【华尔街日报11.21】中国的下一个里程碑——二手车市场

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China's Next Milepost: Used Cars
http://online.wsj.com/article/SB10001424052970203537304577031953145505334.html


By NORIHIKO SHIROUZU            BEIJING—After a decade-long surge in sales that made it the world's largest new-car market, China appears ready to take its next major step: creating a modern market for used cars.

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European Pressphoto Agency               

Used cars currently are sold in open-air markets in China, such as this one in Qingdao last year. But big auto makers are getting into the act.

China's auto industry is so new that there are few used-car businesses today and little involvement by big dealers. Buyers and sellers now meet at stadium-size, open-air markets, some with luxury-car sections.
That's about to change with used-car sales likely to reach 4.1 million vehicles this year, up 7% from last year, according to an estimate from Daimler AG's Mercedes-Benz.
In response, auto makers including Daimler, Nissan Motor Co. and Volkswagen AG are racing to build used-car operations that can take trade-ins for new cars and offer dealer guarantees and services on used vehicles. One big Chinese auto retailer says it plans to increase its focus on used cars to help improve profit margins.


The auto companies are pursuing customers like Cui Yunding, a 37-year-old sales manager in the south China industrial hub of Shenzhen. Mr. Cui recently purchased a two-year-old Nissan Livina van, his fourth used car, for 86,000 yuan, or about $13,500, roughly what he might pay for a new, midsize sedan from a Chinese auto maker like BYD Co.
"I don't trust those cars," he says of domestic brands. "If I bought one of them, I would have to fight a long line for repairs." Mr. Cui says his next car probably also will be used, perhaps Toyota Motor Corp.'s Crown luxury sedan. "This is the most cost-effective way to drive different cars I would not otherwise be able to afford."
Used cars may conjure images of brazen sales pitches and a risk of lemons, but they play an important role in global auto markets. They establish a car's residual value, juicing new-car sales and building brand loyalty, especially for luxury brands.
"Ideally they buy their first car, a used Mercedes, when they are 28 or 29, and we keep them forever," says Klaus Maier, head of Mercedes-Benz unit in China.
                                                            


China's used-car sales today are less than a quarter of the 19 million new cars expected to sell in the country this year. But the number of used-car sales should soar as the new-car market in China slows and matures, industry officials say.
"How we handle this as an auto maker will determine who is going to be a winner and decide who is going to survive and possibly thrive long term in China," says Hideki Kimata, a senior sales executive for Nissan's China sales arm, based in Guangzhou.
The biggest threat they pose is to China's homegrown brands, such as BYD and Zhejiang Geely Holding Group Co. Chinese consumers generally prefer foreign brands; an overwhelming majority of China's top selling cars in recent months were from global auto makers' joint ventures with Chinese car makers.
One reason for that is the lack of cachet among home-grown Chinese auto makers, stemming from their "lack of competitiveness" in creating quality cars, says Dong Yang, deputy chairman of the China Association of Automobile Manufacturers.
Liu Ning, a 47-year-old Beijing resident, bought a six-year-old, General Motors Co., Buick GL8 for 150,000 yuan for his small rental-car business. Mr. Liu could buy a comparable new Chinese minivan, but the "quality doesn't compare to the GL8," he says. "You have a totally different feeling when you drive the GL8. It feels like a car rather than a cargo van."
So far, Chinese auto makers say they haven't been affected. "This also cuts both ways," says Paul Lin, spokesman for Shenzhen-based BYD, which is partially owned by  Warren Buffett's Berkshire Hathaway Inc. "As our cars get better, we also eat into Toyota and other global auto makers' new-car sales," Mr. Lin says.
Zhejiang Geely, which also owns Volvo, has been trying to improve the overall quality of its vehicles, in part to keep its cars being cross-shopped against used cars, says spokesman Victor Yang. Moreover, in a "very status-conscious" place like China, second-hand cars don't have the same cachet as new cars, Mr. Yang says.
Auto makers are investing in infrastructure to handle used cars. Nissan has begun holding auctions on its own to buy back second-hand cars and has begun training dealers to help them properly assess the value of used cars. They then sell some of the cars profitably as "certified" vehicles, Nissan says, offering limited warranties and roadside assistance.
Mercedes-Benz's Mr. Maier says the number of its dealers capable of handling used Mercedes cars should increase to 35 of the brand's network of 180 retail outlets by year's end.
In Nissan's case, all of its retail outlets in China—464 at the end of last year—now make such assessments and buy customers' used cars. Some 90 of its stores have used-car divisions, according to Mr. Kimata.
To price used cars accurately, a handful of foreign auto makers such as Nissan have begun surveying used-car prices by setting up monitoring outposts at big outdoor used-car markets sprouting up in major cities across China. Their research shows that a subcompact car from Geely or a number of other Chinese brands lost between 60% and 65% of its value after three years.
For dealers, used cars offer a way to sustain margins. In a market like the U.S., the profitability of new-car dealers rests heavily on service, such as vehicle maintenance and repairs, and on used-car sales.
                Zhongsheng Group Holdings Ltd., one of the several large auto retail groups in China,  has made used cars one of the company's top priorities and begun setting up used-car divisions in existing stores. The move comes as part of an effort to prepare for what Chairman Huang Yi describes as a "coming shift" in the Chinese marketplace.
In the latest half, Zhongsheng stores on average generated about 90% of their revenue from new-car sales, while only about 2% from used cars, Mr. Huang says.
In the U.S., an average dealer would generate slightly more than 50% of its sales from new cars, with a third or so from used cars, he says.  "That's where we are headed eventually in China, as well."

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