Chinese warming up to used cars

AP

As car enthusiasts converge on the annual Guangzhou auto show, few have anything except a shiny new set of wheels in mind. But explosive growth that transformed China into the world's largest auto market is also giving life to a new industry - used cars.

Chinese started buying new cars in huge numbers about four years ago, about the average length of time analysts say drivers will stick with a vehicle before trading it in for a fresh model.

The second-hand market is already taking off, with sales growth last year outpacing that for new vehicles. By volume, it is still dwarfed by new cars, which outsold used vehicles three to one. In countries such as the US, that ratio is reversed, highlighting the second-hand market's vast potential to make car ownership affordable for millions more Chinese.

The challenge in China is to develop a modern market for second-hand autos. The business is dominated by thousands of small trading companies that operate out of big trading halls or open-air markets on city outskirts. Vehicles are sold tax free and ownership can be transferred in a day, but quality and fair pricing can be uncertain. By some estimates, four in five used-car transactions take place at these markets.

Different in China

For foreign automakers, "the used car business in China is very different to anything that you would recognise in the Western world", said Marin Burela, president of Changan Ford, the US company's China joint venture.

Global automakers have been slow to add used car sales at dealerships, but are now racing to expand into the business, which will diversify their revenue and help build brand loyalty.

Liu Yu-chen, a 28-year-old snack food entrepreneur, plans to buy his first second-hand car after owning a series of new vehicles, the latest, a Toyota Prado SUV bought in August.

"After conducting a good inspection, you just need to figure out whether the car appears to have been in any accidents," said Liu, as he browsed vehicles at Guangzhou's Guangjun Used Car Market, which houses dozens of small auto trading companies.

He is budgeting up to 1 million renminbi (US$164,000) for a used Land Rover, and doesn't consider the price tag high. Luxury autos tend to be more expensive in China because of taxes and foreign automakers pushing the limits of what they can charge.

"What I want to buy is a well-maintained car, no damage. Scratches don't matter. If there's no big problem with the bumpers, no weird sound from the engine, then I'll consider it," said Liu, who flew from his home in the central city of Xian to car shop in the southern economic boomtown because he thought they would be cheaper.

Last year in China, used car sales rose 11 per cent to 4.8 million vehicles, while new car sales rose seven per cent to 15.5 million. Ford's Burela, speaking at the Guangzhou auto show which ran until yesterday, said the industry expects used car sales of six million this year, about 10 million in 2016 and 20 million by 2020, putting it on par with new-vehicle sales.

About half of Ford's 500 dealerships have been approved to sell certified used cars that come with warranties. The company has also opened six showrooms this year selling only second-hand vehicles.