The world's largest car manufacturer, General Motors, has teamed up with Chinese second-hand car retailer Shanghai Automotive Industry to capitalise on the increasing demand for used cars in China. With residual values in other countries falling, the growing Chinese market offers tempting opportunities for western manufacturers.

The GM Shanghai joint venture aims to establish China's largest network of used car outlets. GM will contribute to this goal by establishing used car dealerships at 50 of its Chinese Buick outlets.

China represents a particularly fast paced growth market for used cars, with annual sales increasing 43.7% to 119,888 units in Shanghai alone last year. This demand has in part arisen from Chinese local government efforts to restrict the numbers of new cars sold, in an effort to curb congestion in many areas. As a result, people are turning to used cars as a way of evading this regulatory effort and are driving the growth of the second hand car market.

To capitalise on this growth, GM plans to add used car exchange facilities to fifty existing Buick dealerships in urban locations such as Beijing. Through its Shanghai joint venture, GM has become the first automotive player to address the Chinese second-hand car market directly from its franchised network outlets.

With strong growth expected in the used car sector in the near future, other international manufacturers are following GM's lead. SAIC Volkswagen, VW's Chinese sales agent has plans to open used car sales facilities in 10 of its franchised dealership sites across China this year and other manufacturers are looking to follow this move.

China's huge population and vast economy is proving attractive to western automotive players and joint ventures with local players have long been proven to be the most effective entry point. With used car markets in Europe and North America proving sluggish, and with falling residual values in many countries, the booming market in China is providing a welcome opportunity for major players to grow their operations in the used car sector.

SOURCE: DATAMONITOR COMMENTWIRE (c) 2003 Datamonitor. All rights reserved. Republication or redistribution, including by framing or similar means, is expressly prohibited without prior written consent. Datamonitor shall not be liable for errors or delays in the content, or for any actions taken in reliance thereon.