Online Car Selling Platforms Gain Momentum in S. Korea

SEOUL, March 10 (Korea Bizwire) — Boosted by the popularity of U.S. electric carmaker Tesla Inc., automakers are increasingly adopting online car selling platforms to revive sales in South Korea amid the prolonged COVID-19 pandemic.

In 2017, Tesla began to sell its vehicles through an online platform in South Korea, raising questions over the effectiveness of online sales without visits to dealerships.

But the new way to purchase cars received a strong response from young customers familiar with e-commerce deals.

Tesla’s vehicle sales jumped more than 50 percent to 17,828 units in 2021 from 11,826 a year earlier before falling 18 percent to 14,571 last year, according to local market tracker CarIsYou.

Mark Woo, a 43-year-old YouTube influencer who reviews electric vehicles on his channel Mark World TV, was one of the initial buyers of Tesla models.

He bought the Model 3 Long Range in February 2020 and in October, hopped to the Model 3 Performance after handing over the first model to his friend.

“I came to purchase the Model 3 online because it was only available through Tesla’s website. But it was easier to purchase online because EVs have far fewer options than combustion engine models,” Woo told Yonhap News Agency in a telephone interview.

Electric car makers usually offer a standard product with different battery sizes but without long options lists in order to become more cost-effective and profitable.

“I just clicked the color, the size of wheels, and whether to buy the Full Self-Driving (FSD) beta software when I signed up for the Model 3,” he said. The FSD is an advanced driver assistance system.

Asked if he will consider buying his next car online, Woo replied, “Yes,” saying final vehicle purchasing prices in the imported passenger car market still vary depending on the time of purchase, carmakers and dealerships’ promotions, and other factors.

Buying cars online is relatively transparent and will not likely undermine customers’ trust, Woo said.

He went on to say EV companies that sell vehicles online need to increase the number of after-sales services (AS) centers. Tesla operates nine official AS centers and a couple of showrooms in Korea.

Tesla’s Model S, Model X, and Model Y cars are also sold here but it does not operate a public relations team in Korea.

It is the only imported EV brand that has not registered as a member of the Korea Automobile Importers & Distributors Association.

In spite of its move, Telsa has been benchmarked by other carmakers, which want to sell their cars online.

Not only imported brands such as BMW, Mercedes-Benz and Polestar, but local ones like Hyundai Motor Co., Renault Korea Motors and GM Korea Co. have jumped on the bandwagon to gain a bigger share in the auto market of Asia’s fourth-biggest economy.

Most recently, GM Korea, the South Korean unit of General Motors Co., began to sell the GMC brand’s flagship pickup Sierra Denali through an online platform last month.

In January last year, Swedish electric performance car brand Polestar advanced to the Korean market with the Polestar 2 crossover.

The model’s sales reached 2,794 units last year, the highest among imported EV models except for Tesla vehicles.

Polestar has four showrooms called Polestar Space Seoul here and plans to bring the flagship Polestar 3 SUV in the third quarter.

“Instead of the traditional car-buying experience customers normally find at dealerships, non-commissioned specialists at each Polestar Space will assist them with any questions or coordinate test drives onsite or at home,” a Polestar spokesman said.

Polestar 2 owners can use Volvo Cars’ AS centers in Korea as Volvo owns half of Polestar, the former Volvo performance-division-turned-electric car brand.

Hyundai Motor, South Korea’s leading carmaker, couldn’t sit on its hands.

It began to sell the 1-liter gasoline-powered mini SUV Casper through a digital platform in late September 2021. More than 65,000 Caspers were sold until February.

Hyundai sells the all-electric IONIQ 5, Kona Electric, and Nexo hydrogen fuel-cell electric models through an online platform in Japan.

“We don’t have any immediate plan to sell other models (except for Casper) online in the domestic market,” a company spokesman said.

To catch up with its rivals, Honda Motor Co. plans to open its online platform within the first half, while keeping its current offline dealerships for less tech-savvy customers.

South Korea is the second country for the Japanese carmaker to adopt an online platform for local sales after Australia, where the same platform was launched last year.

Honda said it will also introduce the “one-price policy” for all of its vehicles to be sold in Korea to secure transparency once the online platform is adopted.

Ford Korea Co. also mulls selling its vehicles online in South Korea from next year.

“We are doing that in many markets around the world now, and I think in the not too distant future we will probably start doing that here in Korea probably next year,” Ford Korea Managing Director David Jeffrey told Yonhap early this month.

But he underlined the company needs to offer customers an opportunity to experience vehicles and meet dealers to make a right decision for new car purchases.

The classic dealership model has been under threat due to changing appetite among consumers and the COVID-19 outbreak three years ago.

Showrooms closed, sales teams went home, and customers found an alternative to dealerships to purchase vehicles due to strict virus curbs: an online platform.

Experts and market research firms predicted half of all vehicles in global markets will be bought online by 2030.

Carmakers began to recognize reducing selling costs and unnecessary competition among dealers would benefit them in the long term. Simplified orders, lower inventories and an online buying process are their future, experts said.

“The transition to online appears to be inevitable. More imported carmakers are expected to adopt the online platform as it helps drive down their marketing and operating costs,” Kim Tae-nyen, president of mirae Mobility research & services (m.More), said.

As for Hyundai, however, it won’t be easy to fully adopt the digital platform because its own sales networks, not contracted dealerships, hire employees who are members of the carmaker’s union, he said.

Nearly 80 percent of 915 executives serving in the automobile industry expected it will be possible for consumers to purchase almost any car online within just eight years, according to a recent report released by consulting firm KPMG.

“By 2030, we expect half of all business-to-customer car transactions globally to be conducted online versus 2 percent today,” Swiss banking giant UBS said.

(Yonhap)