Frontline Car Dealerships "Domestic Sales Decline Inevitable Due to Reduced Tax Benefits, Alternatives Needed"

[Asia Economy Reporter Seong Giho] There are concerns that the sales decline effect felt at frontline dealerships due to the government's reduction of automobile tax benefits is greater than expected. The Korea Automobile Manufacturers Association (KAMA) stated that a slowdown in domestic car sales in the second half of the year is inevitable and that it will soon submit proposals to the government to overcome this.

KAMA conducted a "Car Marketing Strategy Interview Survey" from July 21 to August 5 targeting domestic finished car manufacturers' dealerships and sales headquarters to investigate domestic market trends and industry marketing strategies and to listen to difficulties, announcing the results on the 14th.

On-site reports indicated that growth was maintained until July due to the continued effect of new cars and the clearance of first-half contracts, but from August onward, the impact of reduced tax benefits became more pronounced, reversing the trend into a decline. In particular, despite a 5.9% increase in the first half, the second half of this year is expected to stagnate or decline, with annual domestic sales projected to remain at last year's level (1.52 million units). The biggest cause is pointed out as the reduction in the individual consumption tax exemption rate and the expiration of support for replacing old vehicles, which will place a heavy burden on the domestic market in the second half.

Regarding electric vehicles, Tesla sales surged in the first half, while domestic electric vehicle sales were relatively sluggish. It was noted that light commercial vehicles, mainly used by self-employed and small business owners, currently do not meet the heightened safety standards, and meeting these standards would incur additional costs, making profitability difficult and possibly leading to discontinuation.

Dealerships and sales headquarters reported that due to the end of the 70% individual consumption tax exemption and the expiration of the old vehicle replacement support policy from July, some dealerships have seen a decrease in consumer visits and new contracts, emphasizing the need to strengthen domestic market activation policies in the second half.

They also pointed out the need to expand charging infrastructure and secure dedicated stores specializing exclusively in electric vehicles to promote sales of eco-friendly vehicles such as EVs. Additionally, there was an opinion that it is necessary to strategically revitalize the certified used car industry at the industrial ecosystem level to manage the entire lifecycle of vehicles, enhance consumer benefits, and ensure vehicle safety.

Jung Manki, president of KAMA, said, "Concerns about domestic demand contraction due to COVID-19 are becoming a reality from August," and emphasized, "Government measures to stimulate domestic demand, such as a 70% reduction in individual consumption tax on automobiles, are necessary until global demand fully recovers."

Based on the interview survey results, KAMA proposed to the government the following: ▲ expanding the individual consumption tax exemption rate in the second half and reviewing acquisition tax exemptions for commercial vehicles ▲ strengthening promotion and guidance on government policies such as early scrappage subsidies for old vehicles ▲ early establishment of eco-friendly vehicle infrastructure such as EV charging stations ▲ fostering and supporting education for professionals in EV sales and marketing ▲ preparing supplementary budgets and securing local government funding to ensure no disruption in commercial EV sales in the second half, and flexible use of funds (from passenger cars to commercial vehicles) ▲ allowing domestic finished car manufacturers to operate certified used car businesses. These proposals will be submitted to relevant government departments soon.

This content was produced with the assistance of AI translation services.