The Financial Supervisory Service (FSS), the General Insurance Association of Korea, and the Korea Insurance Development Institute (KIDI) said on Monday a special policy will come into force next month encouraging consumers to opt for aftermarket auto parts. (Image: Kobiz Media)
SEOUL, Dec. 24 (Korea Bizwire) – The South Korean government is throwing its weight behind the sale of aftermarket auto parts, with plans to provide cash back rewards.
The Financial Supervisory Service (FSS), the General Insurance Association of Korea, and the Korea Insurance Development Institute (KIDI) said on Monday a special policy will come into force next month encouraging consumers to opt for aftermarket auto parts.
Under the new policy, drivers who are covered by own damage car insurance will receive 25 percent cash back from insurance companies when they buy aftermarket auto parts, instead of those made by the original equipment manufacturer (OEM).
As South Korean automobile manufacturers such as Hyundai Motor and Kia Motors have legal protection for a long-term market monopoly in OEM parts, the measure will first be implemented for auto parts destined for foreign cars.
Aftermarket auto parts, which are of comparable quality to OEM products, according to the KIDI, are priced 25 percent cheaper on average.
For an OEM bumper selling for 1 million won, a similar item from South Korean SME manufacturers would likely cost 750,000 won.
“From next month, you effectively get cash back of 250,000 won for buying aftermarket auto parts instead of original parts,” said Im Joo-hyuk, the official responsible for car insurance at the KIDI.
The FSS explains that the new move is designed to break the stereotype that it’s always wise to opt for OEM auto parts, even if they’re expensive.
“(The perception) has narrowed cheaper options though equal in quality for South Korean consumers, and has resulted in the rise of insurance premiums,” said Lee Chang-wook, a senior official at the FSS.
The South Korean government is throwing its weight behind the sale of aftermarket auto parts, with plans to provide cash back rewards. (Image: Kobiz Media)
Most of the aftermarket auto parts being pushed by the government-backed incentive programs are low-risk components like bumpers and headlights, which are currently being produced by SMEs and then sold to major companies.
Under design protection laws, South Korean car manufactures are guaranteed a long-term monopoly in the auto parts industry, but talks are being held to make exceptions.
Of the 10.5 trillion won in auto insurance claims in 2016, claims related to auto parts amounted to 2.7 trillion won, prompting authorities to promote market competition to bring down prices.
Hyunsu Yim (hyunsu@koreabizwire.com)
