Premium and Luxury Cars in South Korea

2020 IMPACT

Car sales temporarily boosted by tax cut, but face roadblock as measure ends

In the first half of 2020, and despite the spread of COVID-19, South Korea saw increased sales of premium and luxury cars. A key driver of the positive performance was the local government’s temporary reduction in individual consumption tax, which is imposed on passenger car purchases.

Second wave of COVID-19 forces carmakers to review strategies

The rise of a second-wave COVID-19 in August 2020 overshadowed the positive sales performance of the first half of the year. With the sudden spike of daily confirmed cases, the local government elevated its safety measures, tightening social distancing rules and advised consumers to minimise outdoor activities.

Leading brands maintain sales via contactless consultation, Japanese cars struggle due to boycott

Premium and luxury car dealers implemented contactless consultations and repair services to seize sales opportunities in the pandemic environment. BMW Korea introduced a digital sales platform, through which all paper documents required to test drive and purchase a vehicle were replaced with electronic alternatives.

RECOVERY AND OPPORTUNITIES

Sales recovery subject to pandemic and related controls

According to the baseline scenario from Euromonitor’s Scenario Model, assuming that the COVID-19 outbreak continues but phases out to be milder and better-controlled in the second half of 2020, real GDP is expected to recover to pre-COVID levels in 2021. However, the prediction is subject to successful control of the second wave of the pandemic, and at the time of writing this is impossible to predict, as cases continue to rise around the world.

Electric car push to continue as South Korean consumers’ interest grows

Carmakers’ push for electric vehicles is expected to increase over the forecast period, taking advantage of consumers’ growing interest and increasing purchases. Even in 2020, despite the spread of COVID-19, carmakers continued to launch new electric car models: Mercedes-Benz introduced the EQC 400 4Matic, a premium version of its signature electric SUV EQC, Audi launched its electric SUV, the e-tron 55 quattro, and Porsche launched the Taycan in late 2020.

Younger consumers to shift from short-term car sharing to long-term subscriptions

With the COVID-19 outbreak, consumers’ high level of caution regarding hygiene and social distancing represented a threat to car-sharing services such as Socar and Green Car. Premium and luxury car brands are increasingly offering discount promotions and monthly instalment plans, reducing the cost barrier for younger consumers to access their products.