Features
29 juil 20

Transforming second-hand car retail in China

Just a few years ago, we wrote on this channel that the secondhand car market in China was poorly organised. The concepts of residual value and market value were not important, as the Chinese consumer would make more money next year than this year, and even more money the year after. Disposing a vehicle at the best price, or investing in vehicles that maintain value, was of secondary importance; the focus was on getting a new, even shinier car with better performance, more options and, especially, a higher social rating.

Since then, things have changed. The Chinese consumers have become more careful spenders, conscious of the impact of the trade war and an economic growth that is slowing down. The idea of spending wisely is now part of consumption behavior, which, in the automotive ecosystem means that “investing” in a car is done taking into account the reselling value of the asset.

Professionalization

This is the first trend that has led to the secondhand market becoming more professional. The second trend is the popularity of the secondhand car and the consumer understanding that used cars are potentially better investments than new cars.

So, over the course of the last years, the 2 streams that are required to build a used car industry, improved: the availability of good cars to sell and the consumers to buy them. However, the quality of the operations was not on point: China didn’t have remarketing standards, very few scalable platforms and even less control mechanisms.

Here as well, the Chinese traders as well as the Government have been quick to learn from international players. Gradually, the platforms became more professional and consumer protection was gradually integrated through regulations.

The secondhand car market grew from only 3.34 million units in 2009 to 14.92 million units in 2019, because of professionalization.

Digitization

New car sales and distribution networks have undergone a massive change due to the digital disruption of consumer behavior; previously, the Chinese consumer would go to a dealership to look at a car and find information from a professional salesperson. Nowadays, dealerships are much more “experience centers” for well-educated car buyers – salespeople have become almost redundant and their function in the supply chain reduced to price negotiators.

The same trend is now leading to a review of the secondhand car sales model, a trend that is accelerated by the pandemic: car dealers are expected to demonstrate the condition of the car as well as the value of the proposition digitally, rather than in person.

Online broadcast

The secondhand industry has responded by creating online channels where vehicles are promoted, and their condition explained to potential buyers. These buyers receive more detailed vehicle profiles and can make up their minds by digitally interacting with their potential new car. Sales people have become content creators and use their own channels on video hosting platforms such as YouKu.

Organic market improvement

The demanding Chinese consumer is now gradually pushing the secondhand car market to a better level of maturity. Becoming digital means that used car reviews from all over the country become available to the secondhand car buyer, eager to get the best deal. Offering cars that are either too expensive or in bad condition can lead to channels becoming less viewed by car buyers.

At the same time, more data becomes available about the market value of secondhand cars. Gradually, remarketing expectations are standardized, as it is the case in mature markets such as Europe or the US. This will eventually have an impact on car manufacturing and car financing, which are expected to include RVs even more into their development and marketing strategies.

Picture Credit: Shutterstock

Authored by: Yves Helven