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The Korean auto industry after passage of the EU and KORUS FTAs

It has been about 10 months since the KORUS FTA and one year and seven months since the EU FTA went into effect.  As those familiar with this long drawn out process may recall, the biggest sticking point for both agreements has always been about cars.

Yesterday’s WSJ has an interesting piece on how the Korean auto market is evolving after passage of the two FTAs.  The short answer appears to be that imports are making headway into the Korean market at the expense of domestic producers, as this chart would indicate:

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European luxury cars and some German mainstay brands appear to be leading the way:

German brands from BMW AG and Volkswagen AG have led the way in the import market, accounting for 64% of imported-car registrations last year, followed by Japanese brands with 18% and U.S. autos with 7.4%. Sales of diesel-powered cars—most of them from Germany—accounted for more than half of sales.

“With oil prices going up, we are beefing up our diesel lineup to compete with German brands and planning to offer more products at competitive prices,” said a Hyundai executive.

Another interesting bit is that it isn’t necessarily American build American branded cars that are the immediate beneficiaries of the KORUS FTA.  Well, it is still early (the tariffs on both sides get completely eliminated in five years), but the early winners may be Japanese branded cars build in America.

  • imememememe

    I’m in the market for a new car right now and having owned/leased German, Japanese and American cars, I can honestly say that I will never ever buy another German or American car.  For German cars, something almost always goes wrong the moment your warranty expires and it will cost an arm and a leg to repair it.  American cars are poorly designed and/or gas guzzlers.  I did toy with an idea of buying a Volt but just can’t get myself to purchase one after hearing one nightmare story after another.  So it’s all Japanese cars for me from here on out.  Korean cars?  I’ll pass.

  • wangkon936

    “For German cars, something almost always goes wrong the moment your warranty expires and it will cost an arm and a leg to repair it.”

    Yes.  I am experiencing that myself.  The mechanic said he thinks it’s a ploy by German unions to make sure we keep buying a steady stream of automotive aftermarket components at inflated prices.

  • Cm

    Wasn’t it predicted here, not to long ago, this would never happen, that foreign makes will never be able to take off due to terrible unfair unseen barriers?   I think the only reason why foreign cars haven’t done even better is not because unfair barriers.  It’s because of foreign maker’s expensive auto parts and poor after sale service. If any foreign make can get this act together, they’ll sweep the import market because the gap in price of imports versus the domestics are rapidly shrinking.  I’m guessing a lot of people are tired of  just driving Hyundai’s and KIA’s and GM’s.   They want something different.

  • wangkon936

    CM,

    The losers will continue to be cars made by Chrysler, Ford, Peugeot and Fiat, basically guys who don’t have much service in Korea and also don’t compete very well with the Kias, Hyundais and GMs (Chevys) already in Korea. These brands don’t compete well head to head with Korean cars in North America and Europe. What makes anyone think they will compete well with them in Korea?

  • Cm

     Not just makes that you mentioned, but also Japanese (Made in America in reality) and German brands need to do something to bring down the cost of the parts and repair service which are up to ten times the cost of what domestics charge.  If they don’t solve this problem soon, I see don’t see how the imports will continue to grow beyond the traditional luxury market.   I agree with you about the Chrysler and Ford, they have limited brand appeals beyond specialty cars like maybe the Jeep or even Ford pickup trucks.

     

  • http://profiles.google.com/dcmusicfreak DC Musicfreak

    A market effectively closed to foreign competition for 40 years creates a whole eco-system of related trade barriers, including for parts and services. It is too early to tell how open the Korea car market will be. 

  • dlbarch

    Bingo!

    Gawd how refreshing it is to find someone else who actually has an understanding of how things work in the real (Korean) world.

    DLB

  • SomeguyinKorea

    Why not a Renault-Samsung?  After all, they are essentially Peugeots and Nissans assembled in Korea.

  • SomeguyinKorea

     Correction, Renaults and Nissans, of course.  A bit of a Freudian slip. I was thinking about the Peugeot we are considering buying when I wrote that.

  • SomeguyinKorea

     I hear they suck on slippery roads.  The only person I know who owns a German car that’s happy with how it handles in the winter owns a Porsche Cayenne, but that’s overkill for Korean roads.

  • SomeguyinKorea

    I know for a fact that the taxes on imported cars isn’t nearly as high as consumers are led to believe it to be.  But, you’re right about parts. I’d be curious to know what the duty on parts is. Is it high or are consumers being fleeced by seven layers of middlemen (as it happens with most products here, including domestically produced ones)?

  • http://www.bcarr.com/ Brendon Carr

    One issue with parts is the need to ship the parts to Korea from overseas, often on a just-in-time basis (special order) rather than being in inventory in the parts depot. For Korean carmakers, the parts factories are usually here as well, and there is the economy of scale that follows from the larger sales volume of Korean cars. Parts costs will decline as foreign makers’ sales volume increases.

  • platetheif

    With those kind of ideas, sounds like your mechanic could do with having his mind road-tested.

  • wangkon936

    He is a BMW certified master mechanic.  After 20 years of servicing those cars, I think he’s got some inkling of the aftermarket business model.

  • imememememe

    Cuz I live in the states. But even if they were available here, I’d still buy a Japanese car.

  • imememememe

    That’s exactly what my mechanic said He says that they, like Toyota, are perfectly capable of making reliable cars but won’t because German unions need to keep selling their expensive parts.

  • imememememe

    well, i’m never buying another german, that’s for sure.

  • Kaizenmx

    Toyota, moving forward. Whether you like it or not and get you in a automobile shitstorm of an accident.

    This is why I don’t trust japanese automobiles anymore. Toyota’s reputation of reliability is about same as Ford. Same as their sister company, Lexus. 

    I’d rather buy European car if I’m gonna buy a brand new car or just go with Korean made car.

  • platethief

    Since when did unions have any say in car and compnent manufacture? I think its more likely that in their haste to get ever more new models on the road, thereby, staying in competition with the flood of cheaper jaanese and korean cars, they`re skipping certain tests and trying to get the new models on the road.

    But then again, my local senator reckons mechanics`opinions on politics are less reliable these days.

  • platethief

    His mechanical knowledge is sound, im sure.

    As for his knowledge behind the marketing strategies of mass-manufacturing, the jury should be out.

  • nayacasey

    As usual, media and interest groups focus on the “battle” between countries and companies–as if consumers mattered. “Downshift” for those companies, but an “Upshift” for consumers getting more choices.

  • wangkon936