Used car sales on upward trend as provinces remove trade barriers

View of?a?used car?market in Yichang, Hubei province, Aug 11, 2015.[Photo/Asianewsphoto]

China's used car sales hit a record high in 2016, posting 10.3 percent growth year-on-year, as local authorities have been removing barriers on cross-provincial-border vehicle sales.

Statistics from the China Automobile Dealers Association show that 10.39 million used cars were sold last year. Industry insiders expect yet more to be sold this year.

Although the sector's growth did not keep up with surging new car sales, which saw a 13.7 percent growth rate in 2016, it was the first double-digit growth in used car sales for the past several years, said Luo Lei, the association's deputy secretary-general.

"The hard-won achievement was mainly a result of local governments gradually opening their markets to used cars from other regions," said Luo.

The State Council, China's cabinet released an eight-article guideline in March 2016, instructing local governments to lift any limitations on the flow of used vehicles between provinces by the end of May. China has 172 million cars, but local bans have curbed the free flow of used cars, resulting in insufficient supply. However, the policy has not worked out, according to Luo. He said the association's monitoring shows that while seven provinces, including Sichuan and Heilongjiang, have fully removed the barriers, many others have failed to do so.

Luo said those seven provinces saw double-digit growth in their used car sectors, which was significantly higher than that recorded in the provinces that did not remove the limitations.

Industry insiders say local authorities have failed to lift the ban because used cars usually have higher emissions and contribute less to the local economy than new cars. Luo said more regions will catch up now that the Ministry of Commerce and the Ministry of Environmental Protection have issued orders to implement the State Council's guideline. He expects sales this year to hit a new high as a result.

"Used car transactions accounted for 5.8 percent of China's total car sales last year. As local authorities remove their bans, it may return to the normal level of 7.3 percent, which will be 12.5 million vehicles," Luo said.

Xiao Zhengsan, secretary-general of CADA, calls for more attention to be given to the sector's development, saying used cars will contribute to China's automotive market's growth.

"China has become the world's largest auto market, but if its growth is driven by stimulus policies, it is not healthy," said Xiao.

According to Xiao, used cars and car finance will prove to be two critical and healthy market forces. "I will say, if we fail to do a good job in used cars, then it is impossible for us to do a job in terms of new cars sales. In one or two years you will see if I am correct," he said.

In developed markets such as the United States, used car sales are usually more than double those of new cars, while in China, they represent less than 40 percent of new car sales.