Consumers Outraged by Illegal Used Car Fraud... Government and Used Car Industry Turn a Blind Eye

Resistance from Used Car Industry Demanding New Car Sales Rights Amid Complete Vehicle Used Car Market Entry
Used Car Market Grows Annually, but Consumer Harm Also Increases

[Asia Economy Reporter Changhwan Lee] As domestic automakers' entry into the used car market faces the risk of collapse once again, criticism is emerging that the government and political circles are protecting the interests of the used car industry while neglecting the rights and interests of the actual consumers, the public.

The paradox of regulation, where excessive regulations intended to nurture domestic small and medium-sized enterprises (SMEs) end up harming large corporations, SMEs, and consumers alike while only foreign companies reap the benefits, is also appearing in the automotive industry.

On the 31st, the Used Car Sales Industry Development Council's failure to reach a final agreement on the entry of automakers into the used car market is attributed to the used car industry's protectionism and the government's evasion of responsibility.

The council reached a broad agreement on automakers entering the used car market, but ultimately stumbled at the last minute over the new car sales rights demanded by the used car companies.

Used car companies argued that as a measure for coexistence, automakers should be granted new car sales rights equivalent to the number of used cars they sell, but this was a demand that automakers could not realistically accept. Granting new car sales rights to the used car industry could also lead to job issues for new car dealers (salespersons), which is another problem.

As the coexistence agreement faces the risk of collapse again, concerns are raised that consumer damage will inevitably increase. According to the Ministry of Land, Infrastructure and Transport, the number of used car transactions in South Korea reached a record high of 3.87 million last year.

The used car market has grown to be a massive market, about 1.3 times the size of the new car market, but the quality of products and services remains low, and illegal transactions such as fraudulent sales frequently occur, causing the damage to fall squarely on the public.

According to statistics from the 1372 Consumer Counseling Center operated by the Fair Trade Commission, from January 1, 2018, to last year, there were a total of 21,662 complaints related to used car brokerage and sales, ranking fifth among all product categories.

False Listings Persist in the Used Car Market, Outdated Market Structure

The reason consumers have high dissatisfaction with the used car market is that illegal activities and fraud, such as manipulating the actual performance of vehicles to sell them falsely, frequently occur, and the market structure is so outdated that consumers sometimes face confinement and threats during the purchase process.

Consumers believe the used car market should be opened up to increase market transparency. According to a consumer perception survey on the used car market by the Korea Economic Research Institute, 76.4% of domestic consumers perceive the domestic used car market as opaque, chaotic, and outdated. More than half of the respondents, 51.6%, responded positively to the entry of large corporations into the used car market.

Despite consumer demands, the main reason for the delay in opening the used car market is the Ministry of SMEs and Startups, the responsible department, evading responsibility. In February 2019, the Win-Win Growth Committee removed used car sales from the list of industries suitable for SMEs, meaning the Ministry of SMEs and Startups only needs to decide whether to allow large corporations to enter the used car market, but even after more than two years, it has been delaying the decision under the pretext of protecting the used car industry.

Ultimately, consumers bear the damage while foreign large corporations that entered the used car market early reap the benefits. For example, BMW's certified used car sales jumped from 6,900 units in 2016 to 11,687 units in 2018, and Mercedes-Benz increased from 2,635 units to 4,640 units during the same period.

This is a paradox of regulation seen in other industries as well. A representative case is the SI (System Integration) industry. When the government restricted domestic large SI companies affiliated with large corporations from participating in IT projects ordered by public institutions to protect SMEs in the past, foreign companies like IBM and HP took over the work. In the LED (Light Emitting Diode) industry, foreign companies such as Philips dominated the market due to government restrictions on large corporations' participation.

A representative from the automotive-related civic group, the Transportation Solidarity, said, "Stakeholders insist on their own positions rather than protecting consumers, resulting in repeated consumer damage in the market," and emphasized, "From the perspective of consumer protection, the used car market should be fully opened immediately."

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