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Beijing¨s second-hand car market to face tough challenges
2011-02-12
Today we invite two experts. The first expert is Zhang Yaodong, the Chief Editor of Auto Weekly of Economic Observer. And another expert is Xu Feng, the Chief Editor of Auto Weekly of 21st Century Business Herald. Today our discussion topic is about two pieces of news, which are related to Beijing's new policies. Recently, Beijing introduced some policies to curb the booming expansion of car's ownership. Several days ago, I watched a report on television. A reporter carried out an unannounced visit and found that a dealer claimed that consumers would have license plates if they bought cars in his shop. After investigation the reporter found that the dealer had stored a number of license plates prior to the introduction of new policies. Basically, some domestic automakers took this approach and the sales prices of their cars are relatively lower. Through the interview we noticed that there are quite few cars which have license plates. If a consumer is determined to buy such a car, he or she has to pay for extra fees, which range from 20,000 Yuan to 30,000 Yuan. This is not a wise choice. We hope that consumers should keep a rational mind during the process of buying a car in order to avoid unnecessary losses. We are looking forward to the public lottery for quota, which will take place on January 26.
  
  After discussing about new car market, we would like to pay attention to Beijing's second-hand car market. Many people are saying that after the introduction of new policies, Beijing's second-hand car dealers will suffer from setbacks. Now let's first listen to the opinions provided by two experts-Zhang Yaodong and Xu Feng. According to your observations on Beijing's second-hand car market, will second-car dealers suffer from setbacks? Has the downturn already arrived?
  
  Second-hand car market in Beijing will transform from a seller's market into a buyer's market. The price advantage will be eliminated and the industry will step into an instable condition.
  
  Zhang Yaodong: Recently more and more people pay attention to second-hand cars. I personally think that the future of second-hand cars may be miserable. However, there are still some possibilities that the future may not be that bad. If the industry chain of second-hand car trades can be connected with the used car market, the volume will be very huge. Nowadays the automobile ownership in Beijing has totaled over five million units. If 7% to 10% of cars can be replaced every year, the annual exchange volume is great. Consumers do not have to participate in the lottery if they want to replace their used cars. We cannot simply say that the condition of second-hand car market is miserable. We can only say that the industry is faced with a very big bottleneck. It is a tough challenge for second-hand car market to adapt to Beijing's new policies.
  
  Host: second-hand car dealers have to enjoy the holiday of Spring Festival in advance. People have no idea about the future prospect. During this period, Xu Feng also made some related reports. Could you share your views with us about the downturn of second-hand car market?
  
  Xu Feng: We have to observe the intensity of new polices as well as the operational parameters. Currently the second-hand car market and new car market are two relatively independent industries and there are few connections between them. Moreover, there are few links between the people who work respectively in these two industries. In foreign countries, such as the United States, second-hand car dealerships have a clear notion about the source of used car manufacturers. Regarding the replacement of used cars, there are fixed rules and a very clear set of norms about the service life and sales prices. However, in Beijing the used car market is not clear and open, which is a very big problem. If we can organize a second-hand car market and establish a car auction system, the approach will be quite open and transparent, just like Shanghai's auction system for license plates. If we implement the auction method for second-hand cars, we will be able to expand this market. Nowadays the second-hand car market has stuck in a scattered situation and we do not take this problem seriously. Manufacturers should pay attention to the source of used cars. There is still a lot of space. I once chatted with some dealers who engaged in second-hand car business. Several large-scale second-hand car dealers believed that there would be some opportunities. However, small dealers felt desperate.
  
  Host: In fact both new car and second-hand dealers are feeling desperate. Now let's have a discussion with Cai Haiyuan, the Deputy General Manager of Beijing Asian Games Village Auto Market. Mr. Cai, could you talk about the overall situation of second-hand car market after the introduction of Beijing's new policies?
  
  Cai Haiyuan: It should be said that the impact on second-hand cars is far more than that on new cars. I would like illustrate my views from several perspectives. Firstly, people had talked about the new policies for several months. There was a large amount of information. However, we had not paid much attention to the business of second-hand car market. At this time, the new policies followed a direct approach, which will cause extremely huge impacts. There will be several major changes. In terms of the trade flows of second-hand cars, in the past 80% to 90% of transfers took place in Beijing. After the release of new polices, perhaps 90% or even more transfers will be carried out in other places. This is the first change. The second change is about prices. We all know based on regional differences or psychological analysis, Beijing's second-hand car market will transform from a seller's market into a buyer's market. The market's price advantage will be lost. The third change is about the volume of transactions, which will be greatly affected. The fourth change is related to update cycle, which is also a major issue. We all know that in the past the used car business was very active. The business did not only include second-hand cars, but also covered third-hand or fourth-hand cars. Therefore Beijing's second-hand car market is quite active. After the introduction of new policies, the update cycle will become longer.
  
  At the same time, there will be three problems. Firstly, people who come from other places in China will face restrictions when buying cars in Beijing. If they want to buy second-hand cars, the transfers cannot be accomplished. As a result, there are some potential risks. This is the first problem. Secondly, after the introduction of new policies, there are no follow-up policies, or specific implementation measures. Apart from carrying out transfers in other places, consumers cannot complete the transferring process in Beijing. Consequently, the second-hand car market in Beijing has got trapped in a standstill condition. This is the second problem. The third problem is about the instability in the industry. What should consumers do when they find it impossible to sell cars? What kind of situation will dealerships face? The three problems mentioned above resulted in the instability.
  
  I would like to offer some suggestions. Government departments should introduce some corresponding follow-up measures, especially for second-hand cars, to maintain the stability of the industry. Specifically, we propose that second-hand cars should be treated as commodities during the consignment process. Second-hand cars should own a property. Second-hand cars can be traded without license plates. Only by resolving the problem about property of second-hand cars will the industry chain work successfully. On the one hand, consumers will be able to sell their cars. On the other hand, dealerships will be able to collect used cars. Therefore a stable link will be established. Currently the link is broken. As a result, consumers cannot sell their cars and dealerships fail to collect cars. I hope that government should take some measure to cope with this problem. Beijing Asian Games Village Auto Market will also take some efforts such as analyzing the market situation and send some reports to relevant government departments based on the conditions of consumers and businesses. (Translator: Qinghua/Hanxin)
  
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