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Car-sharing Giant Socar Enters Used Car Sales Market Amid Profitability Challenges

Source: Socar

South Korea's leading car-sharing platform, Socar, is venturing into the used car sales market under the brand name "Casting."

Founded in 2011, the company has grown to over 6 million users with 12,000 vehicles on its platform.

However, despite steadily increasing revenues, which reached KRW 256.7 billion (US$220 million) last year, Socar's operating loss doubled to KRW 71.6 billion (US$60 million) over the same period.

Source: Pickool Analysis

Socar has tried to diversify its services to boost profitability, but some efforts, such as the alternative taxi service TADA BASIC, have yet to be halted by government regulations.

The company is now eyeing the lucrative used car sales market, worth 12.4 trillion won ($10.3 billion) in 2018.

However, the market is plagued by information asymmetry, leading to many complaints about used car purchases.

Luxury car brands like Mercedes-Benz and BMW have successfully sold certified used cars directly.

Meanwhile, another player in the used car market, SK, recorded an impressive operating margin of around 41.4% in the first quarter of 2019.

Socar's previous experience selling its vehicles directly could prove beneficial as it enters this new market.

The company is expected to differentiate its used car sales by leveraging its car-sharing vehicles and offering unique programs, such as a 72-hour test drive before purchasing.

The used car sales business is limited to small and medium-sized enterprises.

Hyundai Motor Company and Kia Motors Company are excluded from the market.

Socar faces no barriers to entry, but its disruptive approach may face resistance from legacy and the Korea Used Card Merchant Association.

As the government reviews its policy on used car sales, Socar's entry into the market may face challenges similar to those faced by its TADA Basic service.

However, the company's expansion into the used car sales market could boost its profitability.