In recent years, China's automobile industry has developed rapidly. Not only is the domestic market competition very fierce (Observer website "BBA exits the 'price war' and presses the 'low price internal competition' pause button"), but the international market has also been stirred up by waves (Caixin News Agency "EU plans to impose tariffs on electric vehicles imported from China, Ministry of Commerce, Ministry of Foreign Affairs, China Association of Automobile Manufacturers speak out").
The rapid development of the new car market contributes to the continuous expansion of the used car market, and the development of the used car market also helps to promote consumers' demand for replacement. Moreover, the second-hand car market can also help consumers purchase higher end car models at lower prices to meet the different needs of families or individuals. According to statistics from the Ministry of Public Security, the number of cars in China will reach 336 million in 2023, with 486 million drivers. In theory, this data can serve as an important reference for analyzing the potential of the second-hand car market.
At the 2024 China Used Car Conference, Luo Lei, assistant to the president of the China Automobile Dealers Association, stated that "in terms of market size, the used car market was over 9 million units in 2015, and reached 18.41 million units in 2023." Li Jia, vice president of Shenzhou Car Rental, also pointed out at the conference that "used cars are the only industry in the trillion level vertical category that can still maintain an annual growth rate of over 10%, with enormous potential that cannot be ignored. In the future, the proportion of institutional car sources as boutique car sources will be as large as in countries such as Europe, America, and Japan. Therefore, China's used car market not only has great theoretical potential, but also has great potential in actual market demand. From an investment perspective, there are three main directions to focus on in the future.
National average price of second-hand cars (unit: 10000 yuan)
Source: China Automobile Dealers Association Passenger Car Market Information Joint Branch
The first direction: a unified national market
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According to a report from Xiaoxiang Morning Post cited by Tencent website:
On June 13th, the kickoff meeting of the working group for the establishment and application of the "Automotive Extreme Testing Evaluation Standard System" was successfully held in Turpan, Xinjiang. At the same time, the meeting announced the implementation of the "China Automotive Summer Test", which realistically reproduces the hot summer driving scene and provides consumers with more authoritative and accurate car evaluation references. On June 14th, car companies such as Hongmeng Zhixing, Jiangqi Group, BAIC Group, AITO Automobile, Chery Automobile, BYD (228.730, 0.00, 0.00%) Automobile, GAC Group (7.570, 0.00, 0.00%), and Lantu Automobile publicly voiced their support for the establishment of a national standard system for extreme testing of automobiles.
It can be seen that China has not yet established a complete national standard system for automotive testing. At present, many automotive media outlets release various test contents about certain car models in various ways, but their results are inevitably questioned by some car companies or owners. Regarding this situation, we can refer to the statement in the "Opinions on Accelerating the Construction of a Unified National Market" issued by the Central Committee of the Communist Party of China and the State Council in March 2022: "Accelerate the establishment of a unified national market system and rules, break through local protection and market segmentation, unblock key bottlenecks that restrict economic circulation, and promote the smooth flow of commodity resources on a larger scale. This statement can not only be regarded as the main development direction of the domestic second-hand car market, but also as the main basis for formulating relevant investment strategies, such as the detection industry chain, related enterprises with national market competitive advantages, and the second-hand car logistics industry chain.
Second direction: after-sales service
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In his speech at the 2024 China Second hand Car Conference, Xiao Zhengsan mentioned: "In the past, there were a large number of phenomena such as selling inferior cars as good and selling tampered cars. High transaction costs and opaque car conditions have become stubborn problems in the development of second-hand cars... Due to information asymmetry, consumers generally have doubts about the quality and performance of second-hand cars..." Obviously, after-sales issues are also one of the factors affecting the development of the second-hand car market. Therefore, if a car company can solve the after-sales problems of used cars, it naturally has a higher competitive advantage and is more worthy of investors' attention.
Trend of monthly transaction volume of second-hand cars in China from 2023 to 2024
(Unit: 10000 vehicles)
Source: China Automobile Dealers Association Passenger Car Market Information Joint Branch
Third direction: Exit
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In terms of supply, China has a wide variety of car models and abundant resources of second-hand cars.
In terms of demand, there is a significant demand for new energy vehicles in China overseas, as evidenced by the recent EU tariffs. Therefore, in terms of second-hand car export trade, China also has a vast market space.
