South Korean trade delegates have backed down on a number of automotive regulations in talks with their US counterparts this week although analysts say this is unlikely to have a significant impact on the country’s carmakers.
South Korea’s apparent compromises on automotive clauses in the Korea-U.S. free trade agreement sparked domestic criticism from the opposition parties and civic groups, but industry experts say that the effects on the domestic industry will be limited.
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The Korean side is reported to have conceded to putting a 5% cap on customs refund on automobile parts that are imported and used in exported vehicles.
Unlike Korea’s trade pact with the E.U., such a clause was not included in the original Korea-U.S. FTA.
While the change may not deal significant damages to Korean carmakers, US OEMs could stand to gain from some apparent backtracking on environmental regulations.
According to reports, Seoul is reviewing exempting up to 10,000 vehicles each year from the new fuel economy and greenhouse gas emission standards that will go into effect in 2015. Korea had originally intended to exempt brands with an annual sales figure of less than 1,000 units from the new rules.
From 2015, vehicles able to seat 10 or less people will be required to either meet the 17 kilometers per liter fuel economy standard or emit less than 140 grams of carbon dioxide per kilometre.
While U.S. carmakers will be exempt from strengthened rules, industry officials say that it is too early to predict the extent of the advantage gained and that it will not be lopsided.
According to Korea Automobile Manufacturers Association (KAMA) data, Hyundai Motor Co.’s plant in Alabama produced about 230,000 vehicles during the first nine months of the year, while Kia Motors Corp.’s facility in Georgia rolled out 96,000 vehicles during the same period.
While the majority of Hyundai and Kia’s U.S.-produced vehicles were sold within the country, their production figures are equivalent to about 56% and 36%, respectively, of Hyundai and Kia’s sales in that country.
In addition, with both plants capable of producing 300,000 units per year each, the two Korean carmakers still have room to increase the proportion of their U.S. sales accounted for by vehicles produced within the country.
