South Korea’s five domestic automakers have effectively concluded this year’s labor negotiations with the ratification of Hyundai Motor’s wage and collective bargaining agreement. With the labor risk that had been dragging down earnings now cleared, the industry’s focus has shifted squarely to the second-half sales battle. Facing a triple whammy of U.S. tariff policy, aggressive low-cost competition from Chinese manufacturers, and slowing global demand, the five companies are deploying distinct strategies—new model launches, brand expansion, and warranty enhancements—to defend both domestic and export markets.

On September 7, Hyundai Motor announced that the tentative agreement passed in a ratification vote held on August 31, with a majority of union members voting in favor. Of the 39,638 total union members, 31,166 cast ballots, recording a 78.6% turnout. The core of the agreement centers on wages: monthly base pay will rise by 100,000 won (approximately $74), including seniority increments, and performance bonuses will total 400% plus an additional 12.7 million won (approximately $9,400). Additionally, labor and management agreed to hire 500 new technical workers from the second half of next year through 2028, and to extend the retirement age without expanding the wage peak system, contingent on related legal changes.

Kia held its signing ceremony at the Gwangmyeong AutoLand plant. The agreement includes a 100,000 won base pay increase, management performance bonuses of 300% plus 4 million won (approximately $3,000), quality improvement incentives of 100% plus 4.7 million won (approximately $3,500), and a 2026 AutoCar Awards commemorative bonus of 4 million won—bringing total performance incentives to roughly 400% plus 12.7 million won. Renault Korea also held a general employee meeting on August 26, passing a tentative agreement that includes a 51,000 won (approximately $38) base pay increase and a lump-sum payment totaling 2.5 million won (approximately $1,900). GM Korea and KG Mobility (KGM) had already concluded their respective labor agreements back in July.

August Sales Slump Across the Board—Domestic Cliff Becomes Reality

While labor risk has been resolved, the market environment remains challenging. Combined domestic and overseas sales for the five companies—Hyundai Motor, Kia, GM Korea, Renault Korea, and KGM—totaled 589,412 units in August, down 5.9% from 626,460 units a year earlier. Domestic sales came to just 79,601 units, while exports also declined 1.2% to 508,702 units.

Fortunes diverged overseas. Hyundai Motor sold 288,574 units total—34,333 domestically and 254,241 overseas—down 14.2% year-over-year. Domestic sales plunged 41.1%. It marked the first time in four years and seven months that monthly global sales fell below 300,000 units. A Hyundai Motor official said, “Last month’s results were affected by production disruptions from the strike and pent-up demand for new models. We will work to expand market share based on recently launched new vehicles such as The New Grandeur and The All-New Avante.”

Kia, by contrast, sold 266,675 units total—40,213 domestically, 225,413 overseas, and 1,049 special-purpose vehicles—up 5.0% year-over-year. Domestic sales fell 7.6% due to fewer working days from summer vacations, but overseas sales rose 7.4%, lifting overall performance.

The three mid-sized automakers bore the brunt of the domestic sales collapse. Their combined August domestic and overseas sales totaled 34,163 units, down 6.1% year-over-year. GM Korea sold 23,042 units—731 domestically and 22,311 for export—up 9.4%, but KGM fell 22.6% to 6,860 units and Renault Korea dropped 34.0% to 4,261 units. Renault Korea’s decline was driven largely by domestic sales of its flagship Grand Koleos, which plunged 68.0% year-over-year to just 929 units.

Defending Profitability with Hybrids and New Models

The keys to a second-half rebound are new models and hybrids. Hyundai Motor unveiled the fifth-generation full-change model of its best-selling Tucson, “The All-New Tucson,” on August 19, with customer deliveries expected to begin in the fourth quarter. The GV80 Hybrid—Genesis’s first hybrid vehicle—will also be introduced to domestic and overseas markets in the second half. The GV90, the brand’s first ultra-large electrified flagship SUV, completed its world premiere in the United States last month and is preparing for its domestic launch.

With first-half operating profit down 25.8% year-over-year, the strategy is to restore profitability through a hybrid-centered mix improvement. José Muñoz, President and CEO of Hyundai Motor, said at the CEO Investor Day on August 26: “Considering current regulations and customer demand, hybrids represent the biggest opportunity. The simplest way to enhance business capabilities is to increase production capacity and launch hybrid models.” Hyundai Motor also unveiled mid-to-long-term targets of 5.55 million global sales and an operating margin of 9% or higher by 2030, along with plans to introduce more than 100 new models.

Hyundai Motor’s first-half hybrid sales reached 363,000 units, up 18% year-over-year. However, the individual consumption tax reduction on hybrid vehicles—up to 700,000 won (approximately $520) per vehicle—is set to expire for vehicles delivered by the end of this year, making fourth-quarter sales pull-forward a potential variable.

Kia plans to sustain its momentum by differentiating powertrains according to regional demand. In the second half, the company will expand Telluride production capacity in the United States, and in Europe it plans to boost sales through local production of the EV2 and EV4, along with launches of the Seltos Hybrid and K4 Hybrid.

Survival Cards for the Three Mid-Sized Automakers

The three mid-sized automakers are each pursuing different breakthrough strategies. Renault Korea is betting on warranty and pricing rather than new models. Starting in September, individual and sole proprietor customers who take delivery of the Filante and the 2027 Grand Koleos will see body and general parts warranty coverage extended from the current 3 years/60,000 km to 7 years/140,000 km, and engine and powertrain major component coverage extended from 5 years/100,000 km to 7 years/140,000 km, provided they complete annual scheduled inspections.

KGM is focusing on preparing its next-generation lineup. The SE-10 mid-to-large SUV is under development with a target launch in early 2027. The model applies Chinese automaker Chery Automobile’s T2X platform to the F100 concept car shown at the 2023 Seoul Mobility Show, marking the first joint project between the two companies. KGM is also expanding its overseas sales channels. Last month, the company launched its brand in the Myanmar market, introducing its EV lineup including the Torres EVX and Musso EV, and plans to increase export volume through expanded KD (knock-down) operations in Saudi Arabia and Vietnam.

GM Korea will officially launch the global Buick brand in South Korea in the second half. As the fourth brand after Chevrolet, Cadillac, and GMC, the initial lineup is expected to include the Envista, a coupe-style compact SUV currently produced at the Bupyeong plant for export to North America. A GM Korea official said, “Through Buick’s entry into the Korean market, we plan to further strengthen our multi-brand strategy and offer customers a broader range of brand and product choices. Going forward, we will continue to review diverse product portfolios considering the Korean market and customer demand.”

U.S. Tariff Hike Weighs on North American Production Networks

Overseas, U.S. President Donald Trump has proposed raising tariffs on Canadian-made automobiles from the current 25% to 50%, which is expected to increase pressure on Toyota and Honda, both of which operate large-scale production facilities in Canada.

According to Reuters on August 31, President Trump proposed raising tariffs on vehicles imported from Canada from the current 25% to 50% effective January 1 of next year. While the possibility remains that the two countries could reach a trade agreement before then, if the tariffs are implemented as planned, a significant shock to Canada’s auto industry is anticipated.

Toyota and Honda, which together account for more than 75% of Canadian vehicle production, are expected to be the most affected among major automakers. Last year, vehicles produced in Canada accounted for approximately 24% of Honda vehicles sold in the United States. For Toyota, Canadian-made vehicles represented 17% of U.S. sales. Representative models exported from Canadian plants to the United States include the Toyota RAV4 and Honda CR-V. As both are high-volume SUVs in the U.S. market, there is discussion that high tariffs, if realized, could impact U.S. sales and local supply chains.

Canada’s auto industry produces approximately 1.2 million vehicles annually and supports roughly 427,000 related jobs. Given that the U.S., Canadian, and Mexican auto industries have built cross-border supply chains for parts and finished vehicles over decades, the tariff increase could weigh not only on Japanese automakers but on the broader North American automotive production system.

Toyota incurred costs of approximately 1.4 trillion yen (approximately $9.1 billion) in the previous fiscal year due to U.S. tariffs. The company is expanding U.S. local production, including plans to invest up to $10 billion in its U.S. operations over the next five years and relocating production of the Tacoma pickup truck from Mexico to a new plant in Texas.