Eased nontariff barrier unlikely to boost US car sales in Korea, experts say

U.S. pickup trucks are parked at a port in Pyeongtaek, Gyeonggi Province, Thursday, when Korea and the United States clinched a tariff agreement. Yonhap

Most U.S. auto brands are unlikely to see a significant rebound in sales in Korea, even after the country removes most nontariff barriers on American car imports following the latest tariff agreement, according to experts and industry officials.

While the two countries are still finalizing the details of the barrier scope, they are seen as only minor external factors affecting U.S. car sales in Korea, they said.

The point, they noted, is that American vehicles are not tailored to meet the specific preferences of Korean consumers, who favor "well-balanced and more convenient" vehicles available at reasonable price points.

Under the latest Korea-U.S. tariff agreement, the U.S. agreed to lower a tariff rate on Korean vehicle imports to 15 percent. Korea also reached a broad agreement in alleviating a series of nontariff regulations on U.S. auto imports in such areas as safety and emission certification, which the U.S. Trade Representative cited as major “motor vehicle barriers.”

“The eased regulations may help U.S. auto brands to export more models to Korea, but it remains questionable whether they will be able to meet sensitive demand from local customers,” said Kim Pil-soo, a professor of automotive technology at Daelim University College.

The professor also raised doubts about the competitiveness of U.S. vehicles in Korea — mostly powered by internal combustion engines — amid the growing popularity of hybrid cars.

“In general, U.S. auto brands are considered less competitive in the market for eco-friendly vehicles, which makes them tougher to compete unless they introduce highly commercial hybrid or electric vehicle (EV) lineups here,” he said.

Kim also pointed out that U.S. cars tend to be larger in size and have lower fuel efficiency compared to Korean vehicles — two factors that are generally not appreciated by local consumers.

“Another key downside of U.S. vehicles is their relatively higher maintenance costs,” he said.

Logos of Ford and Lincoln are seen in front of their sales office in Seoul, Thursday. Yonhap

Lee Ho-geun, an automotive engineering professor at Daeduk University, shared a similar view.

“Previous U.S. administrations have also taken issue with Korea’s auto import regulations as major nontariff barriers that drag down sales of American vehicles, but this is far from reality,” Lee said.

“Korean consumers are generally reluctant to drive large U.S. cars for various reasons, such as parking difficulties. Even with the relaxation of nontariff regulations, U.S. cars are unlikely to see a significant boost in sales, as many are not well-suited to the Korean market."

Industry officials noted that U.S. cars may gradually lose their price competitiveness in Korea, as overseas parts suppliers are likely to raise prices following the country’s imposition of hefty auto parts tariffs on multiple nations.

“Under this scenario, U.S. carmakers will also increase their vehicle prices to cover the rise in the cost of sourcing parts,” an auto industry official said. “This does little to help boost their sales in Korea, especially at a time when the local auto market is already dominated by price-competitive domestic carmakers.”

According to data from the Korea Automobile Importers & Distributors Association (KAIDA), the number of U.S. vehicle sales here increased 3.9 percent to more than 24,000 in the first half of this year, but this was driven mostly by Tesla, which accounts for 80 percent of total American car sales in Korea.

Many Korean consumers remain hesitant about U.S. cars for more traditional reasons as well.

Kim Hee-nam, a self-employed worker in his late 30s, said he avoids U.S. cars due to the widespread perception that they are expensive to maintain and repair.

“People in my age group tend to have the same perception of U.S. cars,” said Kim, who is considering purchasing a new vehicle by the end of this year.

“American cars look muscular and attractive, but most Korean customers pay more attention to how practical and price-competitive a vehicle is.”