FTA good news for automakers

Korea’s free trade agreement with Australia is expected to benefit local automakers the most, analysts say, as the deal between the two countries calls for Sydney to remove tariffs on most vehicles immediately after taking effect in January 2015.

“Korean-made vehicles will gain 5 percent in price competitiveness,” said Suh Sung-moon, an analyst at Korea Investment and Securities, yesterday. “Given that Hyundai Motor and Kia Motors’ market share in Australia has been stagnant in recent years, the news came as a nice surprise.”

On Thursday, Korea’s Ministry of Trade, Industry and Energy announced that both countries reached a trade agreement deal at a trade ministers’ meeting in Bali.

The deal includes Australia removing tariffs on most Korean products within five years after the agreement takes effect.

Legal steps must be taken before the FTA is finalized. The Trade Ministry said Australia agreed to immediately remove its 5 percent tariff on gasoline-powered Korean vehicles that account for 76 percent of local brand sales in Australia. Tariffs on other vehicles will be phased out over three years.

“The FTA will boost Hyundai and Kia’s market share in Australia from 2015,” Suh said.

The agreement must be vetted and approved by the national assemblies of both countries.

In 2012, Hyundai Motor sold 91,601 cars in Australia, while Kia Motors sold 30,758, company data showed. In the first 10 months of this year, Hyundai Motor’s sales jumped 6.1 percent year-on-year to 80,700 units while Kia Motors’ sales fell 9.9 percent.

After the Trade Ministry’s announcement of the Korea-Australia FTA deal, shares of Hyundai Motor slipped 500 won ($0.47) to 232,500 won on Thursday and fell an additional 2,500 won yesterday to close at 230,000 won.

As for Kia Motors, although shares went down by 100 won on Thursday to close at 56,500 won, they picked up by 300 won to close at 56,800 won yesterday. In the meantime, along with automobile shares, stocks related to energy and steel are also expected to see positive growth as the cost of importing iron ore and coal - Australia’s major exports - is expected to go down in Korea.

Samsung Securities also said yesterday that Posco and Hyundai Steel would benefit from the free trade deal.

BY LEE EUN-JOO [angie@joongang.co.kr]