Online options feeding boom in secondhand car sales in China

By Li Qiaoyi Source:Global Times Published: 2018/5/15 21:48:40

Illustration: Luo Xuan/GT



 

Secondhand cars are becoming increasingly popular in China, with the nation's auto market maturing and its internet-savvy population availing of a growing number of auto trading sites.

This shift explains the growing investor interest in the country's used car market, which is being powered to a large extent by the internet. It could offer big opportunities, not just for domestic auto trading sites, but also for foreign carmakers and retailers who are gaining greater access to the world's largest auto market.

In a fresh sign of enthusiasm for used cars, China's Craigslist-like classifieds firm 58.com inked a memorandum of cooperation last week with Pang Da Automobile Trade to make joint investments in the creation of an auto e-commerce firm. The classifieds site already has a strong presence in the online auto trading sector, and is aiming for a larger slice of the country's used car market.

Another factor is that cars are increasingly seen as a routine purchase, rather than the special item they used to be. As China's city roads become ever more gridlocked, new car sales seem to have been losing momentum. Figures from the China Association of Automobile Manufacturers showed that new passenger-car sales totaled 24.72 million units in 2017, a rise of just 1.4 percent year-on-year, down sharply from the rise of 14.93 percent in 2016.

But at the same time, sales of secondhand cars have been surging, even though they are currently only around half the level of new car sales. This is the reverse of the situation in the US, where the ratio of used to new car sales is more than two to one.

Sales of used cars hit 12.4 million last year, a rise of 19.33 percent from the year before, according to the China Automobile Dealers Association. And used car sales will outnumber new car sales by 2020, according to the association's estimate.

In an effort to support used car sales, it was announced in March in the annual government work report that barriers to used vehicles being sold between provinces would be removed. 

Online sales have contributed a lot to this used-car boom, even though brick-and-mortar retailers still account for a big chunk of the market.

Chinese people are increasingly comfortable with the idea of using smartphones as a medium for various trading activities, and the growing popularity of online auto trading platforms that make buying used cars easier, more transparent and affordable is also galvanizing demand.

The likes of 58.com, renrenche.com and guazi.com have not been wasting time. Advertisements from these online auto trading platforms have proliferated since last year, and buying cars online has become a default choice for many people. The platforms also offer various services, such as car valuation, safety inspections, insurance programs, and used car financing, among others.

Foreign automakers are seeking ways to profit from the trend as well. Secondhand car sales data from 58.com revealed that the Volkswagen Jetta, Honda Accord and Audi A6L were the top three in terms of used car sales rankings during the first quarter of 2018.

Foreign car firms have instructed many of their Chinese dealerships to start offering sales of certified preowned vehicles as well as new cars.

Given the growing preference for online purchasing, foreign automakers would be wise to make this shift as well and align their China market strategies more intimately with the nation's online appetite.

With the country working on substantial cuts in auto import tariffs and moving to relax foreign ownership limits in the automobile sector - the shareholding limits will initially be scrapped for new-energy vehicle manufacturers before being applied to the overall sector - foreign new-energy cars are expected to get a boost.

Some foreign retailers of used cars, such as Japan-based Gulliver International, entered the Chinese market a long time ago. At that point it might have been too early to tap into the country's preowned car market, but now would be a good time to translate all that experience into success in this promising area.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn




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