1. The Used Car Industry in South Korea is growing at CAGR of 1% Basis Volume, with Brands Competing Intensely on Value Added Services Offered
The South Korea Used Car market is in the Maturity stage. Easy availability of used car loans by various banks & NBFCs have led to the amplification of pre-owned car sales. Players such as Mr. Garage are providing vital information for the purchase of used cars by using AI and Machine Learning Tools. Talking about the challenges, Consumer distrust is quite high in the market. More than 10,000 consumer complaints are received every year.
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Hyundai Motor, monopolizes more than 83% of the new car market. Due to fierce competition, if Hyundai Motor enters the used car market, it is expected that at least 50% of the existing used car dealers and employees will crater. Furthermore, intense competition with various authorized dealerships, multi-brand outlets & independent (standalone as well as clustered dealers) operating in the industry is expected in the upcoming years. Authorized Dealerships compete on the basis of parameters such as warranty, inspection, quality checks, and value-added services. Entry of various online platforms and marketplaces competing is also expected to increase user base, engagement & dealers on-board. The way forward is dependent on Leveraging technologies such as Artificial Intelligence & Virtual Reality to enhance user browsing experience. Moreover, growth of transactional marketplaces offering one-stop solutions to buyers & connecting dealers, financing and insurance companies.
2. Banks, NBFCs and Captive NBFCs Providing Major Credit Lending Facilities in South Korea’s Used Car Financing Industry
South Korea’s Used Car market ecosystem provides a wide range of financing options for the customers. For instance, most organized market players liaise with banks to provide In-House loan to customers and with the help of In-House financing, customers can complete car financing under one roof which saves them the time & energy. Alternatively, customers can directly take an auto loan from bank. Most banks offer a financing period from 2 to 6 years. When it comes to NBFC’s like Roof funding & Kamco, most of them provide finance for used cars & have partnerships with major brands.
3. Lack of Regulations and Insufficient Job Requirements Leading to Low-Competition Entry for Sales Personnel and Market Inefficiency
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The used car market in Korea is less regulated compared to other advanced economies. This has led to a proliferation of small-time dealers who do not possess enough skills/knowledge about the cars and secondly, are not able to scale the shops to a greater extent. Apart from this, insufficient job requirements can also cause hindrances in the future growth of the industry. For instance, anyone who wants to engage in the used car sales business in Korea can obtain a salesperson’s certificate only after completing online education. Moreover, online training takes 8 hours for introductory training for new employees and 4 hours for maintenance training for existing traders. Other than that, there is no other qualification system.
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