The Korea Economic Daily Global - K Car's evolution into top Korean used car sales platform

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K Car's evolution into top Korean used car sales platform

Link [2022-03-13 11:12:22]

Used cars are parked outside of a K Car dealership in Seoul

When Seoul-based private equity firm Hahn & Co. acquired K Car Co. from SK Group in 2018, the No. 1 used car retailer in South Korea controlled a meager 3% of the 35 trillion won ($30 billion) market.Despite the steady growth in used car registrations, the domestic used car market had been fragmented by small brick-and-mortar dealerships. But Hahn & Co., founded in 2010 by ex-Morgan Stanely Managing Director Scott Sang-Won Hahn, focused on the growing online sales of used cars in one of the world's most connected countries. Online sales rose to one-fourth of total used car transactions in South Korea in 2018, versus 19% the year previous. But most of the websites functioned as a simple platform to match would-be buyers with potential sellers, without a guarantee on the vehicle's quality. Buyers also needed to check whether the offer was true or not by themselves."We concluded that the used car market will continue to grow and we can expand into other businesses, based on the used car sales platform," Hahn & Co. Chairman Yoon Yeo-Eul told The Korea Economic Daily's capital market news outlet Market Insight. K Car, launched as an in-house venture in 2010, was a non-core unit of SK Group. The conglomerate was forced to sell the unit in line with the government regulations, under which the used car business was categorized into ones suitable for small- and medium-sized enterprises.

Holding 8,000 used cars also curbed the company's profit margin growth because they were booked as inventory assets. But Hahn & Co. believed it could utilize them to expand into other relevant businesses such as car rental and lease, as well as auto financing.INNOVATIVE FEATURESImmediately after the acquisition worth around 200 billion won, Hahn & Co. bolstered K Car's offline sales network, made additional purchases of vehicles directly from sellers and increased the number of professional salespeople. Currently, 1,150 employees work at K Car's 46 dealerships.To win customer trust, it introduced a 3D Live View service, offering three-dimensional and detailed images of the car from the interior to the trunk to the engine room as if the buyer sees it in person. The platform also shared automotive experts' evaluations of the cars under his or her real name.To set it apart from other online platforms, K Car introduced same-day delivery in 2019 and a return guarantee within three days of purchase regardless of the reason. Moreover, it provided a quality guarantee for up to 20,000 km per year, an unprecedented favor offered to online car buyers in the country. To enhance its brand awareness, K Car hired top South Korean entertainers and movie stars for its TV commercials and advertisements.EXPANSIONARY MOVESAlmost simultaneously with the purchase of K Car, Hahn & Co. in 2018 acquired 100% of Joy Rent A Car Co. from South Korea's CJ Group for around 50 billion won.K Car is able to rent its used cars at a far lower price than rival companies considering that used cars depreciate at a faster rate than new vehicles. "Compared with used car registrations, the car rental and lease market has been growing at a faster rate. That drew our attention," Hahn & Co.'s Yoon said. In 2019, the Korean PE firm established K Capital Co., the country's first auto finance company tailored to used car buyers to allow them to pay in installments. Scott Sang-Won Hahn, President & CEO of Hahn & Co. .j-chart {font-family: 'Noto Sans KR', sans-serif; margin-top: 30px;} .j-chart-txt-div {/*margin-left: 5%;*/} .j-chart-h5 {font-size: 21px; font-weight: 600; margin-bottom: 20px; letter-spacing: -0.2px;} .j-chart-h6 {font-size: 15px; font-weight: 400; margin:-5px 0 20px 0} .j-chart-p {display: flex; justify-content: space-between;} .j-chart-p p {font-size: 13px; font-weight: 300; margin-bottom: 0!important; margin-top: 0px;} .j-chart-sub-p {display: flex; margin-left: 6%;} .j-chart-sub-p p {font-size: 14px; font-weight: 400; color: #374140; margin-bottom: 0!important; width: 50%; text-align: center; padding-bottom: 0px;} .d-pc-none {display: none!important} .d-pc-block {display: block!important} .txt-center {text-align: center; margin-top: 50px} @media screen and (max-width: 765px) { .j-chart-txt-div {margin-left: 0%;} .j-chart-p {display:block; } .j-chart-p p {margin-top: -6px;} .j-chart-h6 {margin:2px 0 20px 0} .j-chart-sub-p {margin-left: 10%;} .j-chart-sub-p p {font-size: 13px; padding-bottom: 10px;} .j-chart-h5 {font-size: 22px} .txt-center {text-align: left; margin-top: 20px} .d-pc-none {display: block!important} .d-pc-block {display: none!important} } South Korea’s online used car market

Graphics by Jerry Lee

Source: Frost & Sullivan’s 2020 Market Research

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K Car’s sales and operating profits on upward spiral Unit: billion KRW

Graphics by Jerry Lee

Source: Financial Supervisory Service