BMW takes advantage of free-trade agreement in South Korea

Article by Anita Panait, on June 7, 2013

BMW is aiming to take advantage of a new free-trade deal that will take effect starting July 2013 in South Korea. Under the free-trade deal, tariffs on vehicles with engines bigger than 1,500 cc like the BMW 3-series will drop by half to 1.6 percent starting July 2013 and fall to zero in 2014. Tariffs on imports from the United States will be totally eliminated in 2017.

The new free-trade deal poses an increasing threat to South Korean carmaker Hyundai, which aims to sell more premium cars at its home market. Hyundai and affiliate Kia controls around 70 percent of the premium vehicle market in South Korea.

Hyundai, however, posted flat sales in South Korean in the first four months of 2013; while BMW logged a 22-percent jump in sales during the period. BMW recently broke ground on a driving center in Incheon, South Korea, which it expects to attract over 200,000 visitors annually when it becomes open to public in 2014.

The KRW70-billion ($62.05 million) driving center allows visitors to test-drive BMW brand and Mini cars on a 2.6-kilometer track made up of six courses. Hyundai, on the other hand, has no similar facilities in South Korea. Hendrik von Kuenheim, head of BMW's Asia, Oceania and South Africa region, remarked during the ground-breaking ceremony that the fact the carmaker chose South Korea over other Asian markets like China and Japan, "proves how much importance BMW places on the Korean market.”

BMW’s rise in South Korea could be a bad omen for Hyundai, as it is currently holding talks with a quite powerful labor union that managed to cripple output during weekends for around three months this year. While BMW's share has risen 20 percent over 2012, Hyundai’s stock has dropped around 10 percent. Currently, foreign carmakers account for 12 percent of the South Korean vehicle market, up from less than 2 percent a decade ago. [source: automotive news - sub. required]

Topics: bmw, south korea

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