Kia mulls price hike in U.S. as tariffs on Mexico take effect

With U.S. President Donald Trump's tariffs on Mexico going into effect on Tuesday, Kia is eying ways to mitigate the damage, including raising its prices in the U.S. market or shifting production to its forthcoming Georgia plant.

Cars are made at Kia's manufacturing plant in Mexico in the northern Mexican state of Nuevo León. [KIA]

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Kia is considering raising the prices of its cars in the U.S. market as the automaker braces for the full impact of U.S. President Donald Trump’s 25 percent tariffs on Mexico that took immediate effect on Tuesday.

Still, the Korean automaker has yet to decide on concrete measures about its production line in the country, while other competitors such as Honda Motor are scrambling to shift the production of flagship models from Mexico to the United States in a bid to dodge the levy.

Trump on Monday said the 25 percent duties on goods imported from Canada and Mexico would take effect from March 4, following a 30-day pause, adding that there is "no room left" to avoid it.

"We are discussing a series of business strategies, like the diversification of export routes for our Mexico plant and an adjustment of car prices, in bracing for the possibility of a prolonged tariff imposition," Kia's spokesperson told the Korea JoongAng Daily.

"An impact is inevitable, especially as five auto parts subsidiaries including Hyundai Mobis have plants that supply Kia in Mexico," he said, adding that the company is carefully observing U.S. policies and competitors' movements.

Kia's manufacturing plant in the northern Mexican state of Nuevo León [KIA]

The output of Kia's Mexico plant is heavily oriented to the U.S. market, with almost 60 percent of its production northbound. Kia produced 238,019 cars at its plant in the northern Mexican state of Nuevo León, and of them, 141,695, or 59.5 percent, were shipped to the United States.

"Around 120,000 K4 sedans [produced in Mexico] will take a hit as of this year," said Kia Chief Financial Officer Kim Seung-jun during a conference call in January.

"We're planning to hedge against the increased expenses through price increases and production cost control."

Another scenario involves shipping Mexico-produced vehicles to third countries to avoid tariffs and cover U.S. demand with its soon-to-be-opened $5.5 billion manufacturing facility in Georgia. The plant, which is slated to start mass production in late March, will ultimately have a 500,000-unit capacity, though which cars will be produced there has not been decided yet.

Reuters reported on Monday that Honda is planning to shift the production of some 210,000 Civic hybrid sedans to its plant in Indiana from its Mexico facility as initially planned, becoming the first auto company to take concrete action in response to Trump's tariffs.

The shift has caused a six-month delay in the start of production, which has been pushed to May 2028 from Nov. 2027. The Civic is Honda's second-best-selling car in the U.S. market, with annual sales reaching some 240,000 units.

Kia CEO Song Ho-sung on Tuesday pledged to turn the crisis into an opportunity to ramp up its competitiveness on the global stage.

"Recent trends show a shift toward regionalism and national interests, leading to a restructuring of international trade norms. These changes pose risks not only to Kia but also to the entire industry," Song said in a letter to shareholders.

"However, crises become opportunities for those who are prepared. Likewise, emerging geopolitical shifts and regulatory challenges will serve as opportunities for Kia to further strengthen our market position, leveraging competitive eco-friendly models and agile operational capabilities."

The Korea International Trade Association predicted that the U.S. government's 25 percent tariffs on Mexico and Canada, along with additional tariffs on China, will drag down Korea's exports by $220 million, or some 0.03 percent.

A total of 25 Korean conglomerates run some 201 subsidiaries in Mexico and Canada as of 2024, including Samsung's 68 and Hyundai's 28.

BY SARAH CHEA [chea.sarah@joongang.co.kr]