{"id":79640,"date":"2025-08-18T21:33:08","date_gmt":"2025-08-18T21:33:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/79640\/"},"modified":"2025-08-18T21:33:08","modified_gmt":"2025-08-18T21:33:08","slug":"us-tariffs-tighten-screws-on-japanese-and-south-korean-captive-finance","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/79640\/","title":{"rendered":"US tariffs tighten screws on Japanese and South Korean captive finance"},"content":{"rendered":"\n

As US auto tariffs bite and global competition intensifies, the finance arms of Toyota, Honda, Nissan, Hyundai, and Kia must pivot fast.<\/p>\n

When Toyota\u2019s chief financial officer addressed investors in early August, his message was anything but reassuring. He revealed that US tariffs had carved a staggering \u00a51.4 trillion \u2014 nearly US$9.5 billion \u2014 off the company\u2019s full-year operating profit. That figure, part of a 16% downward revision to \u00a53.2 trillion, marked the sharpest tariff-related impact estimate yet from any global automaker, according to Reuters.<\/p>\n

The announcement followed a July 22 decision by US President Donald Trump to lower tariffs on Japan-made vehicle imports from 25% to 15%, with a similar rollback for South Korean-made vehicles announced just before the August 1 deadline.<\/p>\n

Industry observers welcomed the move as a reprieve from potentially harsher trade penalties. But relief was tempered by realism.<\/p>\n

\u201cI\u2019d hesitate to call it good news. A 15% US import tariff is still significantly higher than where Japan started \u2014 and higher than most had expected,\u201d said Stefan Angrick, head of Japan and Frontier Market Economics at Moody\u2019s Analytics, according to CNBC.com<\/a>.<\/p>\n

Asian automakers, including Hyundai, are experiencing \u201cunprecedented\u201d profit erosion in Q2 2025, even as US sales show modest gains. Hyundai reported a 22% drop in net profit, absorbing a \u20a9828 billion (US$604 million) tariff hit, according to the Financial Times<\/a>.<\/p>\n

Mitsubishi Motors saw its net profit nearly wiped out, falling from \u00a529.5 billion ($201 million) a year earlier to just \u00a514.4 billion, largely due to tariffs and increased incentive costs. Sales also dipped 3% to \u00a5609 billion, the FT reported.<\/p>\n

Fitch Ratings warned on August 15<\/a> that US auto tariffs continue to weigh heavily on the financial health of Japanese and Korean automakers. While Japan\u2019s direct exports to the US are relatively limited, Korean manufacturers are more exposed to the new 15% tariff rate. Both countries, however, remain vulnerable to tariff risks tied to other export hubs \u2014 particularly Mexico and Canada \u2014 where trade terms are still unsettled. Fitch also noted that the long-term impact on component and raw material costs remains unclear.<\/p>\n

So far, Japanese and Korean carmakers have been reluctant to pass tariff-related costs directly to US consumers. Fitch expects them to prioritise internal cost-cutting measures, though gradual price increases are likely, especially if competitors follow suit. The extent to which these companies can shift costs to buyers will play a key role in determining how much financial strain they face.<\/p>\n

Story Continues <\/p>\n

Currency fluctuations will also be a factor. The yen and won both strengthened by roughly 9% against the US dollar in the first half of 2025, diminishing the value of US sales when converted to local currency, Fitch added.<\/p>\n

\"\" <\/p>\n

While tariffs dominate headlines, a deeper challenge looms: China\u2019s rise as a global automotive powerhouse. Once a vital growth market for Japanese and Korean brands, China has evolved into a formidable competitor. As domestic demand weakens in Japan and Korea, automakers now face intensifying competition from Chinese rivals, both at home and abroad.<\/p>\n

With poor corporate operating performance on the horizon – even with the rollback to 15% – and Chinese manufacturers in the ascendency, especially when it comes to must-have electric vehicles, where does this leave captive finance operations?<\/p>\n

At the core of every Japanese and Korean captive finance provider \u2014 Toyota Financial Services, Honda Finance, Nissan Financial Services, Hyundai Capital, Kia Finance \u2014 is a delicate balance of credit, risk, and customer trust. When tariffs drive up vehicle costs and squeeze manufacturer margins, the impact doesn\u2019t stop at the factory gate \u2014 it reaches the car buyer.<\/p>\n

Manufacturers absorbing tariff shocks often choose to swallow costs to preserve market share. This compresses auto profits and limits their ability to subsidise financing deals, making generous leasing terms harder to sustain. The result? Consumers may face stricter credit assessments, higher down payments, and less favourable lease options. In some cases, captives may pivot toward used-vehicle financing, where margins are more manageable and demand remains resilient.<\/p>\n

In this environment, captive finance divisions are no longer passive enablers \u2014 but become stabilisers of sales and customer loyalty. To stay competitive, captives will come under pressure to redesign customer touchpoints \u2014 to offer refinance incentives, loyalty discounts, and lease adjustments to keep buyers engaged.<\/p>\n

“US tariffs tighten screws on Japanese and South Korean captive finance” was originally created and published by Motor Finance Online<\/a>, a GlobalData owned brand.<\/p>\n

\u00a0<\/p>\n

The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.<\/p>\n","protected":false},"excerpt":{"rendered":"As US auto tariffs bite and global competition intensifies, the finance arms of Toyota, Honda, Nissan, Hyundai, and…\n","protected":false},"author":2,"featured_media":79641,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,23358,46,33093,2454,48188,48189,48190,35646,4737,4992,14767],"class_list":["post-79640","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-chief-financial-officer","tag-economy","tag-fitch-ratings","tag-japan","tag-korean-automakers","tag-mitsubishi-motors","tag-net-profit","tag-operating-profit","tag-south-korean","tag-tariffs","tag-us-president-donald-trump"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/79640","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=79640"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/79640\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/79641"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=79640"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=79640"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=79640"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}