Hyundai, Kia Link European Gains to Products, Not FTA

Korea’s two leading auto makers take issue with a French government official’s allegation that Korean-made vehicles are unfairly competing in his country.

In calling for restoration of the full 10% import duty that was in effect prior to the

Korea-European Union Free Trade Agreement, Armand Montebourg, France’s minister for industrial renewal, accuses the Korean car companies of unfair competition.

He contends the Koreans are increasing marketing efforts and unfairly benefiting from the reduced tariffs included in South Korea’s FTA with the EU, which took effect in July 2011.

A Hyundai spokesman dismisses Montebourg’s allegations, telling WardsAuto: “Our sales success in Europe is attributable to several factors. We have introduced several new models, our quality and value are high, our design is eye-catching and we have a warranty Europeans appreciate.

“To suggest that our European sales growth is owed to a trade pact is not only incorrect, it is insulting to our brand and our products.

“Over the past year, between 85% and 90% of the cars we’ve sold in Europe have been in made in places other than Korea,” the spokesman says. “That means the vast majority of the cars we’ve sold in Europe since the beginning of the Korea-EU FTA have not enjoyed the benefits of the trade pact.

“Our cars are selling on their own merits, not riding on the back of a trade pact.”

A spokesman for Kia, sister company to Hyundai and Korea’s second-biggest auto maker by volume, was less pointed in rebuffing Montebourg.

“I think our sales success in Europe has more to do with good products than a tariff reduction,” the spokesman says. “There has been a big perception change happening in recent years among European customers in the way they view our products in design and performance, and how our products offer good value.”

A spokesman for General Motors Korea, the country’s No.3 auto maker by volume, tells WardsAuto his company’s exports to France and to Europe generally declined in second-quarter 2011, after the FTA went into effect, and the decline has continued through first-half 2012.

“GM Korea’s vehicle exports to Europe decreased in spite of an anticipated positive effect of the Korea-EU FTA,” he says.

Both Hyundai and Kia serve the West European markets primarily with vehicles produced in the East European nations of the Czech Republic and Slovakia, respectively.

The auto makers’ direct exports to France from Korea surged after the FTA took effect July 1, 2011. Hyundai shipments in last year’s second half were 212% higher than in like-2010, while Kia’s were a little more than double.

Hyundai exported 2,084 units to France in first-half 2012, a 182% year-on-year increase. Kia shipments jumped 26% to 6,594. Including European-built vehicles, Hyundai and Kia sales were up 35.2% and 23.4%, respectively, during the year’s first six months.

GM Korea exports more vehicles to France than Hyundai and Kia combined, but has suffered declines since the FTA went into effect. Shipments to France in first-half 2012 were off nearly 3% to 14,652 vehicles from 15,064 prior-year.

Renault Samsung and Ssangyong neither reveal their export figures nor comment on the Korea-EU FTA’s possible effect on sales.

When the Renault-Nissan Alliance announced this month that it would build the new Nissan Rogue cross/utility vehicle at a Renault Samsung factory in Korea, a spokesman for the alliance’s subsidiary emphasized all of the production would go to the U.S. and not to Europe.

Montebourg also announces new government measures to help France’s battered auto industry. They include a promise of €490 million ($602 million) in consumer subsidies to promote the purchase of French-built EVs and hybrids.

French auto makers PSA Peugeot Citroen and Renault are reeling from declining sales and have suffered significant losses. PSA is laying off 8,000 employees nationwide and is closing itsAulnay plant near Paris, a plan denounced by President Francois Hollande.

More than 2,000 workers marched Thursday around PSA’s Paris headquarters, chanting and lighting smoke flares while their union representatives were inside negotiating with company officials.

Unemployment in France is running at about 10%.

Under the FTA, France and all other EU nations are obliged to phase out the 10% import duty on cars produced in Korea over the next five years. Korea is to remove its 8% duty on French and other European-made cars.

More importantly, many analysts believe, Korea also has agreed to accept all EU safety, fuel economy and other required vehicle testing as equivalent to that required in Korea. That frees European cars from costly additional testing to meet Korean standards.

Korean-made vehicles still must meet European technical specifications.