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Carmakers gearing up to reshape used car market

Used car sales have soared to become a 20 trillion-won market, about twice bigger the market for new cars

Used cars are parked at a lot in Seoul. (Yonhap)
Used cars are parked at a lot in Seoul. (Yonhap)

After the Ministry of SMEs and Startups greenlighted the large automotive companies’ entry to the secondhand car market, carmakers here have been quick to announce their plans to launch secondhand services within the year. 

Their entry could bring huge change to the used car market here, which has been protected by the government until recently for microenterprises.

Lotte Rental, which operates a rent-a-car business, announced Friday that it would also enter the used car market in the second half of this year, selling vehicles it had rented out for 3 to 5 years. 

Hyundai Motor will be the first to launch the used car service, as the carmaker made it official on Mar. 7 that it would enter the market by selling only the high-quality certified used cars that have been driven less than 100,000 kilometers and owned for less than five years. 

Hyundai said it would aim to sell 50,000 used cars by the year-end.

For customer satisfaction, Hyundai said all cars to be sold will go through some 200 performance tests and maintenance services provided by the automaker and be given the “Certified Pre-Owned” mark.

Sales will be conducted via mobile application and virtual showroom. It has also set the limit of its market share to 2.5 percent this year, to 3.6 percent next year, and to 5.1 percent in 2024, as part of its efforts to coexist with small and mid-sized used car dealerships.

Some market insiders said that with large carmakers establishing high-standard and detailed criteria to evaluate and test secondhand cars, the market will gain more trust and credibility.

“When a company conducts a quality test based on some 200 criteria, even minor defects will be discovered, which will alleviate widespread perception that secondhand cars are of poor quality,” said an industry insider. 

With online-based sales channel attracting the users, the market is forecasting the customer satisfaction will be also boosted, which the other small and mid-sized used car dealerships will also benefit from. 

According to Hyundai Motor, it will offer high-resolution photos to help customers evaluate the car they want to purchase. The carmaker plans to offer a virtual test-drive so the potential buyers can hear the engine sound. At an unmanned delivery tower, which will be set up across the country, customers can simply test drive the vehicle there and purchase the car instantly via app. 

“With large companies entering the secondhand car business, there will be a lot of advanced, efficient systems introduced to the market, which will be shared by other market players and increase the overall consumer trust to enlarge the pie,” said Lee Ho-geun, professor of automotive engineering from Daeduk University. 

According to the industry, the country’s total transaction volume of secondhand cars is around 2.8 million annually. Of them, some 1.3 million cars are sold via dealerships. 

Korea’s used car market was worth 20 trillion won in terms of the transaction amount, about twice bigger in size than the market for new cars. 

Last week, a deliberation committee under the Ministry of SMEs and Startups decided not to designate secondhand vehicles sales as one of the “livelihood businesses” that must be reserved for small enterprises and startups. The used car business was first included in 2013 in the category from which large companies are banned.

Last year, Hyundai and Kia registered for B2C used car business licenses, while the government put a halt to their business launch amid strong objection from existing players, mostly small and mid-sized dealerships.

By Kim Da-sol (ddd@heraldcorp.com)
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