China's untapped golden mine

by Jack Hu   2013-09-10

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China’s automobile parc passed 100 million in 2011 and will likely reach 200 million by 2017 at the current growth pace.

China’s used vehicle sales reached 7.94 million units in 2012 valued at ¥359.5 million ($58.5 million), up 22.6 percent year-on-year.

Compared with over 30 million used car sales per year in the U.S., China’s future of used car sales is obviously a potential golden mine. Some analysts forecast used car sales would reach 10 million in 2014 and 20 million in 2018.

However, despite the rapid development and promising future, China’s used car sector faces major problems.

Firstly, the used car market lacks an independent 3rd-party quality standard to test and valuate cars for sale. Dealers and brokers either have their own standards or follow some hidden rules so as to make a profit. The lack of an industry fair standard has led to a disorderly used car market.

Secondly, under pressure of slowed new car sales, many brand carmakers have launched trade-in deals. However, dealers may have followed a strict guideline in valuating trade-ins. For fear that their cars may be devalued as trade-ins at dealer shops, customers show little interest in trade-ins and feel more comfortable selling their cars at used-car marts.

Thirdly, the lack of service records, basic warranty period and sufficient aftersales service in used car sales are hurting consumer confidence in used cars. There is no such thing as the ‘Lemon Law’ seen in the U.S. where the quality of used cars is insured.

Tapping into the potential gold mine of the used car market, however, a number of start-up companies are working to address these problems through transparent platforms online and offline. Their efforts may pay off as the size of used car market in China doubles and triples in the near future.

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