South Korean retail giant Lotte Group plans to enter the foreign car dealership business as part of efforts to strengthen its penetration into the automotive sector, industry sources said. 

“Lotte is nearing a deal to take over the dealership business license for Audi cars from Charmzone Motors,” an industry insider who is close to the matter told The Korea Herald under the condition of anonymity.

If the deal is sealed as planned, sales of Lotte in car-related businesses (except car insurance business) will reach up to 1.3 trillion won ($1.1 billion).

The retail giant, however, declined the comments on the deal, saying the rumor is groundless. 

Lotte Group has stepped up business expansion in the auto sector since its resort business arm Hotel Lotte took over 100 percent shares of KT Rental from KT and other investors for $906 million last March. 

The nation’s largest car rental company, whose revenue exceeded 1 trillion won for the first time last year, started its business again from July 1 under the new name Lotte Rental.

In the wake of the car rental business, the nation’s largest department store and duty-free shop operator has set its eyes on faltering Charmzone Motors, a local dealer of Audi cars.

The Audi car dealer posted 248 billion won in sales last year, up 16.3 percent on-year. Despite the continued growth in sales, however, Charmzone Motors recorded a loss in operating profits last year, affected by rising competition among foreign car brands, and continued facility investments.

Industry watchers said Lotte could revive the Audi dealership business by injecting capital and creating a synergy effect with its car rental business arm. Lotte Rental, for instance, has recently launched long-term rental car services for foreign brands.

If Lotte joins the foreign car dealership market, which has grown by double digits for the past few years, more conglomerates, including SK and CJ, are expected to join the fray.

Kolon and Hyosung are presently the most proactive conglomerates in the foreign car sales business. Kolon Global is the No. 1 dealer of BMW cars in Korea. Hyosung has dealership rights to foreign car brands including Mercedes-Benz, Lexus and Toyota. Recently, it gained sales rights for Maserati and Ferrari cars by acquiring Forza Motors Korea.

By Seo Jee-yeon (jyseo@heraldcorp.com)