Korea’s car industry refutes EU officials’ argument on FTA

The nation’s automobile sector has refuted claims by some European car industry leaders that Korean carmakers are enjoying huge benefits under the Korea-EU Free Trade Agreement.

On the contrary, a greater beneficiary of the bilateral FTA ― which took effect on July 1, 2011 ― is the European counterpart, the Korea Automobile Manufacturers Association said Wednesday.

KAMA clarified that the trade pact offers little benefit in terms of tariff elimination to the automobile sector, highlighting the manufacturing factories in Europe.

“The majority of Korean car sales in the EU are those produced within the EU (Czech Republic and Slovakia) or non-EU countries (India and Turkey),” the KAMA said in a statement.

An association executive said it is estimated that vehicles of Hyundai Motor and Kia Motors exported to European countries accounted for “only 20 percent” or so of their total sales in the EU in 2011.

“Around 80 percent of new car sales were those produced in the EU or imported from Turkey and India,” he said.

KAMA cited the recent situation that import car sales are enjoying a robust growth in Korea while the Korean car market dwindles due to the economic slowdown and sluggish consumer confidence.

“In particular, the new registration of European cars swelled 16.4 percent from July 2011 until March 2012 in Korea, running the first in the import car sales, topping Japanese and US products,” it said.

German brands have enjoyed high profits in Korea. In 2011, BMW, Benz and Audi posted US$3.4 billion in sales revenue and recorded $87 million in net income, which is a 6.4 percent growth over a year before.

“European cars captured 6.1 percent of the Korean market in 2011 and 6.5 percent during the first quarter,” KAMA said, citing data.

It compared the figures with the market share of Korean car makers ― represented by Hyundai and Kia ― that posted 5.1 percent in 2011 and 5.7 percent in the first quarter in the European market.

KAMA also stressed that between July 2011 and March 2012, a total 335,320 vehicles were exported to the EU by the Korean auto makers, of which 48.5 percent or 162,624 units were exported by “GM Korea and Renault Samsung Motors, the affiliates of respective US and EU automakers.”

It said the effect of Korea-EU FTA has generally been “overstated” as a substantial cause of Korea’s export increase to the EU.

With the Korea-EU FTA effectuation, the EU’s 10 percent tariffs on the imported Korean cars reduced by only 1.7 percentage points for cars with engine capacity below 1,500cc and 3 percentage points for those over 1,500cc.

Though the tariff reduction will pull down retail prices, leading to a sales increase, it is too much to say that such a minor reduction of tariffs would have meaningful effects on exports, it said.

“It seems more reasonable that the back-to-back introduction of new models and improved customer recognition can explain the increase of exports.” (nvn)