The Unvarnished Truth of the World's 3rd Largest Car Producer... Late Opening of the Used Car Market

Major Corporations Likely to Be Allowed to Enter Used Car Market Within the Year
Automobile Industry Association: "Full Opening of Used Car Market Will Be a Win-Win-Win-Win Game"
"Beneficial for Consumers, OEMs, Dealers, and Parts Companies... Should Be Settled Quickly"

[Image source=Yonhap News]

[Asia Economy Reporters Kim Hyewon and Yoo Jehun] The entry of large corporations into the used car sales industry is coming into view. The Ministry of SMEs and Startups, the competent authority, plans to hold a deliberation committee next month to decide whether to designate the used car sales business as a livelihood-type suitable industry, while domestic complete car manufacturers such as Hyundai Motor, Kia, and Ssangyong Motor have begun reviewing entry into the business.

According to the automotive industry on the 8th, the Ministry of SMEs and Startups intends to hold a deliberation committee next month after coordinating opinions with stakeholders such as complete car manufacturers and used car sales cooperatives this month, aiming to settle the issue of large corporations entering the used car sales business. Although a win-win cooperation plan could be derived before the committee meeting, the industry consensus is that the possibility is low due to significant disagreements. ▶Related article on page 4

It has been reported that the Ministry of SMEs and Startups has settled on not re-designating the used car sales business as a livelihood-type suitable industry. Since the Win-Win Growth Committee, which played a preliminary review role, judged it as 'unsuitable' and public opinion is leaning toward allowing large corporations to enter, the deliberation committee has little justification to overturn this decision.

While domestic complete car manufacturers enhanced their competitiveness by ranking third globally in cumulative production for the first time in the first to third quarters of this year, the used car market has been regressing due to low quality, false listings, and unreasonable pricing structures, according to general consumer evaluations. Major complete car producing countries such as the United States, Japan, and Germany do not separate new car and used car sales channels. South Korea is the only country that stipulates that only used car dealers can exclusively operate used car retail businesses. If the deliberation committee, composed of private members, again decides to designate the used car sales business as a livelihood-type suitable industry, large complete car manufacturers such as Hyundai Motor and Kia will face restrictions on entering the used car market for another five years.

Some complete car companies are reportedly betting on the possibility that the path for large corporations to enter the used car sales business will open and have started building infrastructure. Hyundai Motor and Kia have actively stepped forward, aiming to reorganize the order of the used car market. Ssangyong Motor and other complete car manufacturers are also internally reviewing business feasibility.

In particular, Hyundai Motor and Kia are reportedly securing sites in the metropolitan area in preparation for market opening and are planning a cutting-edge used car transaction platform (Tower) equipped with an advanced IT system ready for immediate operation and capable of simple parts repairs.

◆"Full Opening of the Used Car Market is a '4 Win Game'"

Claims have emerged that the full opening of the used car market will be a 'win-win' for consumers, the complete car industry, as well as existing dealers and parts suppliers, among various stakeholders. Voices are growing to hasten market opening and establish a virtuous cycle in the used car ecosystem.

The Korea Automobile Industry Association (KAIA) held the 19th Automobile Industry Development Forum on the same day under the theme "Is the Used Car Market Okay as It Is?" In his opening remarks, KAIA Chairman Jung Manki stated, "Allowing complete car manufacturers to participate in the used car market can be a ‘4 win game’ where consumers, existing dealers, parts suppliers, and complete car manufacturers all benefit." He explained that advanced countries without exception do not regulate complete car manufacturers' participation in the used car market because it creates positive effects such as expanding consumer welfare, increasing business opportunities for used car dealers, enhancing competitiveness of complete car manufacturers, and expanding the market for parts suppliers.

As of last year, the domestic used car market recorded about 2.515 million transactions, 1.3 times the new car market (about 1.905 million). The total industry size is a huge market worth 22 trillion won, but government regulations have limited large corporations' participation.

Experts attending the forum pointed out that the disadvantages of the current used car market, where large corporations' participation is restricted, are directly passed on to consumers. Kwak Eun-kyung, Secretary General of Consumer Watch, said, "There are no competitive and trustworthy companies in the current used car market, resulting in persistent low quality and elastic pricing, with consumers bearing the brunt. Currently, imported complete car manufacturers trade used cars, but only domestic complete car manufacturers are restricted from market entry, which discriminates against ordinary citizens using domestic cars."

There was also analysis that the participation of the complete car industry in the market could produce benefits for all. Consumers can expect improved transaction reliability; dealers can expand new business opportunities due to increased transaction volume; the parts industry can see market expansion due to increased demand for genuine parts; and the complete car industry can secure competitiveness in new cars as a secondary effect.

Moon Seung, CEO of Daseong Co., Ltd. and Chairman of the Korea GM Association, said, "Although parts suppliers' management difficulties may not be fully resolved by market opening, the expansion of genuine parts use, increased new car sales, and added value from used car exports are expected to bring considerable ripple effects to the parts industry."

As the conclusion regarding the opening of the used car market is delayed, consumer damages caused by the distorted market structure continue to increase, prompting calls for swift decisions from the Ministry of SMEs and Startups and related authorities. In fact, in May, a consumer who suffered damage from false used car listings took extreme measures, sparking public outrage.

Im Gisang, President of the Automobile Citizens' Coalition, said, "Despite repeated calls and signature campaigns from civil society to open the market, the Ministry of SMEs and Startups has failed to reach a conclusion even after 1 year and 6 months from the legal deadline and 2 years and 9 months from the start of discussions," urging full opening within this year.

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