Prolonged Won Weakness and Export Stock Momentum: Analyzing the Impact on the Auto Industry

Introduction: Persistent Won Weakness and FX Market Trends

As of June 19, 2026, the sustained strength of the US dollar in global foreign exchange markets has kept the USD/KRW exchange rate robust at elevated levels. While the depreciation of the won introduces macroeconomic burdens such as rising import prices, it acts as a core driver for the financial performance of export-oriented companies in the stock market. Specifically, the domestic automotive industry, which derives an overwhelming majority of its revenue from overseas markets (such as North America and Europe), falls directly within the radius of this currency fluctuation.

Structural Advantages of Favorable Exchange Rates for the Auto Industry

1. Revenue and Margin Expansion via Forex Gains

Domestic automakers and major auto parts suppliers receive a substantial portion of their payment settlements in US dollars. When the USD/KRW exchange rate rises, converting the dollars earned from the same volume of vehicle sales into won naturally increases book revenue and operating profit, resulting in a Forex Gain. Financial industry analyses suggest that for every 10-won increase in the exchange rate, the annual operating profit of major automakers experiences a structural leverage, improving by hundreds of billions of won.

2. Securing Price Competitiveness in the Global Market

A strong dollar environment provides the flexibility to lower product prices in local currency terms, or to maximize profitability while maintaining price parity. This serves as a crucial strategic advantage in defending or expanding market share in North America against major competitors from Japan and Europe.

Diffusion of Benefits Across the Supply Chain Ecosystem

The exchange rate effect is not confined solely to automakers. Auto parts companies like Hyundai Mobis and HL Mando, which serve global automakers as key clients, are also direct beneficiaries. As the utilization rates of automakers' overseas plants rise and export volumes increase, a trickle-down effect is observed, driving parallel growth in the overseas subsidiaries and export volumes of parts suppliers. In particular, the growing export of electrification components and high-value-added core parts (such as ADAS) is further widening the margin of profit improvement.

Complex Market Variables and Potential Risks

While the fundamentals supporting exchange rate benefits for export stocks are solid, the following offsetting variables must be considered from an investment perspective.

• Rising Costs of Imported Raw Materials and Components: Conversely, a strong dollar increases the won-converted cost of raw materials (such as steel and battery minerals) and certain components procured from abroad. This can partially erode the operating profit gains derived from favorable exchange rates.
• Global Trade Barriers and Demand Slowdown: Should changes in tariff policies or a contraction in consumer sentiment in key countries materialize, the impact of declining sales volumes (Q) could outweigh the positive exchange rate effects.
• Individual Corporate Forex Hedging Strategies: Exposure to currency fluctuations varies depending on each company's financial policies. For companies maintaining conservative foreign exchange hedging ratios, the direct impact of short-term exchange rate volatility on earnings may be limited.

Conclusion

The phase of won depreciation provides a clear financial advantage to major export companies, including the domestic auto sector. However, amidst macroeconomic uncertainty and the restructuring of global supply chains, rather than relying solely on exchange rate effects, this is a juncture that demands the selection of companies based on robust fundamentals—demonstrated through cost control capabilities and local market dominance.