China aiming to tap used car market for EV penetration: Report
China's next advance in electric vehicles is the used car market. The country is aiming to build a thriving market for second-hand electric vehicles, from nearly zero, claims a report by Bloomberg. The report claims that sales of used vehicles have increased by 30 per cent between January and October this year, Also, the total sales of used vehicles in China is expected to grow to 17 million units this year, as forecasted by China Automobile Dealer Association (CADA).
The organisation also revealed that sales of used electric and hybrid vehicles had increased to 47,000 units in 2020. Despite being relatively small in numbers, EV and hybrid used vehicles sales grew to almost double the volume in 2017. The organisation is also expecting the number to grow further as China's new energy vehicle fleet is growing in number and age.
CADA claims that the most popular used vehicles are in the price bracket of 100,000-150,000 yuan. At the top among the pre-owned electric vehicles that are witnessing popularity among consumers are Li Auto's EVs. Nio models rank second, while Tesla cars are in the third position.
CADA has also claimed that the interest level for pre-owned vehicles has been increasing in recent times. This clearly indicates how the used vehicles sector and especially pre-owned electric and hybrid vehicles sales would grow.
Despite being a thriving automobile market and more than 270 million vehicles in circulation, China has been lagging in terms of pre-owned vehicle sales. The number of pre-owned vehicles sold in China is lower than in other developed markets. The annual sales of used vehicles in China is just over half the volume of new vehicles sold in the country. The difference is huge in other major automobile markets such as the US and Germany, where purchases of used vehicles are typically double that of new vehicles.
According to a study by McKinsey & Co. conducted in 2019, only 173 people in every 1,000 citizens in China owned a vehicle. The number in the US is 837 in every 1,000. This clearly shows that the Chinese car market is still developing, which is one of the reasons behind the disparity in used vehicles sales in China compared to other developed countries.
Another major reason is the cultural factor. A new vehicle purchase is still seen as a visible indicator of social status in China while buying a used vehicle is seen as inferior to buying a new one. However, these barriers are fast falling away, paving the way for a larger and thriving used vehicles market.
The Chinese consumers are increasingly focusing on spending on good quality, well-performing pre-owned vehicles that are typically only a few years old. Some customers even favour the environmental benefits of using a pre-existing vehicle. To promote sales of used vehicles, the Chinese government has cut taxes on used car dealers and eased other restrictions as well.