Prices U.S cars drop with FTA

U.S. automakers and distributors are announcing price cuts and corresponding reductions in their special consumption taxes in response to the Korea-U.S. free trade agreement that took effect today.

Ford Korea just joined in on the industry-wide price cut frenzy. Jung Jae H., chief executive officer of Ford Korea, which imports the Ford and Lincoln brands, said yesterday that the company will trim its prices by up to 9 percent. Prices of parts will be slashed by up to 35 percent, he added.

With import tariffs on U.S. cars immediately being lowered from 8 percent to 4 percent, the prices of Fords and Lincolns will drop as much as 5.3 million won ($4,706).

This was further facilitated by a corresponding reduction in individual consumption taxes from 10 percent to 8 percent on cars with engine displacements of at least two liters.

“The Korus FTA marks a turning point for U.S. automakers,” Jung said. “Many of their vehicle prices will be adjusted .?.?. We will make sure that consumers benefit from the FTA as much as possible.”

The new automobile landscape means that new buyers of, for example, a Taurus SHO full-sized sedan, will be able to save 2.9 million won as its price drops to 49.6 million won.

Those hunting for a sport utility vehicle can enjoy even greater savings, with the Lincoln MKS luxury SUV coming down 4.1 million won to 54 million won.

Ford said it will also lower the retail costs of its Explorer 2.0 EcoBoost SUV and Focus.

However, only the individual consumption tax cut will apply for its models produced in Canada or Mexico, it said.

This would include the Fusion midsize sedan and hybrid, as well as the Lincoln MKZ luxury sedan.

Jung said Ford has high expectations for the Korean market in the wake of the implementation of the FTA.

The company hopes to sell 6,000 units this year, up almost 50 percent from the 4,184 cars that local consumers bought in 2011.

Jung said the company will also cut the prices of 161widely-used components by as much as 35 percent, or 20 percent on average. The parts include air filters, brake pads, doors, hoods and bumpers.

Ford’s announcement came after GM Korea, which also imports Cadillacs, said late last month that it will cut the prices of the brand by between 1.4 percent and 3.5 percent.

It has already shaved 1 million won off its popular Cadillac CTS 3.0 Luxury sedan to cut the price to 46.8 million won.

The automaker offered a bigger discount of 4 million won on its Escalade Platinum SUV, resulting in the current sticker price of 125 million won.

GM Korea said yesterday it will reflect the individual consumption tax cut in the prices of its domestically produced vehicles, including the Alpheon full-size sedan, the Captiva SUV and the Malibu midsize sedan. This could see price cuts of up to 940,000 won, it added.

U.S. automakers’ share of Korea’s imported car market declined from 11.7 percent in 2007 to 8.2 percent in 2010, and 7.9 percent last year.

By Limb Jae-un [jbiz91@joongang.co.kr]