By Cho Jin-seo
Staff Reporter
The prices of imported passenger cars may go down as retail giant SK jumps into the field and authorities start inspecting auto dealers for pocketing excessive profits.
The expansion of the imported car market is expected to benefit Korean consumers by providing more affordable options, while putting mounting pressure on local carmakers such as Hyundai. The competition between foreign and locally manufactured cars will further escalate when the 8-percent tariff on American cars is abolished by the free trade agreement.
On Thursday, SK Networks opened dealer shops in the two rich areas of Bangbae, southern Seoul, and Bundang, in Seongnam. In a so-called ``gray market import,'' the company will deal with five brands of sedans ― Mercedes Benz, BMW, Audi, Toyota' Lexus and Toyota's Camry. As the cars will be supplied by the largest American dealerships with a quantity discount, SK said it will be able to sell the luxury vehicles six to 17 percent cheaper than the carmakers' official dealers and other importers.
``By supplying various import cars to customers at an affordable price, we will reshape the car retail network,'' the company said in a release.
The South Korean car market has been dominated by local makers such as Hyundai, Kia, Renault Samsung and GM Daewoo, however, foreign cars have been steadily increasing their portions. For the first 10 months of this year, sales of imported cars rose 32 percent to 43,492 units, according to data by the Korea Automobile Importers and Distributors Association.
But the Korean branches of foreign carmakers and their official dealers have been blamed for setting the car price much higher than in other countries and pocketing the profits. Meticulous design regulations by the government and a number of different taxes and tariffs are another reason that push up the imported car prices. For example, Lexus' LS600hl sedan is sold at 197 million won in Korea including tax. But in America, a full-option model is reported to be around $126,000 (115 million won).
As consumers' complaints increased and the market size expanded, the government began to look into the foreign car market more scrupulously.
According to Money Today, a financial newspaper, the National Tax Service and Korea Customs Service launched tax audits on imported car dealers, as well as Toyota's Korea unit. They are suspected of evading tax by reporting their car prices lower than the actual sales prices.