Used-cars from China: new sustainable trend?

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Used-cars from China: new sustainable trend?

On the background of protracted economic and trade confrontation with the U.S. China has become the first to take unusual measures to stimulate consumer spending motorists. Authorisation of exports of used vehicles was the first step in the resuscitation of domestic consumption. But this, still timid step may soon develop into a serious trend, is able to simultaneously change the state of the Ukrainian market of used cars.

Can this trend survive long enough? How can be sustained the interest in the Chinese used-car in Ukraine? Cope if Chinese competition in the face of American, European and South Korean carmakers on the market, “the secondary”? Will not prevent pandemic these plans? Experts online parts store “Chinese” tried to understand and answer these questions.

Factor №1. The situation on the domestic market of the PRC, or that have been forced to revise its export policy

The trigger for discussion is the Chinese government’s decision to begin export outside of the country of used cars that were produced in China. Officials of the PRC to begin approved a list of 10 regions that are allowed such exports. Among license holders – municipalities – the capital Beijing, Tianjin port, the largest metropolis Shanghai and several provinces.

The magnitude of the export flux may ultimately prove to be very impressive. If the plans of the Ministry of Commerce of China to be (and they are focused on the performance of the secondary market of developed countries, that is, approximately 10% of the volume), then abroad from China can take more than a million used cars. The decision was taken in 2019, taking account of the previous year, when the volume of the secondary was estimated to be 13.82 million copies.

Southern Guangdong province was the first in the list of licensees who ship products of the Chinese automotive industry abroad. And although the scale of the first batch of 3 hundred vehicles for $ 2.5 million does not claim to the world record, is important, in this case, the fact of the beginning of sales. The question is how to China will be interesting to conduct such an export policy in the long term.

Economic strategy or a temporary tactic to save the situation?

Falling sales in the primary market of the PRC began in the summer of 2018, becoming almost a revolutionary event, as the negative dynamics of sales of new cars was recorded for the first time since the end of last century. Since then, CAAM (China Association of automobile manufacturers) regularly updated statistics, reporting another lost interest. So, for example, only one half of 2019 (in comparison with the same period last year), the Chinese car market contracted by 12.4%. Minimize the volume of sales occurs more than two years in a row, and a key reason for this is considered the economic and trade confrontation between the US and China.

Among the significant reasons cited are the General economic stagnation of the market, the slow pace of Chinese officials in making saving decisions, the factors involved, however, it is trading “war” with the United States largely provoked and accelerated the destructive processes. Taking into consideration the fact that this “war” never ends, and Donald trump, initiating the confrontation, there is a real chance to be elected for a second term, the question of the export of “secondary” can be seen in the long term. The more saturated market of Chinese auto industry in any case will need to be supported. And with the exception of the used cars out of circulation you can stimulate the sales of new machines.

A significant factor that can compromise any trading-economic plans, has become pandemic. It has exacerbated social problems, but also dramatically brought the global economic crisis: the closure of the country, refashioned familiar logistics diversifitsiruetsya production with the transfer of some facilities to other countries.

It may seem that in such a crisis the Chinese will not export their used cars. But where others are faced with insurmountable problems, the Chinese see opportunity. Pandemic, along with the overall economic stagnation, on the contrary, can make the Chinese auto industry to perk up and look for new markets that once stood in the second queue and enter in the old markets more favorable consumption patterns. In this sense, the used cars as a cheap and affordable vehicle that gives a freedom of movement in terms of the overlapping of traffic flows is a very promising product.

Thus, the Chinese, with high probability, entering the world market of used machines for the long haul. Given the lower initial cost, the offer price in the secondary market also has the potential to be very attractive. But the question remains how the Ukrainian market, “bawsaq” today, ready to make the ranks a new player?

Factor №2. The capacity of the Ukrainian secondary market of cars

The shift of proportions of the market of new and used cars in Ukraine became noticeable in 2018: in January the volume of sales used-cars still inferior to the “primary” and February and March have already exceeded it. Especially notable was the drop in demand for budget brands, which have lost in competition to the used-cars imported EN masse from Europe.

For this revision, the ratio of “forces” there were objective reasons: during the whole of 2018 has intensified the pressure on the official market of the car, and the end of the year began to increase significantly pent-up demand due to the new excise rates. (For comparison: in December of 2018 used-cars were introduced almost 22 thousand units, which is 3.4 times more than in December 2017). But whatever the reason, at the end of the year it became apparent that the emergence of “beushek” in such numbers is now a long time will affect all the components of the market: from pricing to the psychological perception of the new proposals.

2019-the first in Ukraine began with the establishment of the next record for the sale of used cars. And by the end of the year, the sales of old cars (the total number 408,1 thousand units) 3.5 times exceeded the figures of 2018. Even when the sales of new cars showed a positive trend, “beushki” never departed from him in 2019 the old machine was recorded 5 times more often than new.

Thus, we can say that the demand for b/a in Ukraine represents a stable trend, and the rapid growth of the primary market observed since the beginning of 2020, does not negate the scale of the secondary market.

Indirect factors influencing the growth of the market of used-cars

Experts believe that such a stir, among other things, demonstrates the attitude of Ukrainians to the personal car. “In the mentality of the Ukrainian car is more than a means of transportation. “Buying a car can be considered an event hardly comparable in importance with the purchase of housing, – said the representative of the sales Department of “Chinese”. And Chinese cars in this context quite compete with more established European or American.”

Experts believe that is only for obtaining the status of the car owner, many Ukrainians are interested in the export offer of Chinese automobile industry. Sure to attract Ukrainians and rates Chinese “beushek”. Moreover, due to the abundance of parts you can return to functionality almost any car.

But do not forget that the developed market is a competitive market, and competition in this environment is also very hard. American, European, and more recently Korean cars with mileage closed the most product niches. Can Chinese manufacturers break into those ranks, given that it is still “Chinese” in the top 10 of the ratings used-autoprodotto was not?

Factor №3. The competitive environment and the conditions of existence in it

To see how the market niches with free takes new players on the South Korean example used-cars. In the middle of 2019 in Ukraine for the first time arrived batch of cars from South Korea, which included machine 2012-14 with a mileage of up to 200 thousand km with petrol and diesel engines. And after the confirmation of demand was followed by further broadening of the product range and assortment.

The experts of the online store “the Chinese” believe that of no less interest can cause and some Chinese cars with mileage, but under certain conditions. To reduce the risks of buying “scrap metal”, providers must attend to reputational issues: to document the mileage and the history of service marks that the vehicles were not “drowned”, was not involved in a serious accident and “not affected” by the violation of the body geometry.

In addition, competitive interest can call only those cars whose reputation and primary market was stable. An example is the model range of the brand Chery, which even on the background of catastrophic decline in sales of Chinese cars in 2018 showed growth at 91.6% (for the year). The same trend continued in 2019-th: while other Chinese brand survived, Chery has gained traction.

Thus, if all the conditions can be serious breakthroughs in some areas sales of used cars and review leaders in some segments. The interest of the Chinese in expanding exports is not in doubt. After all, undertaken by the Chinese attempt to export is an important element of the overall strategy to rescue the situation on the domestic consumer market. And the pandemic is in this sense not only does not negate, but, on the contrary, exacerbates the need to take life-saving steps.

But wait-scale wave earnings in Ukraine Chinese cars with mileage, which will sweep away the competitors from other countries, after all, is not necessary. At the level as there are not many market niches in Ukraine, and in a densely filled environment with a spoiled enthusiast to gain a foothold will be difficult. Technical problems can create the situation with the spread of the virus. Business risks increase with the potential introduction of strict quarantine measures to block the usual pattern of supply. In a pandemic, when the situation changes significantly every week, something difficult long term to plan and predict.

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