Nissan, Hyundai Warn of Worse to Come If Trade Tensions Escalate

(Bloomberg) -- Nissan Motor Co. and Hyundai Motor Co. warned of more consequences from the ongoing tit-for-tat tariff war between the U.S. 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 U.S., Nissan Corporate Vice President Joji Tagawa told reporters in Yokohama Thursday. He also said the risks of a conflict between the U.S. and the European Union haven’t been completely eliminated. An extended dispute would have the potential to weaken car demand, Hyundai Vice President 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 U.S., 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 U.S., Nissan’s Tagawa said. “We will continue to work on localization and we are ready to take any action required.”

Tagawa said that additional tariffs in the U.S. could have a “significant impact” by boosting the cost of cars brought in by about $6,000 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 Chief Financial Officer 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 benefiting from rising demand for models such as the Sylphy compact sedan and the X-Trail SUV. Still, Nissan’s U.S. vehicle sales slumped more than 9 percent in the three months through June, offsetting gains in China.

Hyundai is trying to minimize risks from a potential 25 percent tariff by the U.S. 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 U.S. tariffs would be “devastating,” saying that the tax would push up its production costs by 10 percent a year at its Alabama plant, which manufactures about half of Hyundai cars sold in the U.S.

Second-quarter operating profit fell to 950.8 billion won ($850 million), the South Korean company said. That compares with the 963.4 billion-won average of estimates compiled by Bloomberg.

At Nissan, fiscal first-quarter operating profit dropped 29 percent to 109.1 billion yen ($986 million). Analysts predicted 110.8 billion yen on average.

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