Lime green plates deepen slump in Korea’s luxury car sales

Corporate vehicle sales in South Korea continue to plunge this year, particularly among high-end imported models, due in large part to a new government policy aimed at curbing tax abuses. The introduction of lime green license plates for costly corporate-owned cars, effective January 2024, is seen as a primary factor behind the sharp decline.

According to data from the Carisyou Data Research Institute, registrations of corporate vehicles priced over 80 million won (approximately $59,600) fell by 27.7 percent between January and July this year compared to the same period last year. This marks a decrease of over 10,000 units, bringing total registrations down to 27,400. The decline is closely tied to the government’s new policy, which specifically targets corporate-owned vehicles exceeding 80 million won.

The lime green license plates distinguish corporate vehicles from privately owned ones, which continue to use the traditional white plates. The policy is designed to discourage companies from exploiting tax deductions meant for business-use vehicles. Businesses can claim up to 8 million won annually for corporate vehicles, with no limit on the total deductible amount over time. This loophole has allowed companies to write off the full cost of luxury cars as business expenses, fueling demand for high-end and imported cars for a long time.

The sales of popular luxury models have notably suffered under the new system. The Mercedes-Benz S-Class, a flagship sedan popular with South Korea’s business elite, experienced a steep decline, with January-July sales down 63.9 percent to 1,843 units.

The luxury vehicle downturn extends to ultra-luxury brands that cost over 100 million won. Porsche’s corporate sales fell by 47.0 percent, registering 2,219 units, while Bentley was hit even harder, with a 65 percent decrease, registering only 123 vehicles compared to 351 the year before.

Speaking at the world premiere of the fourth-generation Bentley Flying Spur Speed in Seoul on Sep. 11, Christian Schlick, the brand director of Bentley Motors Korea, acknowledged that while the lime green plate system has had some impact, broader economic conditions also play a significant role.

“High-end products like ours are very sensitive to macroeconomic conditions,” he said. He added that luxury buyers may be less concerned about the conspicuous lime green plates on a Bentley, as the brand is already strongly associated with corporate ownership. In contrast, a brand like Mercedes-Benz, which is more frequently used for personal vehicles, might see more hesitation from buyers who want to avoid standing out.

Other ultra-luxury brands saw similar declines: Maserati sales dropped 42.2 percent, Rolls-Royce fell 44.4 percent, and McLaren sales plunged by 85.0 percent. Aston Martin, which sold 26 cars in the same period last year, registered only one corporate sale through August. Lamborghini and Ferrari saw smaller drops, down 1.0 percent and 5.7 percent, respectively.

Another key factor in this year’s slowdown was a rush to buy luxury corporate vehicles before the lime green plate system went into effect. The policy had been widely discussed during President Yoon Seok Yeol’s 2022 election campaign, prompting businesses to purchase vehicles before the January 2024 implementation. In December 2023, corporate cars accounted for 46.5 percent of all imported vehicle sales, a significant increase from the average, as businesses sought to avoid the new plate system.

“Many businesses that didn’t want their cars to stand out with lime green plates likely purchased them before the policy came into effect. That rush has naturally led to fewer corporate registrations this year,” said a dealer from one of the major import car brands in Korea.