"Online Used Car Sales Share Only 1.5% in 2020"
"Brand Power and Quality Expected to Enhance Trust and Increase Market Share"
[Asia Economy Reporter Yoo Hyun-seok] Hyundai Motor Company is expected to strengthen its online presence in the used car business. Since the online sales share in the used car market is still only 1-2%, it is analyzed that Hyundai can quickly expand its market share based on brand awareness and quality. The e-commerce sales share of the used car market, which is only 40,000 units annually, is also expected to increase.
According to the completed car industry on the 10th, Hyundai announced its used car business plan on the 7th. It will select only vehicles within 5 years or 100,000 km of its own brand that have passed quality inspections of about 200 items, the largest scale in Korea, and then sell them after a productization process comparable to new cars.
Hyundai is expected to develop its used car business online. Considering the costs of opening and operating offline stores, online has more advantages.
The key is the online platform. Hyundai will build an 'Integrated Used Car Information Portal (tentatively named Used Car Research Institute).' Through this, services such as ▲integrated information on used car performance and condition ▲appropriate price estimation ▲screening of false or bait listings will be provided. Along with this, indicators of the used car market such as ▲used car value index ▲actual transaction volume statistics ▲price trends by model ▲sales rankings by model ▲and trend reports that allow understanding of the current used car market situation will be offered. The sales channel will be operated mainly through an online virtual showroom based on a mobile application (app). In the virtual showroom, customers will be able to carry out the entire purchasing process from product search and comparison to quotation, contract, delivery, and shipping.
Another reason online is key is growth potential. The U.S. market research firm Frost & Sullivan estimated that the domestic used car market size was 39 trillion KRW in 2020. However, the online share was 590 billion KRW, accounting for only 1.5% of the total market.
The reason for the low online share compared to the entire used car market is trust. Since quality is important for used cars, consumers prefer offline over online. According to the Korea Consumer Federation, in 2020, 5,165 consumer damage cases related to used cars were reported to the 1,372 Consumer Counseling Center. Among them, 2,447 cases (47.4%) were related to poor used car performance and condition, indicating trust issues regarding performance.
However, the industry analyzes that if trust is supported, consumers can sufficiently purchase used cars online. Additionally, the activation of non-face-to-face transactions due to COVID-19 is an element expected to accelerate the online market. In particular, the industry expects Hyundai’s brand to help in terms of trust. An industry official said, "Online should now be seen as a major trend," adding, "In the case of used cars, consumers need confidence in product information to purchase online, and Hyundai’s brand can be seen as guaranteeing quality issues."
In fact, K Car, the number one online used car business, has grown based on its direct management used car (CPO) business model. As of the cumulative third quarter last year, it achieved sales of 1.4006 trillion KRW and operating profit of 56.9 billion KRW. Compared to the same period last year, sales increased by 42.05% and operating profit by 88.78%. Among these, the e-commerce share reached 37.6% (527 billion KRW). In the third quarter of 2020, it was 30.41% (299.8 billion KRW).
The industry expects Hyundai’s entry into the used car market to be an opportunity for consumers to purchase good vehicles. Professor Kim Pil-su of the Department of Automotive Studies at Daelim University said, "If used cars receive proper certification and evaluation, they can be chosen by consumers online as well," adding, "Since Hyundai is putting its brand on it, it will be a good opportunity for consumers to buy quality used cars."
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