4/09/2012

Why are American Cars not Popular in Korea?: Decrease in Duties from FTA has not Helped Market Share

According to an article in the Korea Times, the Korea-U.S. FTA has not increased the popularity of U.S. cars, even though the price of the cars have decreased by nearly USD 5,000.  Why are U.S. cars not popular in Korea?
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. 
What do you think?
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SeanHayes@ipglegal.com