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Posted : 2012-04-08 17:32
Updated : 2012-04-08 17:32

FTA discounts don’t help US car sales


Ford Motor cut the price of its Lincoln MKX, luxury crossover SUV by 5.2 million won or $4,596 to 53.75 million won after the Korea-U.S. Free Trade Agreement came into effect last month. / Courtesy of Ford Korea

By Kim Tae-jong

The Korea-U.S. free trade agreement (KORUS FTA), which went into effect March 15, removed 5.2 million won ($4,596) from the price of one Ford-made Lincoln, but this failed to boost sales.

The lackluster performance was made more manifest as March saw the biggest monthly increase in the number of newly-registered imported cars; and German brands maintained their dominance.

According to the Korea Automobile Importers and Distributors Association (KAIDA), the number of newly registered imported cars last month increased by 15.8 percent to 10,648 from the previous month.

But the sales of U.S. models from Ford, General Motors and Chrysler fell in growth despite aggressive marketing activities and the 4 percent tariff deductions on all models.

Under the KORUS FTA, tariffs on U.S.-made cars were lowered to 4 percent from 8 percent immediately. The remaining tariffs will be lifted completely in four years.

Ford has lowered its price by around 2.8 million won on average, and has also cut component prices by up to 35 percent.

“We will also introduce new models from May and June,” an official from Ford Korea said. “Our goal this year is to sell over 6,000 cars here.”

Thanks to their aggressive marketing, the sales of Ford surged by 80.9 percent to 416 vehicles in March from the previous month’s 230.

At a glance, this performance seems to be a drastic improvement, but in reality, its cars are actually losing their popularity.

Compared to the same period last year, sales of Ford cars decreased by 5.9 percent and the market share also decreased to 3.91 from 4.4 percent.

The reason is that rival automakers such as BMW and Mercedes-Benz have steadily increased their market share.

By brand, BMW sold a total of 2,560 cars last month, ranking first once again among imported brands. Mercedes-Benz came in second, selling 1,746 cars.

Due to the dominance of German autos here, most U.S.-made cars are struggling.

The sales of Chrysler decreased 15.3 percent to 338 cars with its market share dropping by 0.71 percentage points to 3.17 percent.

General Motors sold only 28 Cadillacs sold last month with its market share decreasing to 0.26 percent from 0.68 percent.

Market insiders think the unpopularity of U.S. cars is attributed to the stereotyped image of relatively low fuel efficiency.

“Traditionally, U.S. cars are associated with the idea that they are unnecessarily big and consume too much gas,” an official from one of the German car brands here said. “Without getting rid of such a negative image, it will be hard for them to compete with us or Japanese brands.”

Drivers also point out that U.S. cars have much less of a strong image of being a premium car, compared to their German rivals.

“Just about one or two million won discount doesn’t change drivers’ minds who want to buy premium cars because U.S. cars are less appealing as a luxury vehicle,” an imported car dealer said, declining to be identified.

To tackle such negative images, U.S. car brands are trying to add environmentally-friendly features to their new models.

Ford Korea has been actively promoted the concept of “EcoBoost” engine which they say achieves approximately 20 percent better fuel efficiency and 15 percent reduced greenhouse emissions than previous engines.

“I guess the biggest challenge is to get rid of our stereotyped image,” the official from Ford Korea said.
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