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China’s used vehicle trade booms

Statistics from the China Automobile Dealers Association (CADA) showed that the used vehicle trade in China rose to over 1.9 million units in 2006, up 31.5 percent over the previous year. Of the total, 360,000 were trucks, up 8.32 percent; 453,300 buses, up 14.57 percent; and 819,300 cars, up 54.11 percent.
 
Growth in used car sales was 6.27 percent higher than that of new car sales last year. However, China’s used car trade is only 26.4 percent of that of new cars. In the United States, used car sales are two to three times new car sales, while in China three out of four cars sold are new ones.
 
China is now the second largest auto market in the world but its vehicle parc stands at only 38 million units. Out of every 1,000 Chinese, only 30 own a car, compared with the world average of 120. Consequently, the rapid increase in used car transactions last year was soon curbed by a shortage of supplies.
 
The rapid increase in car ownership over the last few years has stimulated trading in second-hand cars across the country, particularly in economically developed regions. The top five cities and provinces in used car trading are Beijing (322,000 units in 2006), Guangdong (307,300), Shanghai (222,300), Zhejiang (180,300) and Shandong (113,900).
 
A recent web survey says that 19 percent of Chinese consumers have the intention to buy a car in 2007 and that 18.8 percent of car owners intend to buy a second car soon. With nearly 41 percent of current car owners planning to buy a new or used car, China’s used car market is expected to boom in years ahead.
 
In recent years annual growth in used car trading in China has exceeded 25 percent. The volume of trade is expected to hit 5.3 million units in 2008, according to a recent Ministry of Commerce forecast.
 
For an increasing number of owners, the time has now come for a new car, which will help create a huge used car market. The recent enforcement of a policy restricting the use of environmentally unfriendly cars has led to an immediate exodus of used cars from the city. The potential business has attracted dealers as well as automakers.
 
Automakers such as FAW-Volkswagen, Shanghai-GM, Dongfeng-Nissan and Chery have in recent years started their own used car trade-in businesses. Guangzhou-Honda will begin used car certification in March this year to create a more transparent platform for transactions.
 
Manheim Auctions, a U.S.-based leading auctioneer for used vehicles, opened its second joint auction venture in Shenzhen, south China, last month, following the start of its Shanghai operations last November. Neville Green, president of the joint venture, predicts that China’s used car sales could exceed 6 million units a year by 2011.
 
Beijing, with the largest vehicle parc of all Chinese cities, is at present the largest used car market in China. The sales volume of used cars was close to that of new cars last year.
 
Unexpectedly, however, used car transactions have not kept pace with that of used cars in Beijing so far this year. This may be due to rapid price cuts on new cars, where dealers now typically offer a ¥5,000 discount for a ¥100,000 car in Beijing.
 
Observers say that the used car market is plagued by a number of problems. First, there is a lack of information, making it difficult for the used car market to win the trust of customers. Second, with relatively easy access to the market, there are too many used car dealers. Finally, the means used to evaluate used cars are old-fashioned and ineffective. Industry officials are calling for legislation to solve these problems.

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