This undated file photo shows an used car wholesale market in Seoul. (Yonhap)
SEOUL, Oct. 13 (Korea Bizwire) – Amid Hyundai Motor Co.’s official decision to enter the used car dealership market, a high ranking company official made a half-truth comment about the initiative, sparking controversy.
Kim Dong-wook, senior vice president of Hyundai Motor, said during an appearance at the parliamentary inspection of the Trade, Industry, Energy, SMEs and Startups Committee that carmakers should be able to have their own used car dealerships as a way to protect consumers.
With a market size of about 20 trillion won (US$17.3 billion), the used car business has been designated as an SME-suitable business since 2013, with large companies’ market entry and business expansion having been strictly restricted.
“For carmakers, the used car business is as important as the new car business. Carmakers around the world are allowed to run used car dealerships within their home markets as well as their export markets,” Kim said.
In response to a question asking, “Are foreign brands running used car dealerships in their home countries?” from Rep. Kim Jung-jae, a lawmaker from the main opposition People Power Party, the senior executive confirmed that foreign brands did in fact sell used cars in their home markets.
This comment, however, is nothing but a half-truth without fully reflecting on the actuality of the matter. In reality, South Korea is one of very few countries where carmakers are directly engaged in retail sales.
The headquarters of Hyundai Motor and its affiliate Kia Motors in southern Seoul. (image: Hyundai Motor Group)
In other markets such as the U.S., Europe and China, most carmakers sell new and used cars through independent dealer networks, with private dealers in charge of setting retail prices and sales margins.
With this in mind, Hyundai’s claim that South Korea is the only country in the world where carmakers’ used car dealerships are restricted is no more than a half-truth.
Hyundai also claims that its entry into the used car market is a good way to improve consumer welfare. However, this comment also needs to be challenged.
Thus far, Hyundai and its affiliate Kia Motors Corp. have enjoyed a near monopoly presence in the domestic new car market with their market share in new car manufacturing, sales and maintenance estimated at around 80 percent.
Their near-monopoly dominance has been pointed out as being inefficient from the perspective of consumer welfare.
Kevin Lee (kevinlee@koreabizwire.com)
