Commerce Ministry to remove restrictions on cross-regional transfers and trading
(AF) A spokesperson from China’s Ministry of Commerce said Thursday that the ministry would remove “unwarranted” restrictions on used car trading to unleash the potential of the market and boost consumption.
The ministry is working with other relevant government departments to accelerate the development of the used-car market by lifting restrictions on cross-region transfers, facilitating trading, promoting information sharing, and innovating circulation modes, spokesperson Gao Feng told a regular news briefing.
Facilitating the trading of used cars will help unleash purchases, boost car consumption “throughout the value chain”, and propel the high-quality development of China’s car market, Gao said.
Over 6.9 million used cars were traded in China in the first five months of this year, up 60.9% year-on-year from 2020, albeit from a low base, and up 22.9% from the same period of 2019.
China’s used-car market has great potential, Gao said, noting that the ratio of used car sales and new car sales in China is 0.64 to 1 while the ratio in some international markets is about 1.5 to 1.
The number of cars owned by Chinese people has reached 287 million. As an increasing percentage of car owners upgrade and replace their cars, the potential of the used car market is substantial, Gao noted.
“To vitalize used-car trading and to drive new car sales can not only stimulate car consumption but also promote the development of related industries, such as automotive repair, maintenance, insurance, and finance,” analysts from Hua Chuang Securities said.
In February, the Commerce Ministry introduced a policy to stimulate car sales and called for the restrictions on the cross-region transfers of used cars to be completely lifted.
Many local governments previously prohibited people from registering used cars purchased from other regions, citing emission concerns. Data from China Association of Automobile Manufacturers showed that only 27.5% of used cars transactions made last year were cross-region.
From June 1, 20 cities including Tianjin, Shanghai, Shenyang, and Taiyuan scrapped such restrictions under a pilot scheme. Next year, cross-region purchases of used cars will be fully liberalised.
As Beijing lifts the roadblocks on used car trading, several online used car trading platforms recently secured new funding.
Chehaoduo, operator of auto trading platforms Guazi and Maodou, announced on June 10 it raised $300 million in funding led by H Capital at a valuation of more than $10 billion.
Nasdaq-listed Uxin Ltd, a nationwide online used car dealer, said on June 15 that Nio Capital and Joy Capital have agreed to invest a total of up to US$315 million in the company.
Online car dealership took off in 2012 and became highly sought after by venture capital. However, after years of cut-throat competition and extravagant spending on advertising, most of these companies are yet to make a profit. The market is still fragmented with online dealers together accounting for less than 20% of market penetration.
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