Buying cars online is gaining traction in Korea

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Buying cars online is gaining traction in Korea

Published: 10 Mar. 2022, 15:55

Mercedes-Benz Korea's digital platform Mercedes Online Shop sells both certified secondhand car and a new car. [MERCEDES-BENZ KOREA]

Car buyers in Korea like to kick the tires.

For years, that made it a very traditional car market, with customers generally averse to online-buying or, to use jargon, digital platforms. Dealers liked it that way, of course.

That suddenly changed with the pandemic -- which discouraged face-to-face transactions -- and long waiting times for new cars. They were the result of a chip shortage in the auto industry that caused major production disruptions.

Suddenly, trips to car dealers were exercises in frustration -- being told that models were just not available.

Online platforms were the obvious solution. They enabled would-be car buyers to determine the availability of cars with a couple of clicks.

According to data from Statistics Korea, online transactions for cars and related products reached 3.2 trillion won in 2021, increasing 51.8 percent from the year before. In 2018, such transactions only reached 1 trillion won.

Imported carmakers were the first to offer digital platforms to consumers.

BMW Korea's online-only edition M4 Competition x Kith [BMW KOREA]

BMW Korea launched its in 2019, becoming one of the first imported carmakers in Korea to make such an attempt. It even earmarked certain models as online-only editions.

"One point of our online platform was to enable every one of our customers to have a chance to purchase limited editions," said a spokeswoman for BMW Korea.

"Without the online platform, people living outside of big cities like Seoul, where dealers are not ubiquitous, would consider it unfair to release limited editions only through offline channels."

BMW Korea launched 38 limited edition models last year on its digital platform, and sold a total of 5,251. That was a 950 percent increase from the year before, when it launched 20 online-only limited edition models.

Mercedes-Benz Korea is also working on its online platform, selling both certified used cars as well as new models on it. The service, which launched late last year, has sold 500 cars already.

"What differentiates our online platform from competitors is that the Mercedes Online Shop allows customers to monitor in real-time which dealer has the model I want in stock," said a spokesman for Mercedes-Benz Korea.

"At a time when delivery times are long due to the supply shortage, it takes away the inconvenience of having to visit one dealer after another to see if the model you want is in stock."

The Korean unit of the German luxury carmaker is seeing big opportunities in online sales.

Vice President Thilo Grossmann said early this year that online sales are a "top priority" for the carmaker this year.

It plans to bring online-only editions and start a car price comparison service on the online platform this year.

Domestic carmakers can't switch as quickly to online sales due to opposition from its dealers, who are unionized.

Some compromises have been make, but full-fledged online sales have yet to start for any domestic carmaker.

GM Korea started an online sales channel last May with one of its least popular models, the Camaro SS. It extended the option to the Bolt EUV and Tahoe SUV this year.

"The three models were considered to symbolize the young and innovative spirit which we are trying to realize by launching an online sales service," a spokesman for GM Korea said.

The Bolt EV was going to be sold online but sales were suspended after a battery-related recall. When sales resumed this year, the model was excluded from the online channel.

"The Bolt EV is a volume model at GM Korea so it seems the dealers opposed selling it online because that would take away a lot of commissions," an industry insider said.

Hyundai Motor's Casper mini SUV is sold exclusively online. [SCREEN CAPTURE]

Hyundai Motor and Kia are going through a similar conflict.

After a successful launch of Kia's mini Casper SUV online -- the first model for Hyundai and Kia to be sold exclusively online -- Kia attempted at a similar strategy with its EV6, taking preorders exclusively through online channels. Dealers squawked and the company back-pedalled.

"As Tesla showed, selling cars through online channels is increasingly being welcomed by consumers due to its convenience," said Kim Pil-soo, an automotive engineering professor at Daelim University.

"Unions will have to think about ways to co-exist instead of blindly opposing the strategy."

BY JIN EUN-SOO [[email protected]]