Hyundai Motor to take 1st crack at Korea’s used car market

South Korea’s top automaker Hyundai Motor Co. is entering the country’s used car market, whose entry by big companies has long been denied to protect smaller secondhand car dealers.

Hyundai Motor Group, which owns Korea’s two largest automaking companies – Hyundai and Kia Corp. – will start selling secondhand vehicles in October, people familiar with the matter said on Monday.

“Large-scale marketing efforts are in the works for the October launch,” said an industry source.

Hyundai Motor declined to confirm the October launch, although the carmaker officially declared its advance into the domestic used car market in March 2022.

If successful, it would mark the first time for a Korean carmaker affiliated with a big conglomerate to enter the local used car market.

Last year, Hyundai Motor and Korea’s No. 1 car rental firm Lotte Rental Co. said they will enter the domestic used car market, currently estimated at 30 trillion won ($23 billion) in terms of annual transactions – double the size of the new car market.

The government has for years banned big companies from selling secondhand vehicles, citing the need to protect smaller used car dealers. But the Ministry of SMEs and Startups recently decided to allow them to join the market, with some conditions attached, such as limiting their market share, to create a level playing field.

HGH-QUALITY CERTIFIED USED CARS

Hyundai plans to sell only high-quality certified secondhand cars that have traveled less than 100,000 kilometers over up to five years. Such cars will also undergo rigorous 200 quality tests before heading to a secondhand car market, the company said.

Hyundai plans to limit its market share to 4.1% as part of its efforts to protect existing smaller used car-selling companies.

Separately, the company plans to create a used car information web portal to provide customers with data such as car performance, accident histories and flood damages.

Korea’s secondhand car market, a battleground among smaller car dealers since 2013, has been sluggish in recent years due to the COVID-19 pandemic.

Buyer sentiment has also cooled due to worsening economic conditions and elevated interest rates, which increased consumers' auto loans.

SALES VIA ONLINE PLATFORM

Hyundai is said to be selling used cars through an online platform to appeal to buyers increasingly accustomed to online shopping during the pandemic.

The carmaker currently sells its mini-SUV, the Casper, via online sales channels.

Online marketing platforms for used cars are already crowded in Korea.

Once in, Hyundai will compete with existing players such as K Car Co., the country’s top used car retailer, and Hey Dealer, a mobile application for used car trades launched in 2015.

Some 20 imported car brands also sell certified, used cars in both the offline and online markets.

Hyundai has been looking to enter the secondhand car market to gather data from owners of Hyundai vehicles such as mileage, driving habits and maintenance and repair records – information that it can later utilize for improved client services.

With the growing popularity of electric vehicles, Hyundai also hopes to easily recover used batteries if it remains in the secondhand car market – a move that facilitates its entry into the battery reuse and recycling market.

Analysts expect other carmakers such as GM Korea, Renault Korea and KG Mobility Co., formerly Ssangyong Motor, to follow suit and soon enter the used car market.

BOON FOR SMALLER PLAYERS

The domestic secondhand vehicle market has long been regarded as a hotbed of fraud and distrust due to rampant deceptive sales practices in the sector. 

Analysts said Hyundai’s advance into the used car market will improve the credibility of the market where more than half of transactions are made between individuals due to a deep distrust of dealers.

Consumers have expressed dissatisfaction with false performance inspections, bait listings and opaque market prices by existing used car dealers.

According to a 2022 survey by the Voice for Consumers, a Korean consumer advocacy association, two-thirds of the respondents who purchased at least one used car supported big companies’ entry into the secondhand car market.

Write to Nan-Sae Bin at binthre@hankyung.com
In-Soo Nam edited this article.