"'Used Car Debate' Final Countdown This Week... 'Length of Grace Period Is Key'"

The Korea Automobile Dealers Association held a rally near the National Palace Museum in Jongno-gu, Seoul, on the 24th of last month, opposing the entry of large corporations into the used car market. Photo by Moon Honam munonam@

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[Asia Economy Reporter Kim Bo-kyung] The government will decide within this week whether Hyundai and Kia Motors can enter the used car sales business. The existing used car industry is closely watching whether the government will grant a grace period of several years, considering the damage caused by large corporations entering the market. Civic groups have demanded the prompt participation of large corporations, stating, "There should be no more sacrifices from consumers."

According to the Ministry of SMEs and Startups on the 25th, the ministry plans to hold a business adjustment committee meeting this week to reach a conclusion on the business adjustment case related to Hyundai and Kia Motors' entry into the used car market.

Earlier, after the used car organizations submitted a business adjustment application in January, two rounds of voluntary adjustments between the parties and four rounds of voluntary business adjustment council meetings involving private members were held.

However, as the gap between the two sides' positions did not narrow and discussions reached a stalemate, the Ministry of SMEs and Startups expressed its intention to put an end to the used car controversy by holding the first business adjustment committee meeting this week.

The committee will include a total of 10 members, including the Director of the Small Business Policy Office at the Ministry of SMEs and Startups, representatives from the Ministry of Trade, Industry and Energy, the Fair Trade Commission, private experts, and industry stakeholders.

A ministry official explained, "When a business adjustment application is submitted, most cases are resolved through agreements during the voluntary adjustment process," but added, "In the case of used car sales, efforts were made to reach an agreement through voluntary adjustment, but both sides remain at an impasse."

He said, "If voluntary adjustment fails, the committee will hold a meeting to make recommendations, which large corporations must follow," adding, "The committee will discuss multiple proposals and derive the most reasonable recommendation."

He further anticipated, "The recommendation will likely be a compromise that balances the positions of large and small-medium enterprises at an appropriate level," and "It will be difficult to take an extreme stance favoring either side."

If a large corporation fails to comply with the business adjustment recommendation, it may face imprisonment of up to two years or a fine of up to 150 million won.

[Image source=Yonhap News]

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The used car industry expressed bewilderment at the Ministry of SMEs and Startups' decision. They voiced concerns about a 'hasty review,' suggesting that the government is rushing to conclude the used car controversy ahead of a regime change.

An industry representative criticized, "The law stipulates that the review must be completed within one year after the business adjustment application date, but the ministry unilaterally notified that it would conclude the matter in the first review."

He added, "The key issue is how much grace period will be granted before large corporations enter, to minimize damage to small businesses and allow them to build competitiveness."

The used car industry is demanding that large corporations like Hyundai and Kia Motors delay the start of their business by 2 to 3 years and restrict purchases and sales for up to 3 years thereafter, effectively requesting a maximum grace period of 6 years.

According to the Act on the Promotion of Mutual Growth between Large and Small Enterprises, the committee can recommend delaying the timing of acquisition, commencement, or expansion of large corporations within 3 years, or reducing production items, quantities, and facilities. Subsequently, the Minister of SMEs and Startups can extend this period once within 3 years.

Meanwhile, civic groups advocating for the opening of the used car market argue that large corporations should be allowed to enter as soon as possible to reduce consumer harm.

Lim Ki-sang, head of the Automobile Citizens' Coalition, emphasized, "The Ministry of SMEs and Startups should present a win-win plan for consumers, not just for the industry," and added, "To prevent information asymmetry and consumer distrust and to modernize the market, barriers to large corporations' entry must be removed."

He predicted, "Just as traditional markets did not all close when large supermarkets appeared, the used car market will be legitimized, and false or bait products will disappear to meet consumer expectations."

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