Used car sales slow beyond expectations in March

Automakers, Ministry of Commerce both announce plans to mitigate slowdown

The gloomy atmosphere in China's new vehicle market has rolled over to its used car sales with March results coming in below expectations and that trend expected to continue for some months, according to industry experts.

Running in parallel with the rapid growth in the country's new car market, the used car market has been expanding at great speed in recent years, with a year-on-year sales increase of 11.46 percent in 2018.

And so the meager 3.42 percent increase in used car sales reported by the China Automobile Dealers Association for March showed a considerable slowing in the market.

The association is taking a cautious attitude toward used car sales for April and May, due to the large number of new vehicles debuted at the recently held Shanghai auto show, falling new car prices and new stricter Nation VI emission standards.

"We used to believe that the used car market had entered in a good stage of development with rapid growth," said Luo Lei, deputy secretary-general of the CADA. "The slight year-on-year growth in the first three months was unexpected and the market just didn't show its energy."

Luo said that the market has become irregular this year. In the past, first-tier cities always performed well, but half of the top 10 best-selling provinces had a negative growth in March.

Guangdong province, as China's best-selling province for used cars declined 6.2 percent compared with the same period last year.

Lang Xuehong, another deputy secretary-general of the CADA said, "The used car market has come under great pressure this year, mainly due to promotions and large decline in prices of new vehicles.

"When increasing used car stock, dealers have to be cautious that they can sell them quickly and profitably. If not, the risk of losses is high."

Currently, used car inventory hasn't changed much, which has raised awareness of the risks out there among many dealers, Lang added.

Unlike the flat market for conventional used cars, used new energy vehicles sales remain strong. In the first quarter of this year, sales of used new energy vehicles reached 140,000 units, jumping 132 percent compared with the same period last year.

To provide a much-needed boost to the conventional used car market, the Ministry of Commerce announced earlier this month that it is allowing the export of used cars to overseas markets by businesses operating in 10 cities, including Beijing, Tianjin and Shanghai.

Luo said the move is a landmark for China's used car industry. "After more than 30 years' development, China's automobile industry has reached a stage with products of stable quality.

Confined by environmental protection, transfer and purchase restriction, the circulation of used cars used to be limited. With supporting policies, it will become more active," Luo said.

In addition to governmental policies, global automakers are making bigger efforts in the used car market.

According to a report by eeo.com.cn, a used car joint venture among Volkswagen China, FAW-Volkswagen and SAIC Volkswagen has been launched focusing on their used car business.

Last October, the anti-monopoly bureau of the Ministry of Commerce announced the new joint venture was registered with capital of 65 million yuan ($9.53 million), of which Volkswagen China, FAW-Volkswagen and SAIC Volkswagen holds 34 percent, 33 percent and 33 percent stock.

The new company will launch used car business, with residual value guarantees, online auctions and finance leasing.

FAW-Volkswagen and SAIC Volkswagen have operated their own used car businesses for many years. Industry analysts said that Volkswagen China is leading the new joint venture to unify its used car business in China and seek more profit-sharing from used cars as the new vehicle market is shrinking, according to eeo.com.cn.

Last year, China saw its first negative growth in its car market 28 years, selling 28.08 million units, with sales of used cars totaling 13.82 million, accounting for less than half of that of new vehicle deliveries in the country.