hyundai cars sold in the US.

Second-quarter (2Q) operating profit fell to 950.8 billion won (RM3.42 billion), the South Korean company said. That compares to the 963.4 billion-won average of estimates compiled by Bloomberg.

At Nissan, fiscal 1Q operating profit dropped 29% to ¥109.1 billion (RM4.04 billion). Analysts predicted ¥110.8 billion on average.