A report on used car e-commerce released by the Uxin Research Institute reveals that more and more Chinese consumers are buying used cars. Notably, those born in the 1980s and 1990s and people from third and fourth tier cities are driving used car sales throughout China.
Trend 1: The supply of used cars on e-commerce platforms is expanding quickly
There has been a marked increase in the trading volume of used cars over the past year. Statistics show that 13.8 million used cars were sold in 2018, an increase of 11.5% year-on-year. Sun Mingxun, editor in chief of Chuxingcaijing, a digital news platform focusing on the Chinese auto industry, compared China’s used car market to that of the United States. “In the US, used car sales have reached almost 40 million, which is nearly three times higher than sales of new cars, ” he said. However, in China’s market, used car sales are approximately half as high as new car sales at present, indicating the potential for a large expansion of the used car market. Sun also said consumers will buy three times as many used cars than new cars in the near future.
In fact the past decade has witnessed a dramatic increase in the number of new cars in China, which means the supply of used cars may peak in the near future. “Considering the cycle of vehicle purchases, car buyers normally change their cars between every seven and fifteen years,” Sun said, and this offers an opportunity for more Chinese consumers to buy used cars.
Trend 2: Used car sales in third tier and fourth tier cities is rapidly growing
According to the used car e-commerce report, inhabitants of first and second tier cities still own the most vehicles, accounting for 35.3% and 28.4% of the total number of cars in China, respectively. But compared with last year, first and second tier cities’ share of the total vehicle supply decreased, while lower-tier cities’ share increased significantly: third tier cities’ share grew 2.5% while fourth tier and lower tier cities’ grew 2.8%, respectively. The gap in vehicle distribution between cities of different tiers has narrowed.
Data in the report showed that used car e-commerce platforms became popular in third and fourth tier cities in 2018. Compared with the last 17 years, the proportion of used car sales in these cities increased significantly. Sales of used cars in third tier cities showed the largest growth rate, increasing by 10.4%, while sales in fourth tier cities grew by 4.0% year-on-year.
According to Sun, purchases of cars vary greatly in China, which means there are a variety of consumption patterns across different cities. It is undeniable that sales of used cars in lower tier cities are largely responsible for driving the overall growth in used car sales.
In fact, there are still some obstacles when selling used cars in third and fourth tier cities. However, some used car ecommerce platforms have tried to break through the roadblocks. For example, Uxin has established cross-regional transaction services so that used cars can be transferred smoothly to third-tier and fourth-tier cities. According to Uxin, the services increase the inflow of cars into third-tier and fourth-tier cities, which gives customers in these cities a wider range of selection and increased chance of buying their favorite cars at reasonable prices. The network also helps lower costs for used car sellers.
Liu Xiaodong, Deputy Secretary-General of the Used Car Professional Committee of the China Automobile Dealers Association, told AllTechAsia that, even though used car sales have grown in smaller cities, there is still room to further promote the sale of used cars. “Our association will continue to solve practical problems, such as communicating with local companies to ensure that used cars are available for purchase throughout the country,” he said. According to Liu, 26% of the used cars purchased in small cities come from first tier cities.
Trend 3: Popular brands dominate and young consumers play a role
In the used car market in 2018, the top-selling models were those made by Volkswagen, Toyota, Honda, Buick. Compared with the previous 17 years, among China’s car brands, Chang’an and Geely ranked higher, while Haval is still the sales champion.
While big car brands remain popular, the people driving used car sales are those born in the 1980s and 1990s. Those with successful careers and strong economic foundations accounted for about 50% of total used car buyers. At the same time, those born after 1990 are also buying more used cars as they age and accrue disposable income. The increase of under-30 used car consumers is inevitable, as they will need cars as they enter the workforce, get married, and have families, Sun said.
Both Liu and Sun are optimistic about the future of China’s used car market. “Used car sellers can take advantage of both online and offline shops, indicating that the used car market will enter a new era in the near future,” Sun said.
（Top photo from Baidu)