CHINA: New car sales surge boosts used car sector
The rapid growth of the new vehicle market in China has also boosted used vehicle sales there, according to a local report.
Ministry of Commerce data on 255 key vehicle trading markets showed that 1,965,900 used vehicles were traded in China in 2006, up 31.5% year-on-year - higher than new vehicle production volume and unit sales growth last year, the China Economic Net website said.
The report said that, in most developed countries, the number of sales of used vehicles is usually two to three times that of new vehicles but China is different. Last year, 7,238,000 and 7,184,000 vehicles of all categories were produced and sold respectively, while used vehicle unit sales were less than a third of the production and sales volumes, suggesting the used-vehicle market could sustain substantial growth.
Citing China Automobile Dealers Association (CADA) statistics, China Economic Net said used vehicles sales increased 18.36% year on year to 805,000 vehicles nationwide from January to May and, although the growth rate slowed slightly, the used vehicle trade remains robust.
The report also noted that high new vehicle sales in recent years should trigger a new "era of massive automobile replacement this year", with the market expected to grow steadily in future.
According to China Economic Net, a Sinotrust survey showed that 71.2% of vehicle owners choose to replace used vehicles in three to five years, with the bulk changing cars around five to 6.5 years on average. The majority of Chinese vehicle owners will also sell their used cars before having them scrapped.
The report added that, in major markets such as the capital Beijing, the proportion of new to second-hand sales is increasing steadily. It cited a CADA spokesman as saying that 170,000 used automobiles were traded in Beijing in the first half of this year while the ratio between sales for second-hand and new automobiles is 0.85:1, compared with only 0.54:1 in 2005.
China Economic Net the new laws governing used vehicle trading that took effect on 1 October 2005 had altered trading patterns in China.
Chen Yuehong, director of department of market system development at the ministry of commerce, said the single fair-style trade market was changing to the conventional, branded, multi-branch outlets more familiar to developed-market buyers.
The report added that vehicle manufacturers had launched their own used vehicle brands - these include Shanghai GM's 'Chengxin Second-Hand Automobile', Audi's 'AAA Second-Hand Automobile' and Guangzhou Honda's 'Xiyue Second-Hand Automobile' - while some large used-car chains were developing their own brands.
Wang Xudong, deputy general manager of Guangzhou Anyi Auto Trade, told China Economic Net he expected the business model of multiple outlets [stores] offering credit facilities would rapidly increase its share of the China used vehicle market in the next two to three years while foreign chain used-vehicle auction and trading units would rapidly develop their respective networks nation-wide.
He predicted the traditional fair-style traders would have to change to compete or would ultimately disappear.
Li Xiaokuan, deputy director-general of department of market regulation of state administration for industry and commerce, suggested local automakers develop the sale of branded used cars to promote the sale of new vehicles and vice versa.
"Replacement of second-hand automobiles can not only become a new point of profit growth for enterprises but also stimulate the sale of new automobiles," he told China Economic Net.
He added that automakers should promote branded second-hand vehicles as part of their overall marketing strategy and sell both new and used vehicles from so-called '4S stores'.
"Some people doubt whether 4S stores have the right to deal with second-hand automobiles, Li Xiaokuan said. "Actually, there is no provision restricting 4S stores from dealing with the replacement of second-hand automobiles in [the government's] Administrative Measures on Trading Second-hand Automobiles".