Sk Encar No 1 Used Cars in Korea

Socar – national leading car-sharing platform in South Korea – is expanding to the used car sales business. According to the report by Bloter, the Socar team registered the brand name as "Casting" as of 25^th August 2020.

Socar Business Outlook

Founded in October 2011, the Socar users grew up to 6 million users with 12,000 vehicles over the Socar platform. A Series D startup received a total investment as KRW 193B (US$ 160M) including Softbank Ventures. The revenue increased consistently up to KRW 256.7B (US$ 220M) last year, but its operating loss doubled up to KRW 71.6B (US$ 60M) the previous year.

To generate another revenue model and raise its profitability, the company has been launching various services. The alternative taxi service – TADA BASIC – stopped its service due to the government regulation this April. Socar is operating an enterprise client-dedicated service called Socar Business with 24,000 enterprises. However, those services were stopped or not as strong as to make the business turn into operating profit.

Why is Socar coming into the used car sales market?

The total size of the used car sales market was KRW 12.4 TR (US$ 10.3B) in 2018 by the KOSTAT. The market size of the used car sales market was KRW 7.97 TR (US$ 6.7B) in 2016. The used car sales market is one of the lemon markets due to information asymmetry.

According to the Fair-Trade Commission data from January 2018 to July 2020, the complaint on used car purchases was totaled as 27,783 cases. Every year 10,000 points were happening over the used car purchase. 76.7% was regarding the performance or the condition issue.

Luxury car brands such as Mercedes-Benz or BMW are selling certified used cars directly. BMW sold 10,000 used vehicles, and Mercedes-Benz sold 6,500 used vehicles via its direct sales channel last year. The number of new car sales by Mercedes-Benz and BMW was 78,483 cars and 44,142 by each.

SK Encar.com has recorded an operating profit rate of around 41.4% in the first quarter of 2019. The operating profit rate was 43% in 2016 and 44% in 2017. The market itself is profitable compared with Car sharing service itself.

Furthermore, SoCar has experience selling its vehicles directly while the company was terminating its TADA Basic business. TADA basic was operated with 1,500 KIA Sedona vehicles. Socar sold 45 KIA Sedona vehicles instantly to Socar users and sold out all in 90 minutes.

It is being expected that Socar will differentiate the used car sales with its car-sharing vehicles. And the unique program like 72 hours drive before purchase will be operated.

Any Obstacles to the used car business?

Currently, the used car sales business is designated as the business for SMEs only from 2013. Large enterprises such as Hyundai Motor Company or Kia Motor Company are trying to enter the market.

Still, the legacy players and the Korea Used Card Merchant Association is blocking via government talk. The government is under review whether to terminate the policy or not.

As Socar is a Middle-sized enterprise, the used car sales business has no barrier to enter the market. However, there is still concern that another TADA Basic resistance by the legacy player might occur if Socar's methodology might feel as "Disruptive."

Sk Encar No 1 Used Cars in Korea

Source: https://pickool.net/socar-entering-the-used-car-sales-business/

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