[Tariff Negotiations] Korea Expands Safety Certification... Will American Cars Sell This Time?

Korea Expands Equal Safety Certification for U.S. Vehicles
Trump Calls for "Full Opening" of Korean Auto Market
Expansion of Non-Tariff Barriers... Limited Impact Expected Domestically
U.S. Cars Hold 2% Market Share in Korea... The Reason Is "Marketability"

The government has abolished the upper limit on equal safety certification regulations for U.S. imported vehicles as a result of the Korea-U.S. tariff negotiations. With the easing of the safety certification system, which has been considered a representative non-tariff barrier, attention is focused on whether American-made vehicles will be able to increase their market share.

According to the industry on August 1, the market share of American cars in Korea last year was 2.5%, with about 40,000 units sold. There are seven American brands present in the Korean market: Tesla, Ford, Jeep, Lincoln, Cadillac, Chevrolet, and GMC. In contrast, Hyundai and Kia's market share in the United States was 10.7%, with more than 1.7 million units sold annually.

Due to the significant difference in sales volume and market share between the two countries, the United States has consistently demanded "full market opening." Since American vehicles benefit from zero tariffs in the Korean market under the Free Trade Agreement (FTA), the focus of negotiations has been on easing non-tariff regulations such as safety and environmental certifications and recall requirements.

This time, Korea and the United States have agreed to ease safety certification regulations. Under the current FTA, American-made vehicles that have received U.S. safety certification can be imported and sold in Korea without undergoing Korean safety conformity inspections, up to 50,000 units per year.

However, the prevailing opinion in the industry is that the market landscape will not change significantly despite the easing of certification requirements. The underperformance of American cars is analyzed to be due to product marketability rather than policy effects. Tesla has performed relatively well, selling 29,000 units last year, but it still appears difficult to surpass the 50,000-unit mark in the short term.

The United States has claimed that non-tariff barriers are the reason American cars do not sell well in Korea. However, the interpretation within Korea is different. The argument is that the fundamental issue lies in the core product competitiveness, such as the main vehicle types, brand positioning as imports, and pricing strategies, rather than in strict domestic policies.

The main products of American brands, pickup trucks, are not common vehicle types in Korea. In the United States, where the terrain is relatively rough and gasoline prices are low, three out of the five best-selling vehicles last year were pickup trucks. American brands have established a strong lineup of pickups by emphasizing practicality in their home market.

In contrast, Korean consumers tend to perceive pickup trucks more as leisure or hobby vehicles rather than for practical use. Moreover, for Korean consumers, many of whom live in apartment complexes or villas, the large size of pickup trucks creates practical constraints in terms of parking convenience.

There is also criticism that American cars have difficulty establishing a clear distinction in terms of premium image or price competitiveness in the Korean market. American mass-market brands have less of a premium image compared to German cars. Considering factors such as exchange rates and logistics costs during the import process, the price advantage also disappears.

An official from the automobile industry said, "After two amendments to the Korea-U.S. FTA, the domestic market is already sufficiently open to American cars," and added, "Even with further easing of non-tariff barriers, significant changes in the market are unlikely."

GM Chevrolet pickup truck Colorado. Provided by GM Korea