By Choi Sung-jin
The Korea-European Union free trade agreement over the past five years has created a deficit in automobile trade for the nation, industry experts said Friday.
While European cars enjoy brisk sales thanks to lowered import duties here, Korean vehicle exports to the European Union have declined, they said. The trade deficit is likely to aggravate further in July when the tariff on small cars with an engine capacity of 1,500 cc or less is abolished.
According to the Korea International Trade Association (KITA), European car imports have had double-digit growth since the FTA went into effect in July 2011 -- 34 percent in 2011, 18.8 percent in 2012, 17 percent in 2013, 53.4 percent in 2014 and 25.7 percent in 2015. Annual imports soared from $3.18 billion to $8.54 billion over the period.
Their market share has also expanded rapidly, thanks mainly to the strength of German automobiles.
Foreign vehicle imports, which stood at about 90,000 in 2010, grew to 240,000 last year. European cars accounted for 80 percent of the total, with German vehicles, including Volkswagen, Audi and Mercedes-Benz, representing 68.5 percent.
Korean car exports to the EU totaled $5.12 billion last year, down from $5.78 billion in 2011, the KITA report said.
The export of Korean cars increased 68 percent in 2011, dropped 9.5 percent in 2012 and rose 11.2 percent in 2013. But shipments fell 2.2 percent and 10 percent in 2014 and 2015, respectively.
In the first five months of this year, Korea’s car exports to the EU increased 2.6 percent from a year ago while imports from Europe fell 5.7 percent. European car sales in Korea are slow in the aftermath of “diesel gate,” but Korea’s deficit in the auto trade is expected to widen, given local motorists’ preference for European cars, the report said.
“The sharp increase in the import of mid to low-priced European cars since the implementation of the FTA, the traditional good image of European models and preference for diesel cars have combined to push up their sales in Korea,” an official at the Korea Automobile Manufacturers Association said. “Korean exports have stood still in part because their production in Czech Republic and Slovakia increased.”
Noting that European cars have benefited much from consumer preference since the FTA went into effect, the official said: “Despite the temporary setback, the import of European cars is likely to continue to outweigh the export of Korean cars.”