Recent reports from South Korean media indicate that the South Korean National Assembly is pushing for legislation to regulate synthetic nicotine and plans to impose new taxes on e-cigarette products (South Korea plans to include synthetic nicotine in tobacco regulation, causing e-cigarette prices to increase significantly). In order to better understand the impact of this policy change on the South Korean e-cigarette market, 2Firsts has reached out to industry professionals in the South Korean e-cigarette market for more information.
According to the South Korean Tobacco Business Act, only products using tobacco leaves and natural nicotine as raw materials are considered tobacco. Therefore, South Korea taxes natural nicotine but not synthetic nicotine, leading to as high as 90% of products in the South Korean e-cigarette market using synthetic nicotine as a tax evasion strategy. "The proportion of synthetic nicotine in the South Korean market is already quite high, accounting for approximately half of the market share. However, many natural nicotine products are disguised as synthetic nicotine, which has caught the attention of the National Assembly," the industry insider mentioned.
As the South Korean government tightens regulations on the e-cigarette industry, industry insiders have told 2Firsts that if the government officially imposes taxes on synthetic nicotine products, the monthly consumption of e-liquid in the South Korean market could plummet from 50 tons to 20 tons (a 60% decrease). At the same time, the unified tax policy has had a huge impact on the South Korean open system market. "Due to the increase in taxes, the cost of bottled e-liquid has significantly risen, with a 30ml bottle of e-liquid potentially costing 100 yuan in taxes. This has made e-cigarette products gradually become 'luxury items', leading many consumers to turn back to traditional cigarettes," added industry insiders.
When discussing how the South Korean e-cigarette industry is adapting to the government's new tax policies, industry participants explained to 2Firsts: "Currently, a third alternative to synthetic nicotine and natural nicotine has emerged in the South Korean market, which primarily consists of methyl and caffeine.
The industry insider also shared the current situation of the e-cigarette market in South Korea with 2Firsts. "The market share of disposable e-cigarettes in South Korea is rapidly increasing, currently accounting for about 20% of the market, while the market share of open system e-cigarettes is between 40% and 50%." He also mentioned that although the sales situation in the local market in South Korea is relatively stable, the influx of domestic merchants and the accumulation of goods have led to a large amount of inventory. Even if imports were to stop, this inventory would be enough to support sales for a year.
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