3 Catalysts to Help the Used Car Sales to Touch Nearly 3 Mn Units By 2026 in South Korea; Will The Growth Sustain? Ken Research

 Covid-19 pandemic along with South Korean Government nearly 1 Tn Won ($1 Bn) plan to develop autonomous vehicle technologies led South Korea Used Car Market Basis Volume nearly 3 Mn units in 2021, as per findings released by Ken Research.

1. Impact on Used Car Sales in the country due to Covid-19: Is the growth sustainable?

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Multiple trends in the used cars industry were observed since the onset of Covid-19.  Both new and used car sales were witnessing negative growth rates in 2018 and 2019. The pandemic led to an increase in the sales of cars – both new and used, which led to positive growth rates in used car sales. Sales of used cars picked up from March as people were avoiding public transport. Consequently, buying second hand car was the most economical and safe option. The domestic production and sales rebounded in June by over 40% YoY to 175,000 units.

2. South Korea will spend nearly 1 Tn Won ($1 Bn) to develop autonomous vehicle technologies; Giving ample opportunities for the industry to grow.

South Korea will build related infrastructure with a goal of a commercial rollout of a Level 4 self-driving car by 2027 and spend nearly 1 Tn Won ($1 Bn) to develop autonomous vehicle technologies. The Korean government will finance 84 related projects in five areas: new vehicle convergence technology, new ICT convergence technology, new road traffic convergence technology, service creation, and the establishment of an industrial ecosystem.

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3. Social Media Platform is Widely Used for Used Car Sales as it Offers Free Ads for Dealers and Customers; Helping the Used Car Market GTV to Reach nearly 35 Tn Won.

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• Partnership with online platforms to supply used cars to customers. Online portals follow lead generation process, sellers list cars and company facilitate the overall transaction of acquiring the vehicle. Other Services include providing car valuation and quality checks.
• Car dealers use blogs to generate traffic to their website from search engine results pages. They often put-up educational content related to cars maintenance, help guides, knowledge material in order to create a brand presence.
• Unlike online portals and marketplaces, social media provides an opportunity to dealers to advertise their cars for free. This platform is also used by individuals involved in C2C Also, major dealerships use this platform to announce promotional offers and local events.

South Korea Used Car Market is currently in its Growing Stage Owing to low unemployment rate & increasing need for personal vehicle: Ken Research

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1. The Used Car Industry in South Korea is growing at CAGR of 1% Basis Volume, with Brands Competing Intensely on Value Added Services Offered

The South Korea Used Car market is in the Maturity stage. Easy availability of used car loans by various banks & NBFCs have led to the amplification of pre-owned car sales. Players such as Mr. Garage are providing vital information for the purchase of used cars by using AI and Machine Learning Tools. Talking about the challenges, Consumer distrust is quite high in the market. More than 10,000 consumer complaints are received every year.

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Hyundai Motor, monopolizes more than 83% of the new car market. Due to fierce competition, if Hyundai Motor enters the used car market, it is expected that at least 50% of the existing used car dealers and employees will crater. Furthermore, intense competition with various authorized dealerships, multi-brand outlets & independent (standalone as well as clustered dealers) operating in the industry is expected in the upcoming years. Authorized Dealerships compete on the basis of parameters such as warranty, inspection, quality checks, and value-added services. Entry of various online platforms and marketplaces competing is also expected to increase user base, engagement & dealers on-board. The way forward is dependent on Leveraging technologies such as Artificial Intelligence & Virtual Reality to enhance user browsing experience. Moreover, growth of transactional marketplaces offering one-stop solutions to buyers & connecting dealers, financing and insurance companies.

2. Banks, NBFCs and Captive NBFCs Providing Major Credit Lending Facilities in South Korea’s Used Car Financing Industry

South Korea’s Used Car market ecosystem provides a wide range of financing options for the customers. For instance, most organized market players liaise with banks to provide In-House loan to customers and with the help of In-House financing, customers can complete car financing under one roof which saves them the time & energy. Alternatively, customers can directly take an auto loan from bank. Most banks offer a financing period from 2 to 6 years. When it comes to NBFC’s like Roof funding & Kamco, most of them provide finance for used cars & have partnerships with major brands.

3. Lack of Regulations and Insufficient Job Requirements Leading to Low-Competition Entry for Sales Personnel and Market Inefficiency

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The used car market in Korea is less regulated compared to other advanced economies. This has led to a proliferation of small-time dealers who do not possess enough skills/knowledge about the cars and secondly, are not able to scale the shops to a greater extent. Apart from this, insufficient job requirements can also cause hindrances in the future growth of the industry. For instance, anyone who wants to engage in the used car sales business in Korea can obtain a salesperson's certificate only after completing online education. Moreover, online training takes 8 hours for introductory training for new employees and 4 hours for maintenance training for existing traders. Other than that, there is no other qualification system.

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South Korea Used Car Market