Imported auto brands may slump in Korea with Trump in the office

By Jhoo Dong-chan

Amid domestic automakers’ growing concerns over the U.S. automotive market uncertainties following Donald Trump’s surprising upset in the U.S. presidential election last week, imported auto brands also has a similar dilemma in Korea’s auto market.

Because Trump has long claimed the Korea-U.S. free trade agreement (FTA) is a “destroyer of U.S. jobs,” hinting possible abolition of the agreement during his upcoming presidential term.

Imported auto brands who have produced cars in the U.S. and imported to Korea have secured the price competitiveness in Korean auto market through the customs-free trade environment, but such won’t be the case any more if the Korea-U.S. FTA is abolished.

Not only U.S. auto brands like GM and Ford but also other global auto brands, including Mercedes-Benz, BMW and Toyota, have also produced certain models in their U.S. plants and shipped to Korea to enjoy such benefits.

According to the Korea Automobile Manufacturers Association (KAMA), Sunday, a total of 44,685 U.S.-made cars have been imported to Korea during the January-September period, a 24.5 percent surge compared to the same period last year.

In other words, nearly 5,000 cars have been shipped from the U.S. every month this year so the total figure may reach 60,000 cars by the end of this year.

Last year, a total of 49,096 U.S.-made cars were imported to Korea. The figure was nearly four times larger than 13,669 car of 2011 when the Korea-U.S. FTA was yet to take effect.

Tariffs on imported U.S.-made cars had been reduced to 4 percent from 8 percent since the FTA started to take effect in March 2012, and then have been completely abolished since January.

Along with no import duties, imported auto brands carried out aggressive marketing strategies with the U.S.-made models.

Thanks to the FTA and following marketing strategy, U.S. auto brand Ford and Cadillac have enjoyed 8.9 percent and 31.8 percent surge in sales during the January-October period this year while Korea’s imported auto market saw a 5.5 percent decline in total sales volume.

“With the FTA gone and imported customs revived, U.S.-made cars will face deterioration in their price competitiveness and sales performance,” said an industry insider.

Such cases are expected to go beyond just the U.S. auto brands.

BMW produces its X-Series, the sport utility vehicle (SUV) lineup, while Toyota makes the Camry and Avalon sedan as well as Sienna Minivan in the U.S.

Mercedes-Benz also produces its SUV lineup in the U.S. The popular GLS, GLE, GLE Coupe SUVs are included in the list.

“If President-elect Trump bring changes in the Korea-U.S. FTA, Mercedes-Benz’s sales in Korea could be consequently affected,” Mercedes-Benz Korea President and CEO Dimitris Psillakis said during a test drive event, Friday.