South Korea's Auto Importers Call for Easing of Rules on Small Cars - Wall Street Journal (blog)

A woman walks past a Kia Morning compact vehicle in a showroom in Seoul.

Bloomberg News

South Korea's auto sector is an area where foreign companies often complain about non-tariff barriers. In the latest grievance, importers of foreign brands say the government's rules on small cars are too restrictive for them to compete with local ones.

Fiat Chrysler Automobiles earlier this year gave up its plan to introduce the Fiat 500, a popular city car with a 0.9-liter engine, because the car was 4 centimeters larger in width than Korean standards to be recognized as a small car, meaning it can't get tax breaks given to compact cars.

"Some European city cars are selling well globally but aren't available in Korea partly because of different standards. The government needs to ease rules on small cars so that consumers can have a greater choice in that segment," said Yoon Dae-sung, executive managing director at the Korea Automobile Importers & Distributors Association.

More In Economy & Business

According to Seoul's Ministry of Land, Infrastructure and Transport, a car must have an engine size of smaller than 1,000 cubic centimeters and the body of the car must measure less than 3.6 meters in length, 1.6 meters in width and 2 meters in height to be classified as a small car.

Small cars are popular among drivers who are conscious of fuel economy and pricing because such compact automobiles are subject to various tax incentives such as no registration fees and 50% cuts in highway toll and charges of public parking lots.

Only three domestic car models–the Morning and the Ray of Kia Motors Corp. and the Chevrolet Spark of General Motors Korea–are classified as small cars in Korea. Separately, GM's Damas van and Labo truck models are regarded as small commercial vehicles, subject to the same tax benefits as the three passenger-car models.

Amy Jackson, president of the American Chamber of Commerce in Korea, recently said that Korea occasionally tries to insist on unique standards that are "overly restrictive" when compared with global norms. For example, Korea once proposed a monetary penalty "way higher than any other countries in the world" on sales of cars with large engines before backing down.

Seoul's transport ministry said Thursday it was considering changing rules on small cars.

"We know there are complaints by foreign-car importers on this issue. We have commissioned a study on the classification of car sizes to a research firm. We'll decide if we'll ease rules after we get the outcome next year," said a ministry official.

An official at Peugeot South Korea said the company may consider importing compact models such as the Peugeot 108 and the Citroen C1 into Korea if rules are eased.

More In Kia Motors

After a plethora of free-trade agreements with other countries in the past few years, Seoul reached a preliminary free-trade deal with Beijing earlier this month, which negotiators described as marking a high level of market access.

But both sides agreed to maintain import tariffs on autos amid concerns about a possible influx of increasingly popular European and Japanese brands made in China and shipped to the Korean market.

Korean auto makers are rapidly losing ground to imported foreign brands such as BMW AG and Daimler AG's Mercedes-Benz, which have gained appeal among Korean consumers.

Foreign car makers have more than doubled their sales over the past five years and currently account for a record 15% of the local market, up sharply from 2% just a decade ago.

Park Hae-ho, a spokesman for GM Korea, said his company isn't worried about a possible easing of regulations because its cars are priced competitively.

"The Fiat 500 sells at double the price of the Chevrolet Spark. That means a lot for consumers," said Mr. Park.

Asked if an eased rule on small cars would have an impact on sales, Kia officials declined to comment.

The WSJ is now on LINE. Scan to follow or click "Add Friends" from your mobile device to add our official account.

————————————————————————-

Also popular on Korea Real Time now:

Samsung Takes Eye-Scrolling Technology to Disabled Community

Women to Outnumber Men in South Korea

For the latest news and analysis, follow @WSJAsia

Source : http://blogs.wsj.com/korearealtime/2014/11/27/south-koreas-auto-importers-call-for-easing-of-rules-on-small-cars/