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Free Trade deal trips Holden

2014 Holden Captiva V6 SUV.

ONE of Holden's top selling family cars has unwittingly been disadvantaged by special conditions in the Free Trade Agreement with South Korea that were intended to help the struggling company -- in effect adding up $1500 to the cost of one of its most popular vehicles.

Under the proposal, the removal of the 5 per cent import tariff will initially not apply to vehicles with six-cylinder engines -- a move the Federal Government says is designed to protect local car makers as they wind-down their manufacturing facilities.

But Holden is the biggest importer of V6 cars from South Korea. Last year Holden sold more than 10,000 V6-powered Captiva SUVs and it was the company's third-biggest selling model behind the locally-made Commodore and Cruze.

The policy faux-pas is likely to hurt Holden more than the South Korean brands. Hyundai no longer imports a V6 car and its sister company Kia sells only a small number of V6 versions of its Sorento SUV and Carnival people mover.

The Captiva V6 typically sells for between $30,000 and $40,000 and the 5 per cent import tariff added to the wholesale cost of the car is estimated to be up to $1500 on dearer models.

Despite the unexpected setback Holden insists it is happy with the Free Trade Agreement; seven of its 11 vehicles come from South Korea and two of the 11 come from Thailand, which has had a Free Trade Agreement with Australia since 2010.

A statement from Holden said: "Holden imports several car models and various parts from (South) Korea and exports engines from our Port Melbourne plant. While we have only just started analysing the details of the FTA, our first look suggests it will be good for our business."

While the removal of the 5 per cent import tariff on cars from South Korea is expected to start from next year, six-cylinder and V8 cars will be excluded from the free trade deal for a further three years until Toyota, Holden and Ford shut their Australian factories.

All three local manufacturers currently produce six-cylinder cars, although Toyota, Ford and Holden also produce four-cylinder vehicles and Ford and Holden also produce V8s. However, the exemption of V8 vehicles in the Free Trade Agreement is unusual given that there are no V8 cars made in South Korea for right-hand-drive markets such as Australia.

This reporter is on Twitter: @JoshuaDowling