Sales of luxury cars have fallen sharply in South Korea. Reason: green license plate.
This measure is justified by the fact that tax deductions and the use of company cars for private purposes have not become a habit.
Sales of cars from luxury brands such as Bentley, Porsche and Rolls-Royce fell sharply in South Korea in the first months of the year. One of the main reasons? A simple change to the registration system in which every driver of a company or rental car will now be identified as such. If you have a green license plate, it is a company car.
Big changes to Korean license plates. The measure was proposed in 2023 and is already being implemented this year: company cars that are not for personal use must have green license plates. Tax deductions and the ability to deduct vehicle expenses as a business expense remain, but the license plate will scream from the rooftops that the car cannot be legally driven for personal use.
According to the Ministry of Territory, Infrastructure and Transport, the aim was to discourage drivers from using company vehicles for personal purposes by taking advantage of these tax advantages. New car registrations fell by 1.3% in 2023, while company car registrations over the past five years increased by 2.4% over the same period.
The average cost of the company’s vehicles purchased between 2018 and 2023 was $324,000, in line with luxury brands such as Bentley or Rolls-Royce.
A sneaky license plate… and a scary one. According to Korean sources, sales of luxury cars fell sharply after the implementation of this measure. Any vehicle valued at more than 80 million won (US$57,800) purchased as a company vehicle must have this bright green license plate.
The measure appears to be working by making visible the misuse of luxury cars as private vehicles or supercars purchased as company cars.
“Generally, few customers or businessmen prefer to buy cars with green number plates due to the negative image that is created about leased cars. This will dampen the overall sentiment of businessmen who are planning to buy luxury cars for fleet use.”
Anonymous representatives of luxury brands say that businessmen do not want to buy cars of this type: they do not create a good image.
Effect of the measure. In terms of specific numbers, Bentley registrations fell 77% in the first three months of the year, Rolls-Royce fell 35% and Porsche fell almost 23%. Something similar is happening with Lamborghini, which fell 22%.
In 2023, corporate cars made up at least 40% of registrations: they now fall below 28%, although there is still a year to go. Despite this, such low numbers have not been observed since 2013.
This is not the only reason. Identifying corporate cars with green license plates seems to be working, although this is not the only reason why demand for luxury cars is declining in Korea. Company executives told the source that demand for luxury cars was also declining in the absence of “immediate signs of economic recovery.”
Despite this, the Korean economy is resisting the onslaught of high global rates. The OECD projects the country’s growth to 2.2% for 2024, which is higher than the Bank of Korea’s own forecast (2.1%).
Image | Martin Cutler
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