The European Automobile Manufacturers Association (EMEA) estimates the cost of importing cars from South Korea could fall by as much as Euro 1,000 per vehicle – maybe more – following a European Union and South Korea free trade agreement this month.

This deal will wipe out duties charged on vehicles and car parts trades between the EU and South Korea.

Brands such as Hyundai and Kia could reduce prices to compete even harder with mainstream car manufacturers.

EU Trade Commissioner Catherine Ashton said: “This agreement is particularly important in the current economic climate, helping to fight the economic downturn and create new jobs.”

Apart from removing duties, another more controversial aspect of the deal could reduce South Korean prices by another Euro 300-to-500 per vehicle, said ACEA.

This is a “duty drawback” provision allowing South Korean manufacturers to reclaim duties paid on imported car parts and components from low-cost neighbouring countries such as China. ACEA fears this “creates unfair competition,” said a spokeswoman, who added: “in the current conditions that could be very damaging” for EU carmarkers.