China’s thirst for cars is breaking the trend in desire for new over used. It’s also changing the way the industry operates from all angles. The new versus used philosophy for so many years has driven Chinese car buyers towards 4S dealerships instead of the used car markets or used car websites. New car buyers in China keep their cars for an average of over 5 years, whereas other mature markets such as the United States have a turnover of 3-4 years.
What does this mean? That the huge glut of new cars sold since 2007 through 2011 are now in the phase coming out of manufacturer’s warranty and into the markets as the next most desirable used vehicles. The reality is, people are banking on to the fact that a 4 year old brand name car is a great option if you’re budget conscious – and what better status symbol than a nice new looking car
The used car industry is evolving quickly but is still in a state of flux. Different provinces and cities have differing levels of organisation and structure. Problems persist around registration transfers, tier 1 city emission restrictions and minimum statutory warranty obligations, but they are changing quickly.
At this point the rapid growth is proving too hard to resist for business savvy Chinese and local governments are now getting in on the action. Some growth areas have government backing for buildings or land, some are 100% private and others are a mixture.
In larger cities where registration transfers are more difficult, companies are accredited by the government helping to set up transfer facilities inside markets – providing a faster more convenient service and garnering more customers.
At present, used car sales facilities can be considered on a number of levels; in the capital and large cities, there are used car markets. These started as outdoor facilities on flat ground but are being upgraded all across the country into multi storey car park style market places with numerous dealers working in and from them.
Outside of the car markets are the independent operators. They are more like those found in the western world, but differ in that, the space available to operate from is often limited to the ground floor of buildings instead of a plot of land. The different quality and price points of used cars is typically represented by the selling environment.
The cheaper car dealers operates from a small yard or fenced off area and have low staff numbers with low overheads. They can often sell their entire stock each month but offer limited additional value for their clients. Cheap cars can be found, but their odometers and history are unknown.
The next level are the quality used car dealerships. These are independent businesses operated by sole traders or partnerships and on average stock 10 to 30 cars. Many have nice glass font showrooms and tiled floors, they look fantastic and rightly so attract a certain clientele.
For instance, Shanghai has approximately 60 such dealerships around the city and these dealers are very quickly coming to grips with mature market techniques and systems.
Top of the line is the prestige used car dealership. These are businesses set up specifically to deal in high end and exotic vehicles and some are enormous. In most cases, the majority stock 10-20 cars and have a narrow target market. These dealerships are offering over the top service to attract high end customers and in China, there appears to be no shortage of such clients.
Right now there are numerous new multi-level facilities mid construction around China. Some of these new markets aim to combine new cars on some floors, used on others and a range of pre inspection/post sale service and after market services.
