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Japanese, German automakers to benefit from Korea-US FTA

Chosun Ilbo | Dec. 08, 2010

Japanese, German Automakers to Benefit from Korea-U.S. FTA

Hyundai-Kia Automotive Group is bracing for stiffer competition in the domestic market under the Korea-U.S. free trade agreement, as the pact will likely make Japanese and German cars much more price-competitive here.

"Mid-size sedans are the top-selling models here, and Japanese carmakers are also producing them in the U.S.," a Hyundai senior executive said. "Once the agreement takes effect from late next year, we expect to see an influx of Japanese cars manufactured in the U.S."

Of the 8,157 U.S.-made vehicles imported in the first 10 months of this year, only 4,486 or 54 percent were produced by American automakers, with the rest made by Japanese or German brands there.

Immediate Price Cuts

Nissan sold 3,217 cars here from January through November, with 73.4 percent produced in the U.S., as its flagship Altima mid-size sedan is manufactured there. BMW’s SUVs are also all imported from the U.S. The series sold 1,310 units during the same period, accounting for 8.5 percent of the carmaker’s total sales of 15,432 vehicles here. Mercedes-Benz sold 224 U.S.-made M-Class SUVs in Korea in the period, while Subaru imported 222 cars from the U.S. including the Legacy sedan and the Outback crossover.

Tariffs on these models will be halved from the current 8 percent as soon as the trade pact takes effect. Five years later, tariffs will be scrapped altogether, meaning imported cars may see price discounts of as much as 10 percent.

Influx of U.S.-Made Japanese, European Cars

The local branches of Toyota and Volkswagen are also planning to roll out U.S.-made cars from next year. Among foreign brands, Toyota is expected to benefit the most from the trade pact. All Toyota cars currently sold here, including the Camry, Camry Hybrid and RAV4, are manufactured in Japan, but these models are also produced in the U.S. Toyota’s Avalon full-size sedan and Sienna minivan, which have not hit the Korean market yet, are mass-produced in the U.S.

The Japanese automaker also plans to release its Corolla compact sedan here in March next year with an expected price tag of over W25 million (US$1=W1,133), more expensive than the Hyundai Avante (W20 million). But in five years as tariffs are phased out, the price of U.S.-made Corollas may be able to fall to less than W25 million. The price of Camrys made in the U.S. could also drop below W30 million, narrowing the price gap with the Hyundai Sonata.

Volkswagen Korea is also considering importing mid-sized sedans from the U.S. from next summer. Different from the Passat sedan currently sold here, the sedan made for the U.S. market has been competing with the Sonata and Camry there. If it is imported here, it is expected to sell for less than W40 million. Meanwhile, Nissan plans to introduce its Maxima sports car and Quest minivan to the Korean market.

 source: Chosun Ilbo