Hyundai Motors Declares Entry into Used Car Market... Key Issues

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[Asia Economy Reporter Kiho Sung] Hyundai Motor Company’s announcement of its intention to enter the used car business has stirred the related industry. The government, which holds the key, has a positive outlook. Because of this, there are calls for discussions on anticipated issues such as price increases and monopolization related to large corporations entering the used car market.

According to political circles on the 12th, Kim Dong-wook, Executive Director of Hyundai Motor, appeared at the National Assembly’s Industry, Trade, Small and Medium Enterprises, and Venture Business Committee’s audit on the 8th and said, “We need to consider the necessity of finished car manufacturers entering the used car market to protect new car buyers.” Although there have been discussions about finished car manufacturers entering the used car trading market, this is the first time Hyundai Motor has officially expressed its intention to enter.

The used car sales business has an annual market size of about 20 trillion won, but since being designated as a small and medium enterprise suitable industry in 2013, new entries and expansions by large corporations have been restricted. However, since the expiration of the suitability designation early last year, only the government’s decision remains.

If large corporations enter the used car business, consumers can benefit from brand value enhancement and quality assurance through certification systems. Although the used car market is growing, consumer distrust remains high. According to a consumer perception survey conducted by the Korea Economic Research Institute in November last year, 76.4%?about three out of four people?believe the used car market is opaque, chaotic, and outdated. The main reasons cited were poor vehicle condition (49.4%) and false bait listings (25.3%). More than half, 51.6%, responded positively to large corporations entering the used car market.

The finished car industry argues that large corporations need to enter to make the market more transparent and advanced. Last year, domestic used car sales (2.24 million units) were only 1.3 times the new car sales (1.78 million units). In contrast, in the U.S., used car sales last year (40.81 million units) were 2.4 times new car sales (17.06 million units). Germany’s used car market size (7.19 million units) is also twice that of new cars (3.6 million units). Especially in advanced countries, large corporations participate and activate competition through strict quality control and services. In the U.S., it is common for finished car manufacturers to thoroughly inspect used cars about 5 to 6 years old and sell them as “certified used cars” with extended free warranty periods.

On the other hand, there are concerns that prices will rise. An automotive industry official said, “If large corporations enter the used car market, costs for certification of sales and purchases will inevitably occur,” adding, “They may also ‘manage’ prices by raising used car prices to protect brand value and promote new car sales.”

There are also concerns about large corporations monopolizing high-quality vehicles. Professor Lee Ho-geun of Daeduk University’s Department of Automotive Engineering explained, “Most used car supply comes from consumers selling their existing vehicles when purchasing new cars,” and added, “If finished car dealers sell new cars while simultaneously purchasing customers’ vehicles, high-quality vehicles may be concentrated with large corporations.”

Because of this, voices are emerging that discussions on anticipated problems related to large corporations entering the used car market should be actively conducted. The Ministry of SMEs and Startups, which holds decision-making authority, has currently recommended Hyundai Motor submit additional win-win measures. Professor Lee pointed out, “Even if large corporations enter the used car market, measures to protect the rights and interests of existing businesses are necessary,” and added, “Regulations to prevent excessive market share expansion in the early stages of large corporation entry seem necessary.”

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