SEOUL, Oct. 13 (Yonhap) -- South Korean auto parts makers are expected to benefit the most from the implementation of a free trade pact between South Korea and the United States, analysts said Thursday.
The U.S. Congress approved the bilateral free trade agreement
(FTA) on Wednesday, which is expected to help broaden the scope of the bilateral alliance and boost trade. South Korea’s ruling party is pushing to ratify the pact within this month despite dogged resistance from opposition parties.
Analysts said the bilateral trade pact, if implemented, will likely fuel the profits of local auto parts makers.
“The biggest beneficiaries will be automakers, especially parts manufacturers. The tariff on auto parts will be scrapped immediately, while the 2.5 percent tariff on cars will be abolished five years later,” Lee Won-sun, an analyst at Taurus Investment & Securities Co., said in a report.
Lee said local parts makers such as Hyundai Mobis Co. and Mando Corp. are also expected to boost their market share on the back of increased price competitiveness.
Others also said the FTA will open new opportunities for parts manufacturers which export to the U.S.
“The importance of cost reduction is increasingly becoming important in the auto industry. The KORUS FTA will boost orders and profits for companies who are focused on the U.S.,” said Chae Hee-guen, an analyst at Hyundai Securities Co.
Mando, which provides parts to U.S. carmaker General Motors Co., is especially forecast to draw profits from the bilateral trade pact, he said.
Shares of auto parts makers listed on the Seoul main bourse traded higher on hopes the U.S. Congress’s Wednesday move would spur the approval of the trade pact here.
Hyundai Mobis jumped 2.23 percent to 344,500 won (US$297) and Mando gained 2.56 percent to 200,000 won as of 11 a.m. Hyundai Wia Corp. also climbed 2.45 percent to 146,500 won.
Meanwhile, a joint report by 10 state-run think tanks showed that the KORUS FTA would boost exports of key products, such as cars and electronic appliances, by $1.3 billion annually over the next 15 years. Imports would rise by $710 million each year in the cited period, according to the report.
