Korean Light Vehicle sales reached 1.86 million units in 2020, marking a 6% year-on-year increase and the highest annual volume in the history of the market. Paradoxically, this accomplishment coincided with the worst ever global pandemic and the ensuing economic recession. So, how has the market responded in these troubling times?
Two interesting trends can be extrapolated from the latest data on car buyer demographics in Korea.
The first theme to note is that, in 2020, the proportion of fleet sales, which includes shared-mobility vehicles, rental cars and taxis, fell for the first time since 2010. Prior to the outbreak of the pandemic, it was widely thought that these new forms of shared mobility would eventually make privately owned vehicles obsolete, supported by the prevailing view that ‘sharing is a virtue and owning is a vice’.
But against the backdrop of an unprecedented health crisis, what was once seen as a vice quickly became a virtue. In other words, private vehicles are now seen as the most effective – and, arguably, ethical – form of socially distanced transport, meaning that the drop in fleet sales is essentially a reaction to the spread of COVID-19.
The second observation is that the ratio of younger buyers (those in their 20s and 30s) edged up last year. Prior to that, the market had witnessed a dramatic decline in this buyer demographic. As is the case in many other countries, there had been a growing reluctance among younger consumers in Korea to own a vehicle, partly due to increasing financial constraints, and partly because of a preference for alternative modes of transport, such as the plethora of emerging ride-hailing and car-sharing options.
The general apathy for motoring/car ownership among younger adults was seen as a sign that the Korean vehicle market had peaked, and that private car ownership was on an inevitable downward path. But in an odd twist of fate, the virus crisis has lured greater numbers of younger consumers into vehicle showrooms. Meanwhile, there has been a huge uptake in driving lessons as more young people seek to obtain a driving licence.
Could this mean that the Korean market has not yet peaked?
We are likely to see vehicle sales flatten over the longer term, but the current data suggest that the pandemic has, at least, delayed the moment at which the market will reach a tipping point. Indeed, we might still see a new peak during the pandemic, but there is also the chance that younger buyers may, once again, turn away from vehicle ownership. The unpredictability of the pandemic leaves everything in the balance…