The government has given the green light for large conglomerates to enter the used car market, with major automakers preparing to launch their own businesses selling pre-owned vehicles.
Hyundai Motor is speeding up its entry into the business by reorganizing related affiliates and setting the direction of its used car business. In January, Hyundai Motor completed business registration for automobile sales in Yongin, Gyeonggi Province. Affiliate Kia Corp. has also applied for a used car business registration in Jeongeup, North Jeolla Province.
Although major obstacles that hindered conglomerates from entering the used car market have disappeared, it is difficult to enter the business right away as the Ministry of SMEs and Startups issued a recommendation to temporarily suspend the business launch in January after the used car industry filed for a "business adjustment" process, asking the government to intervene to prevent large companies from entering the market.
"The entry of large automakers into the used car business will only be allowed after the results of the business adjustment committee come out," said an official at a major carmaker, who declined to be named.
SsangYong Motor also plans to start a used car business as soon as possible, but the automaker is undergoing a corporate rehabilitation process, which could delay the launch date. GM Korea and Renault Korea are also reviewing business plans to enter the used car market.
"We plan to enter the used car business, but we will first need to resolve our M&A issues," a SsangYong official said.
Other conglomerates unrelated to the automotive industry are seeking to jump into the used car market as well. Lotte Rental announced that it plans to enter the used car B2C market in the second half of this year.
Lotte Rental is the country's leading car rental company and already owns a used vehicle bidding service called Lotte Auto Auction. It decided to expand its online pre-owned vehicle business. SK is also highly likely to enter the used car market as it operates SK Rent-a-Car.
"We currently sell used cars only via B2B auctioning through our affiliate Lotte Auto Auction handling around 50,000 vehicles a year. We are seeking to enter the B2C used car market by giving customers a chance to purchase the used car of their choice both online and offline," a Lotte Rental official said. "Profitability is better in the B2C market so we are expecting an increase in operating profit."
The domestic used car market has been criticized for selling low-quality products due to a lack of ample information available to buyers, while deceptive and bait selling were chronic problems in the market.
Consumers fell victim to the dishonest tactics of some used car sellers. However, once large corporations enter the used car market, expectations are high that the levels of transparency and quality will improve.
"With the decision to open the used car market, companies that provide transparent information on used cars may appear, and consumers can conveniently obtain vehicle performance information and price information," Consumer Watch said in a statement. "The reliability of the used car market, where there was a high level of distrust in used car information, will be secured and the range of consumer choices will expand."
Hyundai Motor unveiled its used car business plans and announced that it would provide differentiated customer service that has not been offered so far in the market by benchmarking high-quality certified pre-owned cars and advanced overseas markets.
Hyundai Motor plans to sell only its own brand of pre-owned vehicles that were driven less than five years and have less than 100,000 kilometers on the odometer. Vehicles that do not meet those requirements will be auctioned off to used car dealers.
The certified vehicles will undergo inspections with a checklist consisting of 200 key areas for evaluation and will go on sale only after passing all parts of the inspection. Hyundai Motor plans to build a used car integrated information portal that collects and analyzes information related to pre-owned vehicles and will make the data available to the public.
Through the portal, services such as integrated information on the performance and condition of used cars, calculations of fair prices and screening of vehicle results will be provided.
The company plans to attain a 2.5 percent share of the used car market initially this year, then 3.6 percent in 2023 and 5.1 percent by 2024.
"Hyundai Motor and Kia aim to start the used car business in the first half of this year at the earliest, or within this year at the latest." an automobile industry official said.
The Ministry of SMEs and Startups held a deliberation committee meeting and decided to allow conglomerates to enter the used car business. This made it possible for large companies to enter the used car market. With this, the controversy of large carmakers entering the market has come to an end after more than three years.
Fiercer competition
However, existing used car dealers are not welcoming the move as they expect the competition to become fiercer in an already cutthroat market, resulting in a drastic drop in sales for them.
"The income of small sellers is expected to decrease by 20 to 30 percent within two to three years as highly profitable used cars that have been produced for one to three years will inevitably flock to large companies," an official from the Korea Federation of Used Car Dealers Association said.
