The Chinese government is considering raising tariffs on large imported cars by up to 25% as the United States increases tariffs on Chinese goods and the European Union moves to tighten sanctions against China. Analysts predict that Hyundai Motor Company’s luxury brand, Genesis, will be adversely affected by this change. Unlike competitors such as Mercedes-Benz and BMW, which have local production facilities in China, Genesis vehicles are entirely manufactured in South Korea and exported to China.
Genesis vehicles are produced in Hyundai’s Ulsan’s Plant 2 and Plant 5. These vehicles are then exported to North America, Europe, and China via specialized export ports. China currently imposes a 15% tariff on all car imports, but the Chinese government is considering raising the tariff to 25% for vehicles with engines larger than 2,500 cubic centimeters (cc). All Genesis models, except for the GV60, would be subject to a potential tariff increase.
To strengthen the Genesis brand’s position in the Chinese market, Hyundai has refrained from price hikes compared to the U.S. and Europe and spent over 100 billion won annually on marketing. Despite such efforts, sales have yet to meet expectations. Genesis sold only 1,457 units in China in 2022, according to the China Passenger Car Association (CPCA). With the addition of tariffs, Genesis’s brand and price competitiveness will likely fall even further.
Global carmakers such as BMW and Audi produce some of their vehicles with engines larger than 2,500cc at local factories in China. BMW has partnered with China’s Shandong Huacheng Group to build factories in Dadong and Tianxi to produce its flagship X5, among other models. Audi also manufactures and sells the A8 in China.
Hyundai and Kia have shifted away from previous localization strategies and are managing their Chinese operations directly from headquarters. They are also focusing on expanding their range of eco-friendly vehicles, including electric models. “Hyundai is reorganizing its business around eco-friendly vehicles, and the potential tariff increases could accelerate this shift,” said an auto industry insider.
