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Demand for imported cars in S Korea cools after VW scandal, tax change
[SEOUL] South Korea's once-voracious appetite for imported cars, which made it a bright spot for Europe's luxury marques, is cooling, weighed down by Volkswagen AG's emissions cheating scandal and a stricter law on taxation of company vehicles.
Sales of imported vehicles in South Korea fell 4 per cent to 73,844 vehicles from January to April this year, after surging 24 per cent last year for a sixth consecutive year of double-digit growth, according to data released on Monday.
That contrasts with a 6 per cent jump in domestic vehicle sales in the first four months of the year, fueled by a temporary cut in excise tax aimed to stimulate demand that applies to both foreign and domestic vehicles and expires in June.
"It would be challenging to meet the industry's projected growth this year," said Yoon Dae-sung, an executive at South Korea's auto importers' association, referring to the body's earlier forecast of a 4.6 per cent rise in foreign car sales in South Korea.
"Momentum is weakening for diesel vehicles - the driving force of South Korea's imported car growth, leading to a short-term correction in the market," he said.
Volkswagen sales in South Korea are down 30 per cent this year to 8,303, while those of sister brand Audi are down 27 per cent to 7,910.
BMW sales are down 0.9 per cent at 13,683 units, while Mercedes-Benz bucked the trend, selling 11 per cent more cars at 16,805 units despite a decline in April.
Starting this year, the government has also tried close a tax loophole that had previously allowed corporate owners to register luxury cars under their company names and get a higher tax deductible amount even when the vehicles were mostly used for personal purposes. The change hit sellers of pricey foreign cars especially hard.
Sales of vehicles priced at 70 million won (S$81,319.80) and above fell by 16 per cent, while shipments of vehicles priced lower than that remained flat, according to the association's data provided to Reuters.
The foreign share of vehicles sold in South Korea has jumped five-fold over the past decade, to a record 15.5 per cent last year, and has been an especially strong market for European luxury cars, including diesel-powered German sedans.
But demand has been dented in the aftermath of Volkswagen's September admission that it cheated on emissions tests for 11 million vehicles worldwide since 2009.