1. GTV for used car market in South Korea has been increasing post 2020, however the used to new car ratio has been declining since 2017
The pre-owned car industry in South Korea is currently in maturity stage. Used to new car sales ratio in the country has declined from 1.38 in 2017 to 1.33 in 2021P. The used car market is growing in size, but consumer distrust is quite high. More than 10,000 consumer complaints are received every year. A lemon market is one in which there is information asymmetry which hurts the market as there is distrust between consumers and sellers. There has been a consistent increase in used car sales between 2019 and 2021 as consumer income levels fell due to the pandemic, customers preferred purchasing pre-owned cars.
2. Increasing Use of AI and Machine Learning Tools by Used Car Market Players in South Korea to Reduce Information Asymmetry in the Market
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The Dealers in the used car market are scattered and small scale due to the law introduced by the Korean Government in 2013 which has been revoked in 2019. The entry of big domestic players such as Kia and Hyundai in the used car segment might change the market conditions now since they are making an entry. The next generation of customers are more technology savvy than the earlier ones, hence focus on online customer acquisition will be at the forefront. Players such as Mr. Garage are providing vital information for the purchase of used cars by using AI and Machine Learning Tools in order to suggest which sellers are the most trustworthy and which are not. This way the information asymmetry is being reduced in the market.
3. Used Car Sales to Recover from Covid-19 Impact, with Online Platforms Aiding Market Growth.
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The overall used car market size will increase steadily since the absolute population growth has been stagnant and various economic indicators that affect purchasing sentiment are not very good. Korea’s used car market is twice as big as market for new cars here. Once conglomerates join the second-hand car business, they can improve the somewhat unorganized used car market here, which is mostly run by individual or small-sized dealerships. Furthermore, it is anticipated there will be a slow increase in the number of new car sales or the consequent increase in the total number of cars owned.
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