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Korea-EU FTA set to hurt Japanese auto sales

Korea Times, Korea

Korea-EU FTA set to hurt Japanese auto sales

By Kim Tae-gyu

5 July 2011

Japanese carmakers such as Toyota and Honda struggled to secure a firm market share here in the first half of 2011 while other imported auto brands boasted record sales.

The Korea Automobile Importers and Distributors Association (KAIDA) said Tuesday that 51,664 imported vehicles were sold during the Jan.-June period, up 23.2 percent from a year ago.

In contrast, vehicle sales for Japanese firms Toyota, Honda and Nissan plummeted amid a flurry of bad luck such as massive recalls, a strong Japanese currency and the Fukushima earthquake.

``Excluding its sub-brand Lexus, Toyota’s sales plunged 21.4 percent over the first sixth months of this year from a year ago. Those of Honda and Nissan also went down by 37.2 percent and 55.8 percent respectively,’’ a KAIDA official said.

``In the aftermath of the recalls, the Japanese auto companies brand image suffered. The earthquake earlier this year also negatively affected production to induce the downturn.’’

Affiliated top-tier brands of the aforementioned corporations are excluded in the data including Lexus for Toyota and Infiniti for Nissan.

Toyota was forced to recall a high number of vehicles in 2009 because of brake pedal problems, undermining the reputation of not only the firm but also compatriot outfits Honda and Nissan.

In March, a magnitude 9.0 quake hit Japan’s main island to disrupt the country’s automakers’ production lines. As a result they have been unable to meet demands.

On a more negative note, market observers point out that Japanese carmakers are not likely to see a turnaround anytime soon as their rivals from Europe gloat under the new free trade agreement (FTA).

``As the FTA between Korea and the European Union goes into effect, the European players have additional room to cut prices,’’ Shinhan Investment Corp. analyst Suh Sung-moon said.

``In this climate, I don’t think Japanese manufacturers can expect a comeback later this year or next year. In my view, the market has already shifted in favor of European vehicles.’’

Previously Korea levied 8 percent tariffs on imported passenger cars from Europe and these duties will be gradually scrapped by 2016.

Cho Soo-hong, a senior researcher at Woori Investment & Securities concurs.

``When Toyota tapped into Korea a few years ago, it was expected to change the face of the business. However, such predictions have yet to materialize,’’ Cho said.

``As far as luxury models are concerned, Korean drivers have been enamored with European cars. With regard to other segments, they do not have to buy Japanese as Korea’s homegrown companies offer pretty competitive models.’’

When contacted, Toyota aimed to rebound in the fourth quarter with the Sienna, a minivan, while Nissan strives to make noise with its Cube, awaiting an August debut in Asia’s fourth-largest economy.

Meanwhile Honda has his fingers crossed for an improvement in the latter half of the year but no plan to launch any new products in the near future. Market watchers claim that they had better cross their toes as well.