By Hyunjoo Jin, Joyce Lee and Heekyong Yang

SEOUL (Reuters) -Hyundai Motor said on Thursday it has launched a task force to respond to U.S. tariffs and reaffirmed its annual earnings target after reporting a 2% rise in first-quarter operating profit.

Hyundai and affiliate Kia, which together are the world’s third-biggest automaking group by sales, are particularly vulnerable to U.S tariffs.

They generate about one-third of their global sales from the U.S. market and imports account for roughly two-thirds of their U.S. car sales, according to data from Korea Investment & Securities.

“We expect a challenging business outlook to continue due to intensifying trade wars and other various unpredictable macroeconomic factors,” Hyundai said in a statement.

The automaker said it launched a task force this month to minimize the tariff impact on its finances and to craft plans to increase local sourcing of car components in the United States.

Benefiting from a weaker South Korean won, Hyundai booked an operating profit of 3.6 trillion won ($2.5 billion) for January to March, in line with estimates.

The weaker won contributed 601 billion won to its operating profit, offsetting the negative impact of increased sales incentives in the United States and Europe and lower sales of higher-margin sport utility vehicles.

Hyundai intends to boost production at its new Georgia factory, part of a $21 billion investment plan announced last month with U.S. President Donald Trump at the White House.

But any ramp-up in U.S. production will take time and tariffs could cost the group billions of dollars.

Its U.S. vehicle sales to dealerships rose 1% in the first quarter, but retail sales jumped 11%, as consumers rushed to buy vehicles ahead of 25% auto tariffs, which took effect on April 2. Trump also plans to impose tariffs of 25% on auto parts no later than May 3, which threaten to hike vehicle prices and cut car sales.

Hyundai has said it plans to keep sticker prices on its current model lineup steady till June 2 and will manage prices flexibly afterwards.

It kept its annual guidance provided in January of revenue growth of 3-4% and an operating profit margin of 7.0-8.0%.

Its shares were down 0.5% after earnings, in line with the wider market’s 0.2% decline.

($1 = 1,429.6600 won)

(Reporting by Hyunjoo Jin, Joyce Lee and Heekyong Yang; Editing by Miyoung Kim and Edwina Gibbs)