In a second-hand car market in Shanghai, a staff member complained: 「In June the market is so bad that a lot of companies are suffering.」 Looking back at the second-hand car market in June, we can see that there are several problems. The trades did not go smoothly and inventory is increasing. What's worse, the sales price was in decline. The operation rules of second-hand car market show that every year from June to August the market has to endure a low season. However, in 2010, the low season actually started from the mid-April. The market stepped into "winter" in advance, according to the Xinmin Evening News.
Due to a lot of factors, the trading volume of second-hand cars in April dropped by 1.64% compared with last month. In May, the trading volume in Asian Games Village Second Hand Car Market in Beijing declined by 23.5% year on year, down by 18% compared with last month. In May the input volume of second-hand cars increased by 15.4% whereas the sales volume declined by nearly 20% compared with last month. Now the price reduction and shrinkage of trading volume have become the main theme of Chinese second-hand auto market.
"Currently it is not the problem about how much we can earn but about how much we may lose when selling cars," a used-car dealer said. In the past, as to some popular models such as Accord, Camry, Tiida, Elantra and Excelle, it wouldn't take ten days to sell them. Now though 20 days have passed, dealerships may still fail to sell those used cars.
The price reduction of new cars is the most direct incentive which caused the decline of used cars' prices. From April more and more models slashed their prices. More and more people who once had planned to buy a used car finally decided to buy a new car, weakening the demand of second-hand cars. There are also other factors which caused the decline of trading volume of second-hand cars such as the rising of oil prices, macroeconomic policies and higher emission standards for second-hand cars.
A number of insiders of auto industry believed that some factor in deeper level resulted in the downturn of second-hand car market including the decline of property and stock markets. On the one hand, in this regard consumers are cautious about the future of economy. On the other hand, a large number of people's funds are hung up. The direct result is that the purchasing power has shrunk.
At present, compared with the United States and other developed countries, the residual value in China is relatively higher. In the United States and Japan, for a car which has been used for three years, the residual value is 50% of the price of a new car. For example, if a consumer wants to buy a 200,000 yuan car which has been used for three years, he or she has to pay about 100,000 yuan on condition that the price of a new car remains the same. However, in China, only those less popular models can reach that level. The residual rate of popular models may reach up to 70%. Therefore the threshold of buying used cars is much higher, greatly restricting consumers' enthusiasm.
At present the overall inventory of second-hand cars has reached the warning status. Many used car dealers are clearing the stocks with a lower price in order to relieve the financial pressure. However, for consumers, they can decide to buy a used car whose price and quality are satisfactory without waiting for the recovery of second-hand car market.
Insiders forecasted that there will be a lot of uncertain factors in the second-hand car market in 2010. It is difficult to grasp the trend of development. The low season may last till September. If government can issue a series of positive policies including the regulation of second-hand car market, the market may get rid of the low season in the second half of 2010. Otherwise the used car market may continue to decline. The industry once forecasted that in 2010 the trading volume of second-hand cars may exceed five million units. The prophecy may come to nothing. (Translator: Qinghua/Hanxin)
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