Journal Archive

As shown in Fig. 1, the size of the car tuning market before the COVID-19 pandemic was KRW 39 trillion in the United States, KRW 26 trillion in Germany, KRW 16 trillion in Japan, and KRW 3.6 trillion in Korea. The size of the global tuning market has been steadily increasing despite the COVID-19 pandemic. As shown in Fig. 2, according to the SEMA report, the US market, which is the largest tuning market, continued its growth trend with an all-time high of USD 47.89 billion in 2020.⁵⁾

Fig. 1 
Pre-pandemic tuning market size

Fig. 2 
2021_SEMA_MKT_report

However, since the domestic tuning market has a very small market size and sales performance compared to the global automobile tuning market, there is an urgent need to prepare measures to revitalize the market.

The automobile tuning market is largely divided into core industries and related industries. The core industries are divided into manufacturing and service industries, while the service industry is the automobile structure/device change service industry, which is the secondary market of the core industry related to automobile tuning.

To classify the primary and secondary markets, the manufacturing industry belongs to the primary market, the before-market, while the sales and service industries belong to the secondary market, the after-market.

When analyzing the industry with the largest market share based on the number of businesses that can be identified from the results shown in Fig. 4 along with the sales size of the domestic automobile tuning market by year shown in Fig. 3, the domestic tuning market sales increased at an average annual rate of 0.64 % compared to 2015. The sales settlement in 2020 shows a decrease of -0.67 %(KRW 72.2 billion) compared to the previous year. The industry with the largest market share is the auto parts and interior product sales sector, with a market share of about 54 %.

Fig. 3 
Domestic tuning market sales trend by year(2015~2020)_KATMO

Fig. 4 
Current status of domestic automobile tuning related businesses

In addition, the automobile parts manufacturing industry occupies second place, accounting for about 25.5 %.

Looking at the graph, the current domestic automobile tuning market mainly consists of simple parts sales focused on dress-up tuning and sales of interior parts rather than actual structural device changes for performance improvement. In fact, the numbers also indirectly prove the lack of professional manpower in the field and the lack of composition by content, which are problem areas in this industry.

The status by sales type in Fig. 5 illustrates this: total sales related to car tuning are about KRW 4.386 trillion. Sales of automobile tuning parts and interior products are about KRW 1.8 trillion. The automobile tuning accessory manufacturing industry is about KRW 1.8 trillion.

Fig. 5 
Sales by item of domestic automobile tuning-related businesses

The value of the automobile tuning body manufacturing industry is about KRW 800 billion. Automotive structural equipment change business(manufacturing sector) is about KRW 520 billion. Vehicle structural equipment change service business(service sector) is KRW 150 billion. The automobile technology and training industry is worth KRW 34 billion. It was thus confirmed that the service industry (service industry field) for the automobile structural system change service industry was not active.

In the car tuning market, the category that can be felt activated by consumers is the secondary market, the after-market sector, so a realistic increase in sales will appear only when transactions in the service-related industries in the automobile maintenance market are actively conducted. Based on that, the vision of the automotive tuning industry can be recognized.

In Fig. 6, the current status of domestic automobile tuning-related businesses is summarized in the form of a distribution chart for each metropolitan city and each region.⁶⁾ A look at the distribution map of tuning-related businesses indicates that they are concentrated in Seoul, Gyeonggi and metropolitan cities rather than being evenly distributed in each region.

Fig. 6 
Distribution of the number and status of domestic tuning-related companies

Why the development rate is slow, especially in the service sector, needs to be examined. First, it is worth comparing and analyzing the scope of overseas regulations and market environmental factors.

As shown in Table 1, the United States does not have separate regulations for car tuning parts, but the tuning tolerance range is free within the range that does not impair the environment and safety compliant with FMVSS. Information on product quality is provided by quality assurance in connection with automobile tuning insurance and SAE(Society of Automotive Engineers) mark. The National Highway Traffic Safety Association(NHTSA) under the Department of Transportation(DOT) protects consumers’ rights and interests by testing the products for use in the United States.

The core of the US automobile tuning industry is ‘guaranteeing consumers’ freedom of choice’ and promoting ‘reliability that consumers can rest assured through appropriate insurance linkage’, thereby revitalizing the automobile tuning market.

As shown in Table 2, Germany and the UK representing Europe, have stricter certification standards for automotive tuning parts than for OEM parts, and they manage certification through certification agencies such as TUV.

These operate a separate automotive tuning parts certification system. Automotive tuning parts certified according to UN Regs(UN Regulations) and EEC Regs (European Community Regulations) can be used. In Germany, automotive tuning parts approved by KBA according to StVZO can also be used.

Automobile ABE(General Operation Approval for Auto Parts), ABG(General Approval for Parts), and TGA (Conformity Approval) should be complied with. The reason for such strict regulation is to secure reliability for consumers. Assuming that certified parts are installed, the tolerance for tuning is similar to that of the US, and the UK has the world’s top-class motorsports industry and clusters worth about $6.4 billion.

The core of the UK and German car tuning industry is to prioritize “securing reliability that allows consumers to feel safe through a strict pre-certification system that guarantees consumer safety”. In the case of finished cars, manufacturers operate a tuning subsidiary to secure consumer trust from the production stage. In particular, the UK is revitalizing the automobile tuning market as the world’s largest motorsports cluster while possessing the world’s best motorsports business.

As shown in Table 3, domestic technology and safety standards(security standards) in Japan shall apply within the scope of general structural change(remodeling). Autonomous standards are more strictly managed and certified by private organizations to gain consumer trust. Under the leadership of NAPAC, strict standards are applied to car tuning reports.

If not subject to an automobile tuning report, the association independently operates its own standards and test methods and perform private certification by issuing its own certificates.

The core of Japan’s car tuning industry is revitalizing the car tuning market by promoting “a market environment in which consumers can access car tuning more easily and comfortably through strict private autonomous certification,” while “guaranteeing consumers’ free choice” like the United States.⁷⁾

As shown in Fig. 7, the top factor pointed out as the biggest problem in the development of the automobile tuning industry remains the difficult tuning regulation system.

Fig. 7 
Ranking of factors impeding the development of automobile tuning industry

The second factor is the lack of publicity marketing, the third factor is the lack of professional manpower, and the fourth factor is the problem of negative consumer perception. Although these deterrent factors have been alleviated more than before, the real demand in the field involves realistic tuning deregulation that can help revitalize the development of various contents.

In the structural change approval, there are still many difficult items to determine which parts require approval or which parts do not, so it is not easy to create and apply a system for each of so many items. It is necessary to develop the tuning parts certification system more efficiently and to make automatic structural change approval by classifying the installation of certified parts alone as minor tuning. By granting follow-up management responsibility to installation companies, the trust of consumers must be secured.

In the case of tuning work to improve the performance and safety of products in the insurance sector, it should be included in the special terms and conditions for discounts on premiums. In case of repairs due to accidents or maintenance and repair, an environment should be prepared so that the use of certified tuning parts can be revitalized by related companies.

As shown in Table 4, despite the fact that automobile-related educational institutions are evenly distributed by size and region, there are only five automobile tuning-related university-level specialized educational institutions in Korea. Thus, it is necessary to promote the environment of professional education by reorganizing the university’s curriculum.

As shown in Fig. 8, the majority made a positive response to the automotive tuning parts certification system, but 29 % responded that the existing situation should be maintained.

Fig. 8 
Priority of factors impeding the development of automobile tuning industry

The fact that only 7 % responded that the system has developed very much means that the perfect trust in the system is still not realistic for consumers, and this is due to negative perceptions about car tuning.

In addition, even those in the field know that the tuning parts certification system must be thoroughly managed, but the system remains underdeveloped because it requires further improvement of procedures and regulations. It also requires a computer network optimization base that can perform follow-up management.

Based on KOTSA’s survey of the general public, 63 % of the respondents thought that car tuning was illegal, while 17 % expressed concerns about safety issues. This indicates the consumers’ deep negative perceptions about car tuning.

Illegal car tuning does not aim to improve basic performance and causes indirect and direct concerns about the safe operation of cars.

As shown in Table 5 and Fig. 9, in the five-year mortality rate for road traffic accidents in major OECD countries, Korea holds the infamous second place after the United States.⁹⁾

Fig. 9 
Five-year traffic accident mortality in major OECD countries overall

In particular, a safety defect caused by illegal tuning of a vehicle can be even more fatal in the event of a vehicular accident.

As shown in Fig. 10, in order to ultimately trigger the vitalization of the automobile tuning market, it is necessary to create an environment in which the market can purify itself through the presentation of clear guidelines from the institutional system.

Fig. 10 
Final stage of the model to revitalize the domestic automobile tuning market

The key points are summarized as follows: efficient management of the traceability system should be implemented; submission of tuning parts certification test reports to the governing body should be mandated; in the case of product defects, if insincere reporting is found, punitive measures should be strengthened. With these measures, it is necessary to meticulously manage the tuning practice from the product development stage and create an environment in which the market can self-correct itself.

As shown in Figs. 11~12, from 2015 to December 2020, there were 7,966 companies in specialized tuning and tuning of supplies and accessories in Korea. These companies had 18,525 employees in their roster.¹⁰⁾

Fig. 11 
Number of domestic tuning industry businesses by year 2015-2020_KATMO

Fig. 12 
Trends in the number of employees in the domestic tuning market by year 2015-2020_KATMO

Due to the impact of the COVID 19 pandemic, the number of companies specializing in car tuning and the number of employees decreased slightly. The market size will gradually increase as the global car tuning market resumes its growth. In order to revitalize the automobile maintenance market, it is necessary to minimize the operating cost of the companies, realize the cost of tuning parts and labor, and improve the operating profit.

As the distribution structure of the automobile tuning parts industry improves, customer convenience increases and unnecessary expenses are accordingly reduced, thereby resulting in cost savings.

Social benefits generated by strengthening the certification system include parts certification-related fees, composition costs obtained from computer system operating costs, and structural change inspection fees.

If the costs for equipment and facility investment including testing equipment for initial certification facilities are excluded, it is expected that there will be no significant increase in the cost of testing and certification facilities in the future, since only maintenance costs such as regular equipment quality inspection are required. However, as the number of certification items increases, the cost increases due to the addition of test equipment or increased inspection items. Yet, improvement of the parts certification system is essential, and certified parts that customers can trust will alleviate the follow-up burden of the after-market and further increase customer trust and satisfaction.¹¹⁾

The cost-benefit ratio is mainly used when analyzing the feasibility of public investment projects. As the distribution structure improves and costs decrease, the benefit ratio becomes higher.

Therefore, to further boost the development of the tuning parts industry, it is necessary to increase the environmental construction of certification testing institutions and clusters. Since this is done through government-funded projects, high-value-added technology should be secured to minimize the ratio of facility cost and parts production cost in order to improve the benefit value compared to the initial cost. Measures should also be determined to improve the benefits through the simplification and efficient management of the certification process.

In conclusion, the ratio of total benefits converted to present value divided by total costs should be improved so that 1 or higher can be obtained to enhance the economic value of the automobile tuning industry.