On July 30, 2019, the China-Europe Chang’an freight train transporting used cars from China to Europe arrived. Leaving from Xi’an International Port a few days prior, the train’s departure was witnessed by officials from Xi’an, Shaanxi Province as well as by the senior management of China’s largest used car e-commerce platform, Uxin.
The occasion marked the first outgoing shipment since the Chinese Ministry of Commerce formally approved the exportation of used cars on May 2019. Earlier in April, requirements for sound inspection and after-sales services for used cars exports were also released. According to the announcement, select cities are given permission to export used cars while local authorities are responsible for identifying qualified exporters and third-party test labs to ensure used car safety and quality. Uxin is among the selected exporters.
Uxin plans to incorporate One Belt, One Road countries into the supply chains of China, the world’s largest automobile manufacturing market, and provide them with a wider range of vehicle options. Uxin will gradually establish a complete overseas sales network and after-sales service network in these areas, according to a Uxin representative.
Not long after the government greenlighted the new export regulations, Uxin secured a deal with a European buyer on July 8. In the following two weeks, Uxin received all the necessary exportation documentation required for an overseas shipping order. Given its robust nationwide supply chain, Uxin is well positioned to apply its domestic success to the overseas market. Prior to Uxin’s operations, buyers normally purchased used cars locally in China. As such, most buyers preferred to physically inspect cars themselves rather than risk purchasing a problematic car. Ultimately, Uxin has enabled buyers in China to obtain any used car they like, no matter the car’s physical location. With innovative cross-regional services and standardized car inspections, Uxin allows buyers to find a used car within their budget more efficiently without worrying about quality assurance.
The exportation of used cars can also be considered as an example of public-private partnership (PPP). Uxin partners with Xi’An International Port Land Investment and Development Group Co Ltd, a state-owned company. Located in Shaanxi Pilot Free Trading Zone, the partner company specializes in trade and logistics. The PPP accelerates the entire exportation process and minimizes typical administrative hurdles.
In fact, from the public government to private car dealers, virtually everybody expects that the additional opportunity to sell used cars overseas will help reshape the Chinese automobile industry. In the United States, used vehicle sales are usually twice the number of new car sales. Meanwhile, in China, the total number of vehicles on the road is 240 million, yet only 13.82 million used cars were sold in 2018. According to a McKinsey study, the number of urban second-time buyers from 2012 to 2020 will grow. Yet, where will the “leftover” cars go? In the past, some have gone to price-sensitive buyers while the rest have ended up at recycling facilities or landfills.
Exporting used cars makes full use of vehicles that are still in good condition. Africa, the Middle East, Eastern Europe, and Central Asia are the primary regions into which most used cars are imported. The majority of One Belt, One Road countries, are targeted export markets. Buyers in these countries often need cheap but safe used cars to meet increasing demands in mobility and transport. Affiliated services such as after-sale warranty, insurance, parts manufacturing, and repair are also likely to increase in these countries. In an era of US-China trade conflicts, the used car export stream constitutes an alternative avenue by which China can increase its trade surplus.
For China’s domestic automobile industry, the export market is expected to help clear out inventories and speed up the auto industry, allowing for the upgrading to safer, larger, and more environmentally friendly models. China’s automobile industry might very well become a significant driver of long-term economic growth. However, car sales in 2018 and the first 4 months of 2019 dropped slightly compared to the base year. The market needs an external stimulus to get the sales back to its increasing trajectory.
China, auto makers, and car dealers are all likely to financially benefit from the exportation of used cars. From the point of view of a circular economy, repurposing used cars that are no longer wanted in the domestic market to emerging markets will maximize their lifespans. Such exports will hopefully provide an impetus to revitalize the automobile market and make it ever more buoyant.
(Top photo from Uxin)