Hyundai to rely on AKFTA to boost sales

SEOUL, South Korea – Instead of expanding its reach in the ASEAN region through production, Hyundai Motor Company intends to maximize the gains under the ASEAN-Korea Free Trade Agreement (AKFTA) to increase sales and improve the quality of its cars. 

Hyundai Motor currently still has no plans of establishing manufacturing facilities in Southeast Asia, which includes the Philippines.

“The Philippines is an important market for us but we (currently) have no plans to set up a plant (in the country). We are focusing on improving the quality of the product,” said Young-Key Koo, vice president of the Asia-Pacific, Africa and Middle East Group.

Hyundai is currently one of the strong-selling car brands in the Philippines Toyota and Mitsubishi. Ten percent of Hyundai sales in Asia come from the Philippines.

Under the ASEAN-Korea Free Trade Agreement, tariff for vehicles imported from Korea have been reduced from 30 percent to the current 20 percent and will be progressively reduced to as lows as five percent, even zero percent in the following years. 

By 2016, duty will be reduced to 10 percent, giving local subsidiary Hyundai Asia Resources Inc. (HARI) tariff advantage over Japanese car importers in the country. 

Under the Japan-Philippines Economic Partnership Agreement (JPEPA), vehicles with a three liter engine and below are imported at 30 percent tariff. The trade pact is currently under review.

HARI president and CEO Ma. Fe Perez-Agudo said the goal is to make Hyundai the number one automotive brand in the country within 10 years.

HARI currently has the advantage of being able to offer a wider vehicle line up than its competitors.

The establishment of a production hub in other Southeast Asian countries is also not a priority right now for Hyundai Motor.

“At this point, there is still no plan to build a plant in Southeast Asia,” said Frank Ahrens of Hyundai’s global public relations team.

Auto industry players in the Philippines earlier said that a third wave of motorization is expected to sweep the region by 2015.   

Hyundai Motor currently has production plants in Ulsan, Asan, and Jeonju in South Korea; Nosovice, Czezh Republic; Izmit, Turkey; St. Petersburg, Russia; Beijing, China; Chennai, India; Alabama, United States and Piracicaba, Brazil.

All Hyundai vehicles exported into the Philippines come from Korea.

Ahrens said Europe, where demand for small car models is rising, is currently a strategic market for Hyundai.