The Used Car Market Also Needs Major Corporate Brands

The used car market is worth about 22 trillion won a year, with 2.515 million vehicles traded annually. It can be seen as a market 1.32 times larger than the new car market, which stands at 905,000 vehicles. One notable feature is that more than half of all transactions are private sales that do not go through dealers. Buying and selling through businesses would presumably be safer and more convenient, so there must be a reason why the direct transaction market is so active.

From the consumer’s perspective, there are no used car companies they can truly trust. For years, many dealers have concealed vehicles’ accident histories and flood damage records, and have even falsified mileage. They have posted fake listings that cause consumers to waste trips, and even when problems arise with a vehicle, they often fail to provide proper after-sales service, resulting in significant consumer harm. In other words, because dealers offer no meaningful differentiation in service and only drive up prices through commissions, private transactions have become widespread.

Consumers bear the cost of the distorted used car market. According to consultation records from the 1372 Consumer Counseling Center, used car-related cases account for one of the highest shares, following smartphones, water purifiers, and jumper jackets. Considering that used cars are typically high-priced products costing over 10 million won, this can be seen as one of the markets with the most severe consumer harm. In fact, YouTube is flooded with videos on how not to get scammed when buying or selling a used car. Consumers are suffering serious tangible and intangible losses, even having to bear the cost of gathering information themselves in order to protect themselves.

To address consumer harm, the market needs the advanced quality control systems and service systems of large companies. In particular, the condition of a vehicle—including its accident history and current performance—can best be understood by the automaker that originally made it. Consumers would also be more likely to trust repairs if they were handled directly by the manufacturer.

Unfortunately, government regulations have blocked large companies from entering the used car market. After the Korea Commission for Corporate Partnership designated used car sales as an industry suitable for small and medium-sized enterprises in 2013, all large companies were driven out. Yet over the past six years, the only result has been restrictions on consumer choice; the chronic problems of the used car market have not improved. No dealership has succeeded in growing into a trustworthy or competitive company.

Consumers want to be able to trust corporate brands and conduct transactions safely in the used car market as well. When we purchase expensive products such as mobile phones, furniture, and TVs, we check the brand and buy without hesitation. These companies have satisfied consumers over a long period of time, and the market has recognized the value of their brands. We do not usually worry whether such products might be defective or whether we will receive proper after-sales service, as we do when buying a used car.

The Ministry of SMEs and Startups needs to allow large companies to enter the used car market in consideration of consumer benefit. Policies designed to protect small and medium-sized enterprises—such as “industries suitable for SMEs” and “livelihood-suitable industries”—have only increased consumer harm and weakened industrial competitiveness. A representative example is the LED lighting market: after it was designated as an industry suitable for SMEs and large companies were forced out, foreign firms such as Osram and low-cost Chinese manufacturers came to dominate the market. In the used car market as well, only imported car brands are effectively able to enter, creating only reverse discrimination against domestic large companies and consumers of Korean-made cars, while achieving little in terms of protecting small businesses.

More broadly, it is important to preserve the market principle that companies selling the products consumers want are the ones chosen by consumers and ultimately survive. This is not only the way to protect consumers, but also a driving force for industrial and economic development. The time has come for the government to make a policy decision so that used car consumers, too, can enjoy good service in a safe environment as soon as possible.

Eun-kyung Kwak, Head of Corporate Culture Division, Center for Free Enterprise (CFE)

---

Original title: 중고차 시장에도 대기업 브랜드가 필요하다

Author: Eun-kyung Kwak

Date: 2021-11-23

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=24342