2020 second-hand car circulation industry development

In 2019, with the support of a series of policies issued by the state to support the development of the used car industry, and under the background that the demand for replacement has become the main growth driver of the market, China's used car market has achieved bucking the trend. In the whole year, 14.92 million used cars were traded, an increase of 8.0%, and the transaction amount was 935.7 billion yuan, an increase of 8.8%. Used cars have become an important growth pole for the development of China's automobile market.

In 2020, due to the impact of the epidemic, the uncertainty risks and potential pressures faced by the second-hand car market have increased significantly. With the compensatory release of a large number of potential exchange and additional purchase demand after the epidemic, the development environment of the second-hand car market has been significantly improved, and the annual transaction volume of second-hand cars was 14.341 million, down 3.9% year-on-year.

1, the second-hand car industry policy environment continues to improve

Creating a loose and high-quality business environment is an urgent need for the further development of China's second-hand car industry, and it is also an effective way to promote the sustainable and high-quality development of the second-hand car industry. In 2019, the circulation policy environment of China's second-hand car market continued to improve, effectively promoting the healthy and orderly development of the second-hand car market.

In April 2019, the Ministry of Commerce, the Ministry of Public Security and the General Administration of Customs jointly issued the Notice on Supporting the Export Business of Used Cars in mature Areas (Commercial Letter [2019] No. 165), supporting 10 regions to carry out the export business of used cars. Subsequently, the Ministry of Commerce and other relevant departments and local governments have issued a series of policies and measures to support the development of used car exports. The export of used cars can effectively revitalize the stock resources of used cars in China, help to broaden the field of automobile trade and optimize the export structure of automobiles.

In August 2019, The General Office of the State Council issued the "Opinions on Accelerating the Development of Circulation and Promoting Commercial Consumption" (State Council [2019] No. 42), referring to the development of new energy vehicles, the cancellation of purchase restrictions, and the complete cancellation of the second-hand car relocation policy, making it clear that the relocation limit in key areas of air pollution prevention and control should be the first to open. This will help to further loosen the circulation of used cars, active used car trading, and stimulate the potential of automobile consumption.

In May 2020, the implementation of the value-added tax policy of 0.5% reduction on sales of second-hand car dealerships has strongly promoted the development of second-hand car dealerships, and has played a prominent role in promoting the healthy and stable development of the second-hand car market.

2. Build a multi-polar used car market pattern

After years of development, under the dual drive of policy support and consumer demand upgrading, China's used car industry is gradually forming a multi-polar market pattern with the core of "traditional used car trading market + auto manufacturers and dealer groups + used car e-commerce + new forces of car manufacturing".

In 2019, under the background of national policies continuing to help the development of the used car industry, auto manufacturers and dealer groups continued to accelerate the promotion of used car business. By virtue of their own brand resources, advanced management mode and global network layout advantages, automobile manufacturers strengthen the construction of brand certification used car business system, promote the further standardization of the used car market, and gradually develop to scale. Second-hand car e-commerce gradually returns to rational development after structural adjustment, and relies on the experience and advantages accumulated by the early development of digital strategy to achieve "second entrepreneurship". Through the development and application of cutting-edge technologies such as AI, big data and cloud computing, used car e-commerce not only brings new development concepts and advanced technologies to the used car industry, but also creates an innovative used car trading experience for consumers. With the rapid development of China's new energy vehicle market and the growing number of new energy vehicles, new energy vehicles have gradually entered the replacement period, and new energy used cars are expected to become the "after wave" to promote the development of the used car industry, creating new development opportunities and space for the industry.

2. Market operation characteristics

(A) second-hand car market transactions

1, the overall steady growth and development trend

In 2019, the used car market as a whole showed a steady growth trend, and the growth rate fell compared with previous years. The number of used car transactions in China was 14.923 million, an increase of 8.0% over the previous year; Transactions reached 935.69 billion yuan, up 8.8 percent year on year. From January to June 2020, due to the impact of the epidemic, the national second-hand car trading volume dropped significantly, with the trading volume reaching 5.516 million, down 19.6% year-on-year; Transactions were 339.43 billion yuan, down 21.7 percent year on year.

2. Large fluctuations occurred in each month affected by the epidemic

From the perspective of the monthly second-hand car trading, the market growth rate in May 2019 reached the lowest point in the year, and the market increased significantly in June, which was due to the early implementation of the National Six in some regions, and the centralized replenishment of inventory by dealers for the second half of the year, thereby increasing the trading volume. In September, the market growth rate began to accelerate, and the growth rate was more than 7% for four consecutive months. In December, it reached 1.68 million vehicles, an increase of 21.9% year-on-year, and the transaction volume was the highest value since the data began to be compiled. Affected by the epidemic, from January to June 2020, the monthly transaction volume of used cars was 5.516 million, down 19.6% year-on-year. In the first half of the year, only May increased slightly from the same period last year, and the rest of the used cars in the month of the same period were negative growth, of which the transaction volume in February fell the most, down 91.2% year-on-year.

In 2019, China's used car manager index showed obvious seasonal characteristics, and the whole year showed a basic trend of low before and high after. Affected by the Spring Festival holiday, the second-hand car trade fluctuated greatly from January to March, the market performance gradually better than the manager's expectations from April to July, and the manager's confidence was sufficient from August to November, and the market trading was further active. The used car manager index in January and February 2020 declined compared with the same period in 2019, of which trading activity in February hit a historic low, and managers' confidence in the market was insufficient. After the full resumption of work in March 2020, the trading volume began to pick up, and the index gradually recovered.

3. There are obvious differences in different regional markets

In 2019, according to regional statistics, East China accounted for the largest proportion of second-hand car transactions, reaching 33.4%, followed by Central and Southern China, North China, Southwest China, Northeast China and Northwest China. Among them, East China and South China region with relatively high economic level accounted for 57.8% of the total trading volume, down 0.3 percentage points from the previous year; The Northeast and Northwest regions, with a lower share, together accounted for 13.5% of the total transaction volume, up 1.3 percentage points from the previous year. From January to June 2020, the proportion of trading volume in East China, Central and South China, Southwest and Northeast regions increased, while the proportion of trading volume in North China and Northwest regions decreased. Among them, East China and South China accounted for 58.6% of the total transaction volume, an increase of 0.8 percentage points compared with 2019.

According to the statistics of provinces, Guangdong Province accounted for the largest proportion of second-hand car transactions in 2019, at 12.6%, and the top 10 provinces accounted for 66.8% of the total transactions, down 1.3 percentage points compared with 2018. From the perspective of provincial transaction volume growth, due to the comprehensive cancellation of the second-hand car relocation restriction policy in Shandong Province, the market activity has been greatly improved, and the transaction volume growth rate in 2019 has reached 20.5%; Three provinces saw a year-on-year decline in trading volume, followed by Henan (-3.0%), Hebei (-0.5%) and Jiangsu (-0.2%).

From January to June 2020, the province with the largest second-hand car transaction volume was Guangdong Province, with a total transaction volume of 668,000 vehicles, down 8.2% year-on-year, and the top 10 provinces accounted for 64.6% of the total transaction volume. Affected by the epidemic, the trading volume of the top 10 provinces declined year-on-year, with 3 provinces experiencing a year-on-year decline of more than 30%.

1. Suvs are significantly better than the overall market

From the perspective of market segmentation, the second-hand passenger car transaction in 2019 was 11.425 million, an increase of 9.3%, higher than the growth rate of the overall second-hand car transaction volume of 1.4 percentage points, accounting for 76.6% of the total transaction volume, an increase of 1 percentage point over the previous year. Among them, 8.614 million basic passenger cars were traded, an increase of 4.8%, and the growth rate was significantly lower than the market as a whole; It accounted for 57.7 percent of the total transaction volume, down 1.8 percentage points from the previous year. 957,000 MPVS were traded, up 22.4% year-on-year; It accounted for 6.4% of the total transaction volume, an increase of 0.8 percentage points over the previous year. SUV transactions of 1.481 million, an increase of 30.4%, a significant increase; It accounted for 9.9% of the total transaction volume, an increase of 1.7 percentage points over the previous year. 373,000 cross-type passenger cars were traded, up 20.1% year on year; It accounted for 2.5% of the total transaction volume, an increase of 0.3 percentage points over the previous year. 2.782 million commercial used cars were traded, up 3.4% year on year; It accounted for 18.6% of the total trading volume, which was basically the same as the previous year. Among them, 1.369 million trucks were traded, an increase of 11.9%, the growth rate was significantly higher than the market as a whole; It accounted for 9.2% of the total transaction volume, an increase of 0.3 percentage points over the previous year. Passenger cars traded 1.414 million units, down 3.7% year-on-year; Accounted for 9.5% of the total transaction volume, down 1.2 percentage points over the previous year.

(2) The development of second-hand car dealers

At present, there is no obvious change in the situation that the main body of second-hand car dealers is small and scattered. According to the survey data, the proportion of second-hand car business enterprises with an annual transaction scale of less than 100 vehicles is 59.6%, of which the annual transaction scale of less than 50 vehicles accounts for 23%. From the point of view of the product level of enterprise management, the annual transaction scale of less than 50 car dealers mainly operate low-end cars below 30,000; Car dealers with annual transaction scale of 50-100 units are mainly engaged in mid-end cars of 30,000 to 200,000 yuan; The annual transaction scale is about 100-500 units, mainly operating 200,000 to 500,000 yuan of high-end cars. From the perspective of the main income of enterprises, 82.6% of enterprises are within 1 million yuan.

At the same time, the number and scale of independent used car dealers are expanding. From the data of the top 100 second-hand car dealers in 2019, there are 51 independent second-hand car dealers in the top 100 enterprises, an increase of 14 compared with 2018. The top 100 dealers traded 204,000 vehicles with a transaction volume of 44.443 billion yuan. Among them, the transaction volume of second-hand car trading market enterprises was 44,000, and the average price of bicycles was 174,000 yuan; Independent used car dealers traded 160,000 vehicles with an average price of 230,000 yuan. Among the second-hand car business enterprises, the scale of independent second-hand car dealers is gradually expanding, and the total amount and average price of vehicles operated are relatively high, indicating that their business scale and quality have obvious advantages.

In the development of recent years, the used car industry has gradually entered the stage of "customer is king" from "car source is king", and used car dealers have changed from "operating vehicles" to "operating customers", and good talent reserve and management ability have also become a necessary condition for serving customers. However, many second-hand car manufacturers still focus on the acquisition of vehicles, the lack of team management ability, resulting in the company's talent system is not sound, has become an important bottleneck restricting the development and growth of car manufacturers.

(3) The development of the dealer group

Chinese automobile dealer groups continue to increase the importance of second-hand car business, and the second-hand car transaction volume of the top 100 dealer groups is on the rise year by year. In 2019, the top 100 dealer groups traded 1.22 million used cars, an increase of 7.9% year-on-year, accounting for 8.2% of the total used car transactions. From 2014 to 2019, the compound annual growth rate was as high as 26.5%, much higher than the overall growth rate of the used car market.

In 2019, the used car business of the top 100 dealer groups has the following characteristics: First, the income proportion of the used car business continues to increase. The revenue share of the used car business of the top 100 dealer groups increased from 4.7% to 5.2%. At the same time, the proportion of financial and insurance business revenue has gradually increased, from 3.5% to 4.7%. But compared with the US, where dealers' used-car business accounts for 32 per cent of the overall business, there is still plenty of room for growth. Second, most of the top 100 dealer groups achieved profit in the used car business. Among the top 100 dealers, 87% of the Group's used car business achieved profit in 2019, and the development of the used car business also led to the development of the Group's new car sales, decoration after-sales and other businesses. Third, the proportion of retail sales has increased significantly. The retail share of the used car business of the top 100 dealerships group increased from 20% in 2018 to 43.3% in 2019, and the used car business of the dealerships group gradually changed from the traditional simple wholesale model to the retail model for end customers.

(4) The development of second-hand cars of manufacturers

At the same time, in the overall development of China's second-hand car market, in the gradual scale and standardized development, the brand second-hand car development business of the host manufacturer relies on the brand second-hand car system established by the vehicle manufacturer's resources, and guides the development of the second-hand car market industry by creating norms, advocating integrity and improving services. Under the environment of market economy and capital cooling, each business entity actively explores an effective and suitable profit model for long-term development. Through the research data, it is found that there are 27 hosts to carry out the second-hand car business for a long time, and use it as a powerful means to improve the brand, promote new car sales, and cultivate new profit growth points. Most manufacturers carry out second-hand car business with replacement as the starting point, among which the replacement rate of independent brands is more than 5%, and the replacement rate of joint venture brands is more than 12%, providing a rich source of vehicles for the second-hand car market. Although the second-hand car business prospects are good, but from the impact of the industry environment, market, policy and other factors, there are not many manufacturers to independently register the second-hand car business of the second-hand car business company to carry out all aspects of business, statistical research data is as follows:

It is believed that in the future, with the continuous improvement of the development system of the used car industry, the market environment has entered a benign period, which is bound to bring opportunities to the development of the used car business of the main engine factory, to provide more comprehensive and diversified services, and to lead the market development with brand strength.