Hyundai Motor Group and General Motors (GM) are forming a 'supply chain alliance' to share global production facilities. This will allow Hyundai and Kia to produce vehicles in CKD (complete knock-down) form at GM's US plants, minimizing potential damage from the 25% automobile tariff threatened by former US President Donald Trump.

According to the automotive industry on the 20th, Hyundai Motor Group and GM will announce a comprehensive cooperation plan as early as next month, which will include sharing global production facilities and supply chains. An industry insider familiar with this matter said, "The two companies are in discussions to comprehensively share production networks in the US and overseas to maximize production efficiency," and added, "The announcement of the two companies' strategic cooperation is imminent."

Hyundai Motor Group Chairman Chung Eui-sun and GM Chairman and CEO Mary Barra met in New York last September and signed a memorandum of understanding (MOU) for comprehensive cooperation. The two leaders presented areas of cooperation such as ▲ passenger and commercial vehicles ▲ internal combustion engines ▲ eco-friendly energy ▲ joint development and production of electric and hydrogen technologies, and have been coordinating specific cooperation plans. Hyundai Motor Group and GM have selected 'production efficiency' as a priority for strategic cooperation and decided to increase manufacturing competitiveness and reduce costs by jointly utilizing each other's production facilities and supply chains. It is a strategy to save money invested in new plant construction and increase the utilization rate of existing plants.

With this cooperation, the global supply chain network of Hyundai Motor Group and GM is expected to expand at once. Hyundai Motor Group has plants in the US, Mexico, China, Czech Republic, Slovakia, India, Turkey, Vietnam, Indonesia, Thailand, and Brazil. GM operates production facilities in Canada, Mexico, and Egypt. By using the CKD method, Hyundai can produce cars in Canada and Egypt, where there are no plants, and GM can re-enter the European and Indian markets by utilizing Hyundai Motor Group's plants.

In particular, it is analyzed that Hyundai Motor Group will greatly reduce the damage from the 'Trump-related' tariff bomb by forming an alliance with GM. GM, the largest automaker in the US, operates 11 production facilities in the US. If Hyundai and Kia produce in CKD form here, the volume of goods subject to tariffs will be reduced. If GM's US plant's production volume increases, local investment and employment will naturally be activated, which will also meet the policy direction of the Trump administration.

The background of the 'supply chain alliance' between Hyundai Motor Group, the world's 3rd largest, and GM, the world's 7th and US's No. 1, is the recognition that it is difficult for a single company to overcome the threats faced by established automakers.

Chinese companies such as BYD are now advancing overseas after exceeding 60% of the market share in their own country, which has emerged as the world's largest automobile market. Chinese automobiles, which recorded about 21% of the global market share last year, are gaining momentum with the prospect that they will increase their dominance to 33% by 2030. Chinese brands with advanced autonomous driving technology and electric vehicle (EV) competitiveness are entering the Indian and European car markets as well as the neighboring ASEAN (Association of Southeast Asian Nations), and market competition is further heating up.

As market competition intensifies, large automakers are also burdened with expanding new plants where trillions of won are invested. This is because even existing plants are not able to utilize all of their production capacity. Moreover, with President Trump announcing that he will impose a high tariff of 25% on cars imported into the US, the world's second-largest car market, automakers' management is entering an off-road state.

In response, Hyundai Motor Group and GM, which have signed a comprehensive cooperation agreement, have decided to strengthen their competitiveness through joint production and overcome various threats head-on. It is a strategy to maximize the 'economy of scale' effect by utilizing the factories that the two companies have around the world. The content announced by Chairman Chung Eui-sun of Hyundai Motor Group and Chairman Barra of GM at the time of signing the MOU for cooperation in September last year is also in line with this. At that time, Chairman Chung emphasized "strengthening competitiveness in major global markets," while Chairman Barra emphasized "systematized resource allocation."

The industry evaluates that cooperation using the global supply chain will be a 'win-win' strategy for both companies. First of all, Hyundai and Kia can minimize the threat of tariff imposition announced by the Trump administration. Of the approximately 1.71 million vehicles sold in the US last year, Hyundai and Kia exported 1.01 million units from Korea.

Hyundai plans to reduce tariff risks by expanding the Meta Plant (HMGMA) in Georgia, US to a maximum of 500,000 units. Hyundai and Kia's US production volume is 1 million to 1.2 million units, so more than 500,000 vehicles will not be able to avoid tariffs. However, if Hyundai Motor Group uses GM's plants, which number 11 in the US alone, the situation will change. If Hyundai and Kia's partner companies produce products in the form of semi-finished products under consignment production, they can quickly increase local production.

GM also secures a bridgehead for new and re-entry in various lost global markets. GM withdrew from Europe in 2013, Indonesia and Thailand in 2015, and India in 2017, while Hyundai has production bases in the Czech Republic, India, Indonesia, and Vietnam, and Kia has production bases in Slovakia and India, respectively. If GM starts consignment production through Hyundai and Kia, it will be able to rebuild its collapsed global production network. Hyundai and Kia can also expand access to the African market by utilizing GM's Egyptian plant.

Once the cooperation system in the production field is established, Hyundai Motor Group and GM plan to expand their alliance relationship to 'rebadging', which releases one car model under multiple brands, and sharing supply chains such as logistics. A key industry official explained, "Kia is entrusting production to Donghee Auto, and Renault Korea is also about to produce Polestar 4 at its Busan plant," adding, "Using CKD enables rapid production expansion and reduces risks from large-scale investment."

Meanwhile, an official from Hyundai Motor Group said in this regard, "We cannot confirm the matters under discussion, but it is not true that we are pursuing supply chain cooperation to avoid tariffs."