Auto makers vie for used-car market

• Source: Shanghai Daily
• [08:17 January 19 2010]
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Boost to sales

Selling used cars is one way for car makers to boost sales as fierce competition shaves profit margins of new cars.

According to a report released by the China Automobile Dealers Association, the used car market in China may hit 3 million units this year, rising to more than 4.8 million vehicles by 2012.

In the United States, three used vehicles are sold for every new car sold. In Japan, the ratio is about 2.5. In Beijing, the biggest used car market in China, the proportion is only 0.66. That suggests a lot of room for growth.

The used car market in China will eventually account for two-thirds of auto sales, up from 23 percent at present, the dealers' association said.

Mercedes-Benz now has 15 Star Elite dealerships nationwide and plans to add up to 15 more this year.

"Market analysis shows Chinese consumers prefer to buy used cars from an original equipment manufacturer-backed dealership because this automatically increases the trust in the model," said Bjoern Hauber, general manager in charge of sales and marketing at Mercedes-Benz (China) Ltd.

"Last year, China's used car market grew 30 percent," he said. "It showed tremendous growth potential, which will help dealers enlarge the business and attract a wider variety of customers."

However, industry analysts said the government needs to better support the market by easing regulatory hurdles for second-hand cars.

The central government is drafting rules for the development of the used-car market in China, which may include tax and other incentives.

In addition to name-brand dealerships, there are also numerous trading marts, auction firms and brokerages involved in used cars. Some are disreputable, selling lemons to people who are anxious to get behind the wheel but can't afford a new car.

One clear trend, said industry officials, is that newer vehicles are being traded in sooner.

"The proportion of cars driven by their original owners for only about 18 months is increasing, meaning that sometimes almost brand-new cars are traded in," said Su. "This is because consumers are bombarded with more choices as new car launches intensify."

Currently, up to 60 percent of used vehicles have been driven for less than five years, and the proportion of cars only about 18 months old has grown to nearly 10 percent.

Su said he expects it will take up to two years before used-car sales start to catch up with new car sales.

"That's when the market will really take off," he said.