Used Car Market Entry by Automakers: Will the Turbulent Market Be Cleansed?

Domestic Complete Vehicle Manufacturers Association Declares Entry into Used Car Market Next Year
Used Car Fraud Continues as Government Hesitates, Leading to Reverse Discrimination Against Imported Cars

Used Car Market in Janghanpyeong, Dongdaemun-gu, Seoul
Photo by Yonhap News

[Asia Economy Reporter Changhwan Lee] The domestic complete car industry has declared its entry into the used car market. As the government has repeatedly delayed its decision on whether to grant permission for the used car business, the industry has decided to proceed with entering the used car business starting January next year.

On the 23rd, Chung Manki, Chairman of the Korea Automobile Manufacturers Association and the Korea Industrial Federation Forum, held a forum at the Automobile Hall in Seocho-gu, Seoul, and stated, "The domestic complete car industry will begin the used car business from January 2022 by carrying out necessary procedures such as business registration and securing physical space for the used car business."

The Korea Automobile Manufacturers Association is an organization with member companies including domestic complete car manufacturers such as Hyundai Motor, Kia, GM Korea, Renault Samsung Motors, and Ssangyong Motor.

Chairman Chung emphasized that the decision reflects the consolidated opinions of complete car manufacturers, strong consumer demand, the trend of manufacturing industries moving toward services, and the need to secure competitiveness throughout the entire life cycle of automobiles.

He explained, "Considering the continuous entry demands from consumer groups and others, and the recent expansion of competition among global companies to the entire life cycle of automobiles, complete car manufacturers have judged that they can no longer delay entering the used car market, which is why this declaration was made today."

Used Car Market Still Turbulent, Consumer Damage Continues

The used car sales business was blocked from entry by domestic complete car companies after being designated as a ‘small and medium enterprise suitable industry’ by the Win-Win Growth Committee in 2013, but the deadline expired in early 2019, opening the door for entry. Later, at the end of 2019, the Win-Win Growth Committee submitted an opinion to the government that the used car sales business was 'unsuitable' as a livelihood-type suitable industry for small business owners, making entry seem imminent.

However, the used car industry opposed this and requested the Ministry of SMEs and Startups to designate it as a livelihood-type suitable industry, causing discussions to return to square one. According to regulations, the Ministry of SMEs and Startups should have made a final decision on the livelihood-type suitable industry last year, but no conclusion has been reached so far.

As the government's decision is delayed, concerns are raised that innocent consumers are suffering greater damage. According to statistics from the 1372 Consumer Counseling Center operated by the Fair Trade Commission, from January 1, 2018, to last year, the number of complaints related to used car brokerage and sales totaled 21,662 cases, ranking fifth among all product categories.

Many consumers also want large corporations to enter the used car market. According to a 'Consumer Awareness Survey on the Used Car Sales Market' conducted by the Federation of Korean Industries in November last year targeting 1,000 men and women aged 19 and over nationwide, 80.5% of respondents said that Korea’s used car market is opaque and turbulent due to false listings and odometer tampering.

Additionally, 63.4% supported the entry of large complete car manufacturers into the used car sales market, citing reasons such as 'improvement of performance and quality' and 'resolution of issues like false listings.'

The Federation of Korean Industries pointed out that government entry regulations intended to protect the used car industry ultimately infringe on consumer rights.

Citizen Groups Push for Audit by Board of Audit and Inspection Amid Government’s Stalled Discussions on Complete Car Manufacturers’ Entry into Used Car Market

In response, the civic group Automobile Citizens’ Union recently announced that it has recruited 300 petitioners to apply for a national audit against the Ministry of SMEs and Startups, which has delayed its decision on opening the used car market for three years. The push for an audit by the Board of Audit and Inspection aims to hold the Ministry accountable for failing to decide on the opening of the used car market within the legal deadline.

Im Gisang, head of the Automobile Citizens’ Union, said, "With the Ministry of SMEs and Startups delaying its decision for a long time, the domestic complete car industry should no longer hesitate to enter the used car market. To protect the rights and expand the choices of used car consumers who have repeatedly suffered damages in the used car market so far, the domestic complete car industry must immediately enter the used car market."

While domestic complete car companies have been blocked from entering the used car market, major imported car companies have entered the domestic used car market several years ago and achieved great success, leading to ongoing claims of reverse discrimination.

For example, BMW’s certified used car sales jumped from 3,820 units in 2014 to 11,687 units in 2018, and Mercedes-Benz increased from 550 units to 4,640 units during the same period. Audi’s sales rose from zero to 4,582 units, and Jaguar Land Rover’s from 61 units to 2,677 units. Certified used car sales are estimated to have increased even more this year.