Secondhand car dealers mixed about automakers entering market

Industry

Published: 29 Mar. 2022, 17:47 Updated: 29 Mar. 2022, 19:25

Secondhand car dealers mixed about automakers entering market

Used cars are parked at Autobell's Sihwa center at Siheung, Gyeonggi. [MOON HEE-CHUL]

Used-car dealers are divided over the effects of auto manufacturers entering their business, with some saying the end is nigh and others arguing that not much will change for them.

On March 17, the Ministry of SMEs and Startups announced that automakers could start selling secondhand cars.
A deliberation committee under the ministry ruled that the sale of used cars will no longer be restricted to smaller companies, arguing that small family businesses accounted for only a minor portion of the market and that the entry of large companies can improve consumer choice.

"Automakers are likely to boost used-car prices for dealerships, so small players will end up mostly with cars with accident histories," said a secondhand car dealer in the business for three years.

"Companies like K Car and Hey Dealer have already been dominating the market," said another dealer, adding that "the small businesses will eventually lose a foothold."

Used cars that are in good condition command higher prices. Dealers argue that the ministry's decision will leave them at a disadvantage, since the large companies will be able to get first dibs on high-quality vehicles.

With the big-name companies such as Hyundai Motor preparing to enter the market, dealers who used to buy cars through the carmakers will have no choice but to find other channels.

"Used cars fewer than 5-year-old and with fewer than 100,000 kilometers [62,137 miles] are considered the most preferable for dealers," said Ji Hae-sung, secretary general of the Korea Federation of Used Car Dealers Association, "and the automakers will now monopolize all those good offers on the market."

Ji also forecast that "many small companies without enough funding might eventually go out of business altogether."

Some dealers remained unruffled, saying that everyone saw this coming.

The government limited large companies from entering the used-car business in 2013 but did not immediately extend the protection for small and mid-sized businesses when the restriction expired in February 2019.

Despite used-car companies demanding the extension, the government did not make the final decision until March 17.

"Not much will change even when large companies come into the used-car market," said Lee Joon, who runs a secondhand car dealership in Suwon.

"Those who don't feel confident about the cars they sell might take a hit," said Yang Myeong-joon, manager at Gyeonggi Motors, "but I'm confident that I will be able to buy good-quality used cars at competitive prices and sell them at reasonable market prices."

Yang added that the companies have already been bracing for the impact, as "large companies were operating in the market before."

Korea Exchange-listed K Car, which operates a used-car trading website, is categorized as a middle-market enterprise but is 72 percent owned by Hahn & Co Auto, a private-equity firm. It is more a large company than a small or mid-sized business. Major imported auto brands, such as Mercedes-Benz and BMW, are in the business as well.

Some people are expecting that the entrance of large companies will enhance the integrity of the industry.

Autobell, a Hyundai Glovis online used car listing service, is one example offered.

Hyundai Glovis, 4.88 percent owned by Hyundai Motor, introduced Autobell in January. On the site, dealers and individuals can list their cars after putting them through a thorough quality check.

Lotte Auto-Action, operated by Lotte Rental, provides a service that allows dealers to make deals more easily and provides buyers with more information.

BY MOON HEE-CHUL [shin.hanee@joongang.co.kr]