Price Wars Hit Used Car Market: So How to Build a Healthy Market? (AI Translation)
Listen to the full version
文｜财新周刊 安丽敏
By An Limin, Caixin Weekly
国内二手车交易进入了活跃阶段。公安部交管局7月8日披露，2024年上半年，全国共办理汽车转让登记业务1626万笔，同比增长53.8%。另据中国汽车流通协会（下称“流通协会”）统计，2024年前五个月，二手车累计交易量同比增长8.7%至786.4万辆。
The domestic used car market has entered an active phase. The Traffic Management Bureau of the Ministry of Public Security disclosed on July 8 that a total of 16.26 million car transfer registrations were processed nationwide in the first half of 2024, marking a 53.8% year-on-year increase. According to the China Automobile Dealers Association (CADA), the cumulative transaction volume of used cars in the first five months of 2024 grew by 8.7% year-on-year to 7.864 million units.
这两个数据与二手车实际交易量或许存在偏差，但市场规模稳步提升的趋势毋庸置疑。二手车交易量正在逐步接近新车销量，当二者数量之比达到1 ： 1时，业内通常认为二手车行业走到拐点。
These two figures may deviate from the actual volume of used car transactions, but the trend of steady growth in the market scale is undeniable. The volume of used car transactions is gradually approaching new car sales. When the ratio of the two reaches 1:1, the industry typically considers it a turning point for the used car sector.
一名广州的资深二手车商认为，国内拐点最快在2025年就可以出现。二手车拍卖公司汽车街（02443.HK）在招股书中引用市场机构灼识咨询的观点称，到2028年，中国社会保有汽车的平均车龄将超过八年。依据美国和日本等成熟汽车市场经验，届时将会有大量旧车进入二手车市场，行业达到根本拐点。
A veteran used car dealer in Guangzhou believes that a turning point in the domestic market could appear as early as 2025. AutoStreet (02443.HK), a used car auction company, cited the market insights of CEC Consulting in its prospectus, stating that by 2028, the average age of cars in China will exceed eight years. According to the experiences of mature automotive markets in the United States and Japan, a substantial number of old cars will enter the second-hand car market by then, signaling a fundamental turning point for the industry.
- DIGEST HUB
Digest Hub
Back
- The domestic used car market in China is growing rapidly, with a 53.8% year-on-year increase in car transfer registrations in the first half of 2024 and an 8.7% year-on-year growth in the first five months of 2024.
- Despite this growth, 80-90% of used car dealers are currently operating at a loss due to intense competition and the impact of price wars in the new car market.
- The industry faces challenges such as fragmented market sources, lack of authoritative valuation systems, and regulatory bottlenecks, although exports and favorable policy changes offer potential avenues for improvement.
## Summary of the Content
The domestic used car market in China has become increasingly active. By the first half of 2024, the Traffic Management Bureau reported 16.26 million car transfer registrations nationwide, a 53.8% increase compared to the previous year. Additionally, the China Automobile Dealers Association (CADA) noted that used car transaction volumes in the first five months of 2024 grew by 8.7% year-on-year, reaching 7.864 million units [para. 1].
The used car market is gradually reaching the scale of new car sales, with experts predicting that a turning point for the market may arrive as early as 2025. By 2028, the average age of cars in China is expected to exceed eight years, increasing the number of old cars entering the second-hand market [para. 3].
Despite market growth, many used car dealers face significant financial challenges. By mid-2024, it was estimated that over 90% of used car dealers were experiencing losses, exacerbated by continuous price wars in the new car market since the beginning of 2023 [para. 4][para. 8]. The used car industry is highly fragmented, with low barriers to entry making competition fierce among small-scale dealers [para. 5].
Many businesses are now pivoting towards exporting used cars, especially after the Russia-Ukraine conflict in 2022 created opportunities. Nonetheless, used car dealers face difficulties in competing with new car dealers in exporting "zero-kilometer used cars" due to less advantageous vehicle sourcing [para. 6][para. 7].
The market dynamics have seen many used car businesses like Guazi, Uxin, and Renrenche struggle to maintain profitability, lacking a leading transaction platform. Expectation of the market achieving transaction volumes equal to or exceeding new car sales has yet to materialize [para. 9].
China’s unique automobile market landscape contributes significantly to the struggles in the used car sector. Unlike mature markets, China’s automobile market is relatively new, with personal car consumption gaining traction only after China joined the World Trade Organization in 2001. The average car age in China was just 6.5 years as of 2023, with the new car market still in flux, compelling the used car market to follow its lead [para. 10].
Efforts to improve the market included CADA's call for criminalizing "odometer tampering" to foster trust. Regulations and policies such as lifting restrictions on used car exports and implementing trade-in initiatives have also been rolled out, alongside expectations of increasing used car transactions by 45% from 2023 to 2027 [para. 12][para. 13][para. 25][para. 26].
Despite favorable policies, the price war in new cars disrupted the used car market’s rhythm. The decline in new car prices leads to depreciated values for used cars, making it challenging for dealers to remain profitable. The price competition in new energy vehicles, now taking significant market share, further complicates matters [para. 19][para. 20][para. 27].
On the international front, used car exports have grown since China began exploring this market in 2019. By 2023, nearly 300,000 used cars were exported [para. 22]. However, the fragmented domestic used car market, characterized by small-scale operations and lack of well-organized trading platforms, remains a fundamental obstacle to its development [para. 23][para. 24].
Ending on a note for future direction, experts stress the need for car manufacturers and dealers to play leading roles in stabilizing the market and developing financing lease schemes that lower the entry threshold for new cars while stabilizing used car supply [para. 29][para. 30].
- Auto Street
汽车街 - Auto Street (02443.HK) is a Chinese second-hand car auction company. Despite being China's largest second-hand car service platform, it accounted for only 1.3% of the domestic market in 2022. It faces challenges such as preventing direct transactions between buyers and sellers, as its operations are hindered by a fragmented market and familiarity among local dealers.
- Uxin Used Cars
优信二手车 - Uxin Used Cars (NASDAQ: UXIN) listed in 2018 and has since faced financial challenges, even nearing delisting in 2020. Despite significant investment, China's used car market hasn't developed as anticipated, with Uxin continuing to operate at a loss. The market remains fragmented, and major players haven't emerged, highlighting ongoing industry difficulties.
- Guazi Used Car
瓜子二手车 - Guazi Used Car is one of the prominent internet platforms that emerged over the past decade in China's second-hand car market. Despite significant investments and anticipation that China would closely follow the U.S. model of high second-hand car transactions, the market hasn't developed as expected, and Guazi, like its peers, hasn't yet dominated the industry.
- Renren Car
人人车 - Renren Car is mentioned as one of the internet platforms, alongside Guazi and Uxin, that emerged in the Chinese used car market over the past decade. These platforms attracted significant investment but failed to meet expectations, as the market didn’t grow as anticipated. Renren Car, like its peers, struggled, and the Chinese market has yet to establish a leading used car platform or dealership.
- Seaside Car (Nanjing) Technology Co., Ltd.
海上车（南京）科技有限公司 - Seaside Car (Nanjing) Technology Co., Ltd. specializes in exporting used cars. The company's CEO, Li Huai, has over 20 years of experience in the automotive industry, previously leading the used car business at Chery Automobile. Despite the company's primary focus on exports, the article indicates that the majority of used car dealers in China are currently facing significant financial losses.
- March 2024：
- The lifting of restrictions on qualifications for used car exports domestically created favorable conditions for the export of used cars.
- By the first half of 2024：
- The proportion of second-hand car dealers experiencing losses could exceed 90%.
- July 4, 2024：
- Luo Lei stated at a second-hand car conference that roughly 80% of second-hand car dealers are currently operating at a loss.
- July 8, 2024：
- The Traffic Management Bureau of the Ministry of Public Security disclosed that a total of 16.26 million car transfer registrations were processed nationwide in the first half of 2024.
- PODCAST
- MOST POPULAR
Sign in with Google
Sign in with Facebook
Sign in with 财新