Online platforms emerge as new battlefield for auto sales in Korea

Visiting a car dealer’s stylish showroom to touch, feel and sometimes test drive a car before purchase has for decades been a rite of passage for new car buyers in South Korea.

With the contactless business practice becoming a new normal in the pandemic era, however, Koreans are becoming increasingly accustomed to buying everything they need online, even expensive cars fresh from the factory.

According to data from Statistics Korea, auto sales, both new and secondhand models as well as imported vehicles, through online marketing platforms reached a record 3.32 trillion won ($2.77 billion) last year, up 52% from the previous year.

The growth rate is the fastest among all durable goods, including home appliances, shoes, bags and books – the usual top-selling items on online shopping malls.

The statistical office didn’t reveal the number of cars sold online, but industry watchers estimate that over 100,000 cars were sold via online platforms in 2021.

“Automobiles weren’t ideal for online sales as a new car usually costs at least tens of millions of won. But the coronavirus pandemic has changed the way people buy cars. They want to buy a car online rather than visiting a showroom,” said an industry official.

TESLA LEADS THE WAY

In Korea, Tesla Inc. has led the way cars are sold, particularly among foreign imported vehicles.

The US electric vehicle maker started selling its cars exclusively through online platforms in 2019, when it sold 2,430 units, according to a tally by CarIsYou Data Research Institute.

Tesla’s online sales in Korea rapidly increased to 11,826 units in 2020 and 17,828 cars in 2021 to rank fourth among foreign automakers when compared only with their online sales.

BMW, which operates dealer shops in Korea, sold 5,251 cars online in Korea last year, a tenfold increase from the previous year.

When the German automaker put four units of its limited-edition sports car, the M4 Competition x Kith, on an online platform for sale last month, as many as 24,000 people applied to buy the car the first day.

Automakers going online for marketing isn’t just a trend in Korea. It’s spreading globally.

Volvo Cars, a Swedish carmaker, said last week it is launching a new online sales platform for used cars, offering secondhand models directly from the manufacturer with guarantees on quality.

Volvo has previously announced its intention to sell all of its new electric cars online, with the aim of selling the majority of its new cars in the UK online by 2025. The Swedish firm will then look to move all its global new car sales online by 2030.

 
HYUNDAI TO JOIN NEW TURF WAR

Hyundai Motor Co., Korea’s top automaker, last week unveiled an ambitious plan to enter the Japanese car market after a 12-year hiatus, starting with its IONIQ 5, a mid-size crossover EV, and the NEXO, a hydrogen fuel cell SUV.

This time, Hyundai said it will sell its EVs exclusively through an online marketing platform to appeal to buyers increasingly accustomed to online shopping amid the pandemic

In Korea, Hyundai is already selling a mini-SUV, the Casper, via online platforms only.

Launched in September of last year, the Casper has so far sold more than 10,000 units, and people have to wait for at least four months to buy one, according to the company.

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

The country’s top used car retailer K Car Co. earlier this week posted a record operating profit of 71.1 billion won on all-time high sales of 1.9 trillion won in 2021. Of its total revenue, online car sales accounted for 39% or 733 billion won, posting a 74% sales increase from the previous year.

The company sold 48,655 secondhand cars via its online platform My Car Home Service last year, accounting for 45% of its entire transaction volume.

Hey Dealer, another Korean online auto auction platform for used cars, said its transactions have reached 5 trillion won since its launch in 2014.

Hyundai Motor has also shown interest in the domestic secondhand car market, but faces objections from its unionized workers and regulatory obstacles.

Last month, the automaker was advised by related authorities to put off its entry into the used car market to protect smaller car dealers.

“Some workers at local automakers are opposed to online sales for fear of losing their jobs. But online marketing is a global trend that no one can deny,” said an industry official.

Write to Il-Gue Kim at Black0419@hankyung.com
In-Soo Nam edited this article.