The dollar-to-won exchange rate continues to soar in the upper 1,400 KRW (about 1.05 USD) range, creating a mix of optimism and concern within the automotive industry. While companies anticipate improved profitability due to the high exchange rate, they also worry about potential domestic market stagnation and rising import costs if the high rate persists.
Industry sources reported on Sunday that the dollar-won exchange rate has risen sharply since entering the 1,400 KRW (about 1.05 USD) range in early October and is now approaching 1,500 KRW (about 1.13 USD). On Friday, the rate hit 1,475.6 KRW (about 1.11 USD), marking its highest level since the previous peak on April 9 this year.
This elevated exchange rate is viewed as a short-term benefit for the automotive sector. With domestic automakers exporting more vehicles than they sell locally, higher exchange rates can improve profitability. Research analyst Lee Yoo Woong from Daol Investment & Securities estimated that Hyundai and Kia could see increases of 2.2 trillion KRW (1.65 billion USD) and 1.3 trillion KRW (975 million USD), respectively, in operating profit for every 100 KRW (0.075 USD) rise in the exchange rate.
Some experts believe the high exchange rate may partially offset recent tariff burdens. Industry insiders predict that if the exchange rate remains in the 1,400 KRW (about 1.05 USD) range, Hyundai and Kia could recover about 30% of their tariff costs.
An industry representative said that for Korean automakers with a significant global presence, a high exchange rate can support profitability up to a certain level, and added that short-term improvements in tariff pressure are possible.
However, many warn that if the high exchange rate persists, it could lead to a slowdown in the domestic market. Rising costs for raw materials and parts may push up vehicle prices and weaken consumer purchasing sentiment.
Last year, domestic automobile sales fell to 1.635 million units, the lowest in 11 years. This year saw a modest recovery due to normalized supply and pent-up SUV demand, but concerns remain that continued currency depreciation could reduce next year’s demand.
Imported vehicle prices may also continue to climb. Cadillac Korea recently launched the Escalade IQ in the domestic market at a price roughly 50 million KRW (37.5 million USD) higher than in the United States, citing exchange rate pressures. Such increases are expected to burden consumers further and suppress demand.
With a large portion of automotive materials sourced overseas, prolonged currency weakness could raise procurement costs. Second- and third-tier suppliers may face shrinking bargaining power compared to major automakers, potentially pressuring profitability across the supply chain.
Analysts also warn that Hyundai Motor Group’s previously announced large-scale investment plans in the U.S. could face additional challenges in this environment.
The industry sees the duration of the high exchange rate as a decisive variable. Although forecasts for a rapid decline remain unlikely, discussions about a new normal of long-term elevated exchange rates are gaining traction. One industry insider said it is time to strengthen cost structures to prepare for continued volatility and global supply chain risks.