From Busan to Gangnam, Koreans are more inclined to buy imported brands than ever before.In South Korea, a significant reduction in import tariffs is fueling sales of foreign-branded cars as buyers branch out from the traditional default choice between domestic brands.
Import duties on European cars have dropped from a hefty 8 percent to a more reasonable 3.2 percent as a result of a trade pact between South Korea and the European Union. Similarly, a new pact between South Korea and the United States will eventually reduce the cost of American cars - at least once American automakers begin exporting cars in larger numbers to South Korea.
Japan and South Korea don't have a trade deal, but Japanese automakers are leveraging their substantial U.S. manufacturing presence. Toyota is exporting its Toyota Camry sedan, its Venza crossover and its Sienna minivan from plants in North America and Honda has followed suit with its Pilot crossover, its Odyssey minivan and, as of last month, its Accord sedan. Since the cars are built in the U.S., they aren't subject to hefty tariffs like they would be if they were built in Japan.
Still, as is the case elsewhere, most European cars are pricier than their Korean counterparts. An Audi A6 runs about 58 million won, while a Hyundai Genesis costs buyers about 43 million won. As a result, European cars are still primarily reserved for the Gangnam set - those who live in the country's higher income areas.
Just two years ago, Korean brands held a roughly 99 percent share in the domestic new car market. Last year, that figure dropped to 92 percent - and it's likely to continue sliding. An analyst with NH Investment & Securities told Bloomberg that imported brands will account for about 10 percent of the South Korean market in 2012.
The significantly higher interest in foreign brands isn't going to help Hyundai and Kia, which have seen unprecedented growth outside of their home market.