This photo taken on March 11, 2022, shows a used car dealership in Janganpyeong, eastern Seoul. (Yonhap)
SEOUL, April 28 (Korea Bizwire) — The South Korean government on Thursday ordered Hyundai Motor Co. and its smaller affiliate Kia Corp. to delay their plans to enter the used car market by one year to minimize the impact of their advance on existing players.
In March, the Ministry of SMEs and Startups decided not to designate secondhand car sales as one of the “livelihood businesses” that must be reserved for small enterprises and startups, paving the way for conglomerates, like Hyundai Motor Group, to enter the market.
The decision invited strong objection from the country’s used car dealer associations.
The government has arranged several meetings between Hyundai Motor Group and representatives from the associations to narrow gaps between them, the ministry said in a statement.
But they failed to reach an agreement, and the ministry ordered the compulsory mediation on the matter.
The ministry ordered Hyundai and Kia to begin their used car business from May next year following a four-month test period, during which they are allowed to sell less than 5,000 high-quality and certified used cars, respectively, the statement said.
In other conditions, the government has limited the number of used cars the carmakers can place in the market for two years from May 2023 to April 2025.
Hyundai is allowed to handle 2.9 percent of the country’s overall used car transactions from May 2023 to April 2024 and 4.1 percent in the following one year. Kia’s corresponding figures are allowed at 2.1 percent and 2.9 percent during the same period, it said.
Hyundai and Kia have to purchase used cars from their customers who plan to buy new vehicles with their own brand badges.
They also have to put their brand used cars that have been on the road for more than five years and traveled over 100,000 kilometers on auction, where existing small players participate.
The government will deliver an implementation order to Hyundai and Kia unless they follow the “recommendations.”
If the carmakers do not implement the order, their representatives will be sentenced to less than two years in jail or face a fine worth less than 150 million won (US$118,000).
The government’s recommendations will remain effective for three years from May 2022 to April 2025, the statement said.
This file photo, provided by Hyundai Motor Group, shows Hyundai Motor Co.’s and Kia Corp.’s headquarters buildings in Yangjae, southern Seoul.
Hyundai and Kia recently outlined their used car business plans to expand customers’ choices following the government’s decision not to designate secondhand car sales as livelihood businesses last month.
Hyundai said it will sell used cars that pass a strict quality testing process after purchasing its own brand vehicles that have been on the road for less than five years and traveled less than 100,000 kilometers.
Kia said it will take the same step in the used car purchase program.
To coexist with smaller rivals in the used car industry, Hyundai said it will restrict its market share from 2.5 percent in Korea in 2022 to 3.6 percent in 2023 and 5.1 percent in 2024.
Kia said it plans to restrict its domestic market share from 1.9 percent this year to 2.6 percent in 2023 and 3.7 percent in 2024.
In other programs, Hyundai said it will introduce the “trade-in” program, in which the company purchases used Hyundai brand cars from customers and offers discounts when they buy new Hyundai models.
Kia said it will allow customers to experience a used car they want to buy for one month and then decide on whether they will purchase it or not in the “subscription and purchase program.”
Kia also plans to develop its own quality testing and certificate system for secondhand electric cars, as it aims to become a leading player in the used EV market.
The Korea Used Car Dealers Association (CARKU) and the Korea Federation of Use Car Dealers Association (KUCA) said the government’s decision has put 300,000 jobs in the used car industry at risk and may result in massive job losses.
The country’s used car market reaches 2.6 million vehicles a year, with K-Car leading with a share of 5 percent and the remaining 95 percent composed of small dealerships and consumer-to-consumer transactions.
(Yonhap)
