Market Trends of South Korea Used Car Industry
Rising Adoption of Digital Technologies Will Foster the Growth of the Target Market
- The adoption of advanced technology by tech-savvy young individuals, the emergence of e-commerce marketplaces, and various companies' aggressive strategies to spend on online advertisements are boosting the demand for used cars sold through online platforms. These platforms assist consumers in making informed decisions as end-end information on vehicles is already listed, such as vehicle make, model, kilometers driven, engine capacity, condition, etc.
- Moreover, increasing Internet penetration rates and rapid urbanization across South Korea contribute to developing an efficient ecosystem wherein vehicle owners can reach out to buyers from different parts of a region and initiate a smooth online sales process without any need to visit a physical location.
- The Internet penetration rate in South Korea stood at 93.0% in 2022, a substantial surge from 2017, when the internet penetration rate stood at 90.3%. South Korea boasts one of the highest urbanization rates among emerging economies, with 81.43% of its overall population residing in urban areas as of 2022. These consumers are highly tech-savvy, and most of them have the financial capability to make an informed decision to purchase a vehicle for their mobility. Owing to these factors, the online used car market in South Korea is expected to showcase positive growth in the coming years.
- To integrate the growing online used car market, various players across South Korea are actively engaging in integrating the online space to diversify their business and offer enhanced online experiences to consumers. For instance, in June 2023, Hyundai Motor Co, a South Korean-based auto manufacturer, announced its entry into the used car market in the country by extending used car purchasing and selling services to customers via an online platform. The automaker indicated that its initial business will kickstart from October 2023.
- Further, improved offerings such as an enormous number of photos and videos of the used vehicles being sold through online platforms and easy online instant finance, insurance, and warranty service are expected to fuel the demand for used cars in South Korea in the coming years.
Understand The Key Trends Shaping This Market
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Electric Segment of the Used Car Market is Gaining Traction in Recent Years
- South Korean government's strategic plan of banning internal combustion engine sales by 2035 and consumers' growing preference for purchasing eco-friendly vehicles to combat environmental impacts is aiding the growth of the electric used car market segment. The purchase of new electric cars is a costly affair owing to the huge cost of its batteries, which consumers tend to avoid. Due to this, the demand for used electric car models has been gaining traction in recent years.
- Coupled with that, the sharp decline in prices of used electric secondhand cars in the South Korean market is positively contributing to the increased demand in this segment. Although declining used electric car prices pose a significant challenge to the overall used car industry, as revenue generation for companies becomes tougher, on the other hand, this phenomenon proves to be beneficial to consumers as they get the opportunity to purchase advanced electric vehicles at a lesser cost in the used car market. For instance,
- SecondhandSecondhand EV prices witnessed a decline of 21% on average to 36.4 million won (USD 27,930) in South Korea during January and June 2023, compared to the previous year.
- Tesla Model X led the price downfall with a 28.2% decline during January and June 2023, compared to the same period in 2022. It marked the sharpest price drop among second-hand cars sold as of June 2023. Audi e-tron saw its secondhand model price tumbling 20.5%, while the price of Hyundai's IONIQ 5 dived 20.2% in the South Korean used car market.
- According to the South Korean Ministry of Environment, CO2 emissions from passenger vehicles in South Korea stood at 97 grams per kilometer in 2021, which is expected to reduce in the coming years with the adoption of electric vehicles. However, purchasing a new electric passenger car is an expensive affair. Therefore, consumers' preference to purchase used electric vehicles (EVs) in the coming years would contribute to combating Co2 emissions from passenger vehicles, which are expected to stand at only 70 grams per kilometer in 2030.
- Further, various companies offering value-added services such as vehicle financing and insurance options are helping consumers purchase high-end vehicles with ease. Coupled with that, the rise in the demand for vehicle subscription services in the last few years, which allows consumers to use a vehicle every month by paying monthly fees, which include maintenance, insurance, and roadside assistance, is positively impacting the demand for used electric vehicles. For instance, in June 2022, KB Chachacha, operated by KB Capital Co., a unit of KB Financial Group, attracted dealers to promote the use of its financial services to sell secondhand vehicles. The company also reported an increase of 83.3% in their operating profit with the incorporation of used-car financing options in their portfolio, compared to when the company did not have this business.
