K Car Sales Decline... Impact of Hyundai Certified Used Cars Also Noted

First Revenue Decline Expected Since 2018 Launch
Hyundai Motor's Aggressive Entry Announced... "This Year Won't Be Easy"

K Car, the largest direct used car platform in South Korea, is expected to experience a decline in sales for the first time since its launch in 2018. The growth of peer-to-peer transactions to reduce commission fees, coupled with Hyundai Motor Company and Kia entering the certified used car business, has dealt a blow to existing used car companies. In particular, concerns are rising that the performance of the used car industry will further deteriorate as Hyundai and Kia plan to actively expand their used car business starting this year.

According to financial information analysis firm FnGuide on the 13th, K Car's consensus sales forecast for last year was estimated at 2.0465 trillion KRW, a 6% decrease compared to the previous year. This marks the first decline in sales since its steady growth following its launch in 2018.

It is analyzed that the increased burden of car installment payments due to high interest rates and the preference for peer-to-peer transactions to reduce commission fees also had an impact. According to KaizU Data Research Institute, the actual number of used car transactions in South Korea last year was 2,363,327 units, a 2.0% increase from the previous year. However, transactions through used car dealers decreased by 2.1% to 1,054,947 units. The launch of Hyundai and Kia's certified used car business in October-November last year also added pressure. As waiting demand emerged for purchasing vehicles after checking prices from large corporations, transactions through K Car somewhat declined.

Profitability, however, is evaluated to have improved. The operating profit consensus forecast for last year was 60.5 billion KRW, expected to increase by 20%, which is attributed to an increased proportion of purchases of vehicles priced under 20 million KRW with high inventory turnover. Researcher Lee Jae-il of Eugene Investment & Securities explained, "As the domestic used car market shrinks, the proportion of sales through self-owned channels with lower purchase commissions has increased, and the proportion of purchases of vehicles priced under 20 million KRW with high inventory turnover has also risen."

The outlook for this year is not optimistic. First, new car sales, which serve as a supply base for the used car market volume, are expected to be sluggish. The domestic sales guidance for this year is projected at 704,000 units for Hyundai and 563,660 units for Kia, representing decreases of 7.6% and 6.0% respectively compared to last year. The expansion of Hyundai and Kia's used car business is also a burden. Hyundai has set a target of 15,000 used car sales this year and plans to start selling electric vehicles (EVs) from next month. The market share limit, previously set to coexist with existing companies, will be raised from 2.9% in April this year to 4.1% in April next year.

An industry insider said, "Although the impact of complete car manufacturers entering the used car market is not yet significant, this year they are expected to act more aggressively amid concerns over reduced new car sales, which will amplify the ripple effects."