BMW-Mercedes rivalry targets used car market

 The competition between BMW and Mercedes-Benz is heating up in the used car market again, following a duel in the luxury car segment.

The two German carmakers have recently announced plans to expand their used car businesses in an effort to encourage the continued growth of their sales.

BMW Korea has been the market leader among foreign car brands for the past decade in selling certified preowned cars since its launch of the “BMW Premium Selection’’ services in 2005. 

The company said it offers a BPS certificate to preowned BMW and Mini cars only when they have no accident record. They also have to be less than five years old and have a mileage of less than 100,000 kilometers. As the final stage to be certified, used BMW cars also have to pass through the 72-point extensive technical inspection.

“We sold a total of 3,820 certified preowned vehicles last year, a 45 percent increase from 2,400 units in 2013. We are expecting to see the business grow more than 20 percent by the year’s end,’’ Jung Jae-eun said.

BMW Korea currently runs 10 BPS showrooms nationwide through its six dealers and it has plans to open two more showrooms within the year.

Mercedes-Benz is a fast follower of BMW in the premium preowned car business here. The company has expanded the new income-generating business since it launched certified preowned car services under the name of “StarClass’’ in 2011.

To offer customers quality and reliability equal to new Benz cars, Mercedes-Benz Korea said the company has issued a StarClass certificate to preowned cars with no accident records that are less than four years old and have less than 100,000 kilometers on them.

The company conducts a 178-point technical inspection for the StarClass certification. 

“(Based on growing demand for used Benz cars), we are expecting to sell 1,200 StarClass cars this year, which is a 200 percent increase from a year ago,’’ said Choi Duk-jun, the head of sales at Mercedes-Benz Korea.

The company said it will drive the business expansion by increasing the number of StarClass showrooms to seven from the current three.

Seeking long-term effect on growth in new car sales

Business growth of the top two foreign car brands in Korea in the secondary car market could encourage other luxury car brands, including Volkswagen, Audi and Lexus, to follow suit in the near future.

“The used car business is appealing to foreign car brands in that it can be another income source as the country’s secondary car market grows at a fast pace, ’’ industry sources said. ‘‘In addition, the business will have a positive effect on sales of new cars in a longer term.”

According to data from the Ministry of Land, Infrastructure and Transport, used cars made up 17.2 percent of the entire registered car market in Korea last year, an increase of 2.7 percentage points from the previous year. Market watchers said the used car market will further expand in every segment, partially affected by the prolonged economic slowdown.

Supplying quality preowned cars to the market will help foreign car brands to seek continued growth in their new car sales.

The increase of quality used foreign car brands will have an effect to boost their salvage value in the secondary car market, which tends to be helpful to boost sales on new foreign cars.

The value of premium foreign cars plunges when they are put on the secondary car market, regardless of car age or mileage, due to the lack of a system to guarantee the quality of used foreign cars, which require expensive maintenance costs.

“Car buyers in every car segment tend to prefer cars whose salvage value is attractive. They want to sell their cars later at as high a price as they can,’’ the sources said.

By Seo Jee-yeon (jyseo@heraldcorp.com)