A fast-growing market is not enough. Good management is not enough. If the industry is flooded with capital and the products are substitutable, profit will be scarce. China’s used-car market is big and will get much bigger. In 2009, China’s new-car market became the largest in the world, surpassing that of the US. The youth of the country’s car fleet means that the second-hand car market still has lots of room to develop.
At 8m units last year, Chinese used-car sales were about a third of new-car volumes, based on the China Association of Automobile Manufacturers and Wind financial data. In the more mature US market, used-car sales are about twice those of new cars.
The opportunity has not gone unnoticed. Two online used-car sellers, Autohome and Bitauto, are listed in the US, and both have parent companies with local clout. Last month Telstra, the Australian telco, sold nearly half of Autohome to Ping An Insurance.