Kia plans to take on the used car market

Kia announced on Monday it will enter Korea's used car market. [KIA]

Kia will enter Korea’s used car market, the company announced Monday, after regulations that limited the industry to only small businesses was lifted early this year.

The Ministry of SMEs and Startups concluded last month that allowing bigger players into the market will help prevent fraud, such as false offerings or cover-ups of major defects.

Kia aims to start its own used car business and expand its subscription service to include used cars.

Kia's used car service will purchase used Kia cars that were driven for less than 5 years or 100,000 kilometers (62,137 miles) and calculate their residual values based on 200 criteria before offering back up for sale.

“Kia will provide [the used cars at a] fair price to customers based on the company’s strict inspection and evaluation system [taking into consideration] its function and residual value,” the company said.

Responding to the rising demand for electric vehicles (EVs), Kia said it will come up with a separate system to calculate the residual value for EVs in which it will also inspect the condition and safety of the battery.

Used EV purchases in Korea stood at 12,960 units last year, rising by 63 percent compared to the year before, according to the Transport Ministry’s data.

“Due to lack of a concrete evaluation system to determine used EVs' residual value, 64.3 percent of transactions were done individually, rather than through a used car platform or dealers,” Kia said.

In order to raise the credibility of its offerings, Kia said it will allow customers to drive the model they are interested in for a month before making a final decision.

“This service is intended to wipe out consumer concerns on used cars’ performance and quality,” the company said.

Kia said it will also set up a separate space tentatively dubbed the Re-Conditioning Center where customers can see the cars for themselves, and go on test drives before making a decision.

Its first branch will be in either Seoul or Gyeonggi.

Kia will also expand its existing Kia Flex subscription service, where users are currently allowed to drive a number of new cars for a monthly fee. It now plans to provide a similar service for used cars at a cheaper price.

In order to not dominate over the smaller businesses in the country’s used car market, Kia said it will limit its market share to 1.9 percent this year and 2.6 percent next year.

“Even after three years, Kia won't have any more than 4 percent of the market share,” it said.

The Ministry of SMEs and Startups has to give its final stamp of approval to automakers before they start their used car business. Kia is waiting for its final approval.

Hyundai Motor already announced in March that it will enter the country’s used car market.

It said it plans to take 3.6 percent of the market share by 2023 and 5.1 percent by 2024.

Renault Korea Motors, SsangYong Motor and GM Korea had hinted at entering the used car market but haven't made official announcements yet.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]