[Click to Buy a Car] ① Used Car Market Revitalized... Is the Era of Domestic Automaker Online Sales Beginning?

Used Car Dealers' Online Sales Share '↑'
Completed Car Manufacturers 'Watchful' of Dealership Relations
"Used Car Online Activation Will Also Affect New Cars"

The era of online car sales is opening. Due to COVID-19, the number of consumers using online platforms has increased, and used car companies have strengthened vehicle inspections and warranties to enhance trust, leading to a rapid rise in online sales.

Domestic automakers have been passive about online sales due to relationships with dealerships and other factors. However, as some automakers plan to enter the used car market centered on online platforms, new car online sales are also expected to increase. This is because the trust built through online sales in the used car market can influence new car sales as well.

According to statistics compiled by the Ministry of Land, Infrastructure and Transport, the number of vehicle ownership transfers last year was 2,527,819 units. New cars accounted for 1,685,028 units. The used car market is 1.5 times larger than the new car market. Market research firm Frost & Sullivan estimates that the size of the domestic used car market last year reached 44 trillion won.

The used car market is often called a "lemon market" (a market with many low-quality products). There are many vehicles with false or bait listings and poor performance. As a result, it has been common for people to visit in person and carefully inspect each vehicle before purchasing.

The Korea Consumer Agency reported that from 2018 to March 2021, there were 455 consumer damage cases related to used cars. Vehicle performance and condition defects accounted for 207 cases (45.5%), the highest number. This was followed by insufficient disclosure of accident information and flood-damaged vehicles with 52 cases (11.3%), and information discrepancies with 11 cases (2.4%).

However, recently, online sales have been increasing. In the case of used cars, transactions are divided into direct transactions and brokerage transactions. Direct transactions occur when a used car company directly purchases vehicles and sells them to consumers. Brokerage involves the company connecting sellers and buyers.

The top direct transaction company, K Car, had an online sales ratio of 56.9% in the first quarter. This is a 6.5 percentage point increase from 50.4% in the fourth quarter of last year. Also, AutoPlus, the second-ranked company operating Reborn Car, surpassed 51% online sales ratio last year.

The increase in online sales is analyzed to be due to COVID-19 and efforts by used car companies to enhance trust. As people preferred non-face-to-face activities over face-to-face due to COVID-19, online purchases increased. Additionally, companies providing used car sales services have implemented various systems and measures to prevent false listings, raising trust. A K Car representative said, "During the pandemic, the number of consumers purchasing online rather than visiting stores directly has increased."

On the other hand, domestic automakers still consider online sales as an "event." While vehicle quotes can be viewed online, actual purchases require meeting with dealership dealers. Simply put, online sales sites serve as a connection channel to dealership dealers. Only Hyundai Motor Group and Korea GM sell some models online, such as Casper (Hyundai), and GMC Sierra, Bolt EV, and Tahoe (Korea GM).

KG Mobility has sold some models in collaboration with home shopping and online shopping malls (11st). However, currently, they sell cars only at offline stores. Renault Korea is in a similar situation. The only online sales case was the 2020 XM3 Online Special Edition.

The reason they hesitate to sell online is due to relationships with dealerships or dealer companies. An industry insider said, "From the dealership's perspective, if online sales increase, their position diminishes," and "Automakers are cautious about dealerships."

However, as Hyundai Motor, Kia, and KG Mobility also enter the used car market, the possibility of expanding new car sales through online channels is high. For used cars, confidence in product information is necessary to purchase online. From the consumer's perspective, they may perceive that large corporate brands guarantee the quality of used cars.

Hyundai Motor and Kia plan to build an integrated used car information portal to resolve information asymmetry in the market. Used car transactions will also be operated mainly through a 'one-stop buy and sell' system via online sites and apps.

Kim Byung-soo, a researcher at Shinhan Financial Investment, said, "Hyundai Motor's used car business plan is 'online-centered,' 'certified used cars,' and 'building a public interest used car information portal,'" adding, "'Online-centered' can increase consumer trust in online used car transactions."

Professor Kim Pil-soo of Daelim University said, "The used car market is not an area for union involvement," and "If trust is increased through certified used cars, this can spread to new cars as well." He added, "If this happens, it can justify buying new cars online, leading to a chain effect."

It is analyzed that once the perception that cars are products bought and sold online is established through online used car transactions, more people will buy new cars online in the future.