FTAs boost import vehicle sales: KAMA

Korea’s import car industry’s sales growth is rapidly rising mainly thanks to the nation’s free trade agreements with the United States and the European Union, according to a local car industry lobby group.

In its report last week, the Korea Automobile Manufacturers’ Association said that import brands saw their vehicle sales increase by 15.5 percent for the first three quarters of 2012 on a year-on-year basis.

Their brisk performance was “on the back of the Korea-EU FTA and the Korea-U.S. FTA,” the association analyzed.

In particular, KAMA noted the fact that import car brands grabbed 10.1 percent of the local market with sales of 90,440 units for the first nine months of the year.

Car dealers share the view ― despite the overall weak domestic demand in Korea due to the economic slowdown ― European carmakers such as BMW and Mercedes-Benz have been enjoying further sales growth since the implementation of the Korea-EU FTA in July 2011.

They attribute their rapid growth to consumer-price discounts as tariffs on import vehicles were slashed under the free trade pacts.

Korea had levied an 8 percent tariff on European cars but the FTA requires them to be entirely tariff-free by 2016.

Employees for the import brands say they do not anticipate higher profits from the tariff cut, but they expect sales to go up in the mid-term as lower prices certainly appeal to more buyers.

U.S. automakers ― suffering lackluster sales performance over the past few years ― are also pinning hopes on its bilateral FTA with Korea that took effect in March 2012.

Some think tanks predict that imports from the U.S. would jump to 75,000 units per annum under the trade accord, from fewer than 10,000 units currently.

Under the pact, the tariff on U.S.-made cars was lowered from 8 percent to 4 percent immediately. The 4 percent tariff will be lifted completely in four years.

U.S. automakers are about to engage in aggressive marketing here to take on Hyundai Motor and Kia Motors.

GM recently decided to slash the prices of all Cadillac models a maximum of 3.5 percent, reflecting in advance the tariff cut. GM Korea has opened a large dealership in southern Seoul as part of efforts to attain a double-digit market share.

Cadillac dealers are also expected to make the most of GM Korea’s sales networks and distribution channels nationwide.

Ford Motor plans to open seven more showrooms in the local market and increase the number of dealerships from the current 15 to more than 30 within two or three years.

Earlier this year, the carmaker lowered the price of the Fusion Hybrid by 4.7 million won ($4,200) to 42.9 million won.

Meanwhile, an executive in the local automotive industry said it seems that a large portion of Korean consumers prefer European brands to made-in-U.S. cars where prices are similar.

“In terms of brand image and fuel efficiency, I believe most European brands surpass them. But consumers can afford to purchase upper segment U.S.-made cars at cheaper prices,” he said.

But a spokeswoman for Chrysler Korea downplayed the situation, saying, “The FTA has paved the way for us to expand the vehicle model line-up.”

She said the company will increase its market share on a gradual basis.

This year, the association forecasts the 25 import brands together will grab 10 percent of the nation’s automobile market in terms of yearly sales for the first time in history.

On a monthly basis, the import car industry has already attained a milestone 10 percent market share.

Apart from the big four ― BMW, Mercedes-Benz, Volkswagen and Audi ― new competitive players such as Nissan and Jaguar/Land Rover have been fueling the rapid sales growth in Korea.

KAIDA chief Jung Jae-hee has said the industry “would push ahead with programs, including philanthropic activities, for corporate social responsibility” in the coming years.

He also vowed to enhance quality-based growth, turning from the past position of seeking mere sales growth.

Foreign carmakers saw the market share exceed 1 percent for the first time in 2002.

Buoyed by active sales of smaller-sized sedans in the early 2000s, import vehicles’ combined market share continued to climb to 5 percent in 2007.

By Kim Yon-se (kys@heraldcorp.com)