Korean oil refiners ramp up car wash business amid declining profit margins

By Park Sae-jin Posted : May 7, 2024, 15:16 Updated : May 7, 2024, 15:26
Getty Images Bank
[Getty Images Bank]

SEOUL, May 07 (AJU PRESS) – Major Korean oil refiners are expanding their presence in the market of automatic no-brush tunnel car washes as part of efforts to improve their bottom line as higher oil prices and operating costs are squeezing their profit margins.

HD Hyundai Oil Bank signed a cooperation agreement with domestic unmanned no-brush car wash service operator Come In Wash last week to accelerate the distribution of an automated no-brush tunnel car wash system to its gas stations.

The major refiner, which currently operates 13 no-brush washers across the country, plans to install the high-pressure water jet car wash system to about 300 gas stations directly managed by the company.

"Gas stations are now transitioning from simple refueling spaces to total energy platforms," HD Hyundai Oil Bank's business operation director Park Ki-cheol said in a statement Friday. "We will make efforts in the car wash market to provide better services that meet diversified customer demands."

SK Energy is already a major player in the market. Focusing on attracting savvy customers who wish for high-quality, quick and safe car wash services, the company joined hands with touchless car wash service operator AUTOSTAY in 2022. The petroleum product subsidiary of SK Innovation released a monthly subscription plan for 30,000 won ($22), offering subscribers unlimited car wash services once a day for a month.

Their diversification moves came as the average operating profit margin of gas stations dropped from 2.5 percent in 2019 to 1.8 percent in 2022 and observers predict lower margins for 2024, affected by increased oil prices and the spread of electric vehicles (EVs). The Korean government plans to increase the number of registered EVs to more than 7.8 million units by 2030 from the current 550,000.

According to Insights Leader Automotive & Spare Parts, a global automobile market analysis firm, Korea, with about 26 million registered vehicles, has a car wash detergent and soap market valued at $9 billion growing at an average annual growth rate of about five percent in 2023. This growth is primarily driven by car detailing enthusiasts, who typically spend an average of about 15,000 won per visit to a self-car wash center.

While about 50 percent of gas station operators generate additional revenue by operating automatic tunnel car wash systems, which cost around 5,000 won per vehicle, some drivers express concerns about potential damage to their car's paint and coating from the hard plastic brushes used in such systems.

As a result, many consumers favor no-brush tunnel wash systems, which utilize specialized detergents and high-pressure water jets, despite a higher average cost of about 13,000 won per service.
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