Will Hahn & Co. sell K Car amid surge in used car industry?

Used cars are parked for sales in Seoul, May 13. Yonhap

The growing popularity of used cars here and abroad is creating favorable conditions for Hahn & Co. to speed up its long-awaited sale of K Car, a used car platform owned by the local private equity firm, according to data and industry officials Wednesday.

Hahn & Co. took over SK Encar’s offline used car business in 2018 at 220 billion won ($160 million) and launched the K Car brand that same year.

As expected, Hahn & Co. has taken a path similar to most other private equity firms by focusing on increasing the valuation of the acquired entity and putting it up for sale for a much higher price. Under this drive, K Car went public in 2021 on the benchmark KOSPI, and the firm recouped its initial investment.

Hahn & Co. initiated its process for the sale of K Car in 2022, but has made little progress so far. The sales price for K Car is estimated to reach between 800 billion won to 1 trillion won.

However, there is a growing possibility for the private equity firm to finally sell K Car, as the used car platform is on track to drastically enhance its earnings. The rosy outlook for the used car business — as evidenced by soaring used car exports — also makes the company more attractive than before.

According to data from K Car, the company recorded sales of 604.7 billion won and an operating profit of 21.5 billion won in the first quarter of the year. Of particular note is the operating profit growth of 21.8 percent from a year earlier.

This was enabled by increasing car prices, particularly for exports. A surging number of Korean used cars are being exported to Russia and countries in Central Asia and the Middle East, such as Kyrgyzstan, the United Arab Emirates and Jordan.

Data from the Korea International Trade Association showed that the number of exported used cars in April reached more than 78,000, up 55.7 percent from the previous year. Their combined value came in at over 1 trillion won, up 94 percent during the same period.

“K Car’s valuation is also expected to increase further, in line with the optimistic used car market sentiment here,” an industry official said.

Market analysts also painted an optimistic picture for the short-term outlook for K Car’s earnings growth.

“As of the first quarter of this year, the number of new vehicle sales dropped by 11 percent here, but the market share for K Car in the used car industry increased to a record high of 12.7 percent during the same period,” Hana Securities analyst Ahn Do-hyun said.