Despite the domestic economic slump, the used car market is booming, positively impacting the performance of corporations, according to forecasts from the securities industry.
On the 1st, Hana Securities released a report analyzing that the strong condition of the used car auction market supports used car prices and outperforms the new car market.
According to K Car's first-quarter performance this year, the average retail transaction price (ASP) for used cars rose by 3% compared to the previous year, while the number of retail sales decreased by 5%. In contrast, auction ASP increased by 17% year-on-year, and auction sales also rose by 9% during the same period.
Analyst Ahn Do-hyun from Hana Securities said, "While retail demand for used cars is stable, auction demand is noticeably strong," adding, "The number of domestic used car auction bids increased by 16% compared to the first quarter of last year, aligning with the trend of increasing overseas exports of used cars."
In the first quarter of this year, the export value of used cars increased by 31% compared to last year. In particular, exports to Central Asia surged due to demand from Russia. The export value of domestic used cars doubled in two years, and this rapid increase in export demand appears to be driving up used car prices.
Ahn noted, "In the first quarter of this year, domestic new car sales decreased by 11% compared to the same period last year, while the number of registered used cars increased by 3%. The market share of K Car, a corporate business operator, reached 12.7%, marking the highest level ever, which indicates a structural change in the used car market."
Hana Securities pointed out that this situation is also positive for rental car companies. Rental car companies purchase new cars to use as rental cars for 3-4 years and then sell them; if the sale price is higher than the residual value (new car price - total depreciation), the difference is recognized as profits from selling used cars.
The share of profits from selling used cars within the total profits of rental car companies is high, accounting for more than 50%. Thus, the increase in used car prices may lead to improved performance for rental car companies. Hana Securities identified K Car, LOTTE Rental, and RedcapTour as the rental car corporations that are likely to benefit.
Analyst Ahn said, "Due to the interest rate cuts and rising used car prices, the rental car business environment is improving," noting that K Car, LOTTE Rental, and RedcapTour all show stable performance trends and are corporations with a high dividend propensity.