Fortress Korea car market cracks under German luxury barrage
By Hyunjoo Jin
SEOUL (Reuters) - South Korea is on track to spend more on vehicle imports from Europe this year than it earns from exports the other way, for the first time in 24 years, as German brands breach the once impregnable fortress of Hyundai Motor and its local rivals.
The turnabout follows a 2011 free trade deal eliminating duties on vehicles from Europe, and as tastes change in a market once so patriotic that foreign cars were sometimes targeted by vandals.
Imports made up 3 percent of cars sold in South Korea a decade ago and now account for a record 14 percent. German cars make up 71 percent of foreign cars sold in South Korea this year, led by luxury marques BMW and Daimler AG's Mercedes-Benz.
"In the past, Korea lagged behind and had to catch up very fast, so we had to give benefits to domestic firms," said Park Hyun-suk, a businessman in his early 40s who lives in Seoul's affluent Gangnam district and drives a Mercedes-Benz E Class.
"But they are not small companies anymore and we have no obligation to support them. We have to be set free now."
The value of imports from Europe was up 60 percent to $4.6 billion in the first nine months of 2014, customs data showed, against exports of $4.4 billion.
"The driving force of imported cars has been diesel engines, younger customers in their 30s and luxury brands," said Yoon Dae-sung, an official at the auto importers association, who expects further growth to be driven by mass-market, non-German cars.
A free trade deal agreed last week with China excluded cars, to the relief of local automakers, staving off a potential influx of China-made German-branded vehicles and helping to preserve South Korea's status as one of few markets where domestic automakers hold a dominant share - for now. Continued...