Automakers cleared to enter the used car business

Used cars are parked at a lot in Jangan-dong, central Seoul. [NEWS1]

Large automakers are now allowed to sell used cars, following a decision by the Ministry of SMEs and Startups announced Thursday.

The deliberation committee under the ministry said it will no longer limit the secondhand sales of cars to small and mid-sized companies, arguing that average annual sales of the small businesses is high. It also said that the used car market is growing rapidly, and that the entry of large companies can enhance the quality of used cars sold and give more choices to consumers.

The committee noted that support measures would be necessary because small businesses will inevitably struggle when big companies, such as Hyundai Motor and Kia, enter the market.

The used car market was selected as a business suitable only for small and mid-sized companies in 2013, but the regulation expired in 2019. Big companies took a wait-and-see approach because the ministry has been considering re-imposing the regulation, with the final decision being delayed for over two years.

In 2020, 2.5 million used cars sold in Korea, up 7.6 percent on year. The global chip shortage and the resulting delay in new car deliveries made used cars a popular option.

"Korea is one of the few countries in the world that limits automakers from entering the used car market, and it is basically a market trend that we can't go against," said Kim Pil-su, a professor of automotive engineering at Daelim University.

The Korean Automotive Manufacturers Association (KAMA) welcomed the decision.

The association released a statement Thursday saying that it "welcomes the decision, which will serve as a huge opportunity to develop the secondhand car market."

Many companies are rushing to embrace the new business opportunity.

Hyundai Motor has been preparing for the change for some time. In February, it purchased a 2,000-square-meter (21,527-square-feet) lot in Yongin, Gyeonggi for used car sales. It registered for a license to sell cars and operate distribution centers and was given approval in January.

The company will only sell secondhand Hyundai cars, buying back those driven less than 100,000 kilometers (62,000 miles). Cars that pass about 200 quality inspections by the company will be qualified to be resold.

Kia registered for the same license with the city of Jeongup in North Jeolla province, and is waiting for approval.

Genesis and SsangYong Motor also said they will enter the market, but didn't offer details.

"Large companies will dominate the used car market and only create monopoly," said Ji Hae-sung, secretary general of the Korea Federation of Used Car Dealers Association

BY KANG KI-HEON, MOON HEE-CHUL, LEE TAE-HEE [lee.taehee2@joongang.co.kr]