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New cars are competing fiercely on price, and used car dealers may be the most "injured" group.

A recent investigation by the Red Star Capital Bureau found that when the pricing system of new cars was disrupted, the used car industry, which used it as an anchor for pricing, was also affected. Some used car dealers have lost more than 300,000 yuan in recent months, and some have moved to cheaper used car markets to save money.

Fortunately, after entering the third quarter, some new car brands have suspended price wars, and the difficulties of some used car dealers may be alleviated.

(one)

Being "blamed" by the price of new cars

At the end of July, the Red Star Capital Bureau visited a used car market in the southwest region.

Under the scorching heat of summer, the used cars parked in the open area are hot, and the salesmen gather in the shade to play with their phones, some watching short videos, and some playing cards. Occasionally, when a customer stops in front of their parking space, they put away their phones and quickly get up.

Many used car dealers expressed their feelings to Red Star Capital Bureau that it is difficult to do business based on the used car market this year. "The price of new cars has dropped too much." "Everyone is buying new cars." "The price of new cars has dropped, and used cars will definitely have to follow suit."

The Red Star Capital Bureau noted that in the first half of this year, a price war swept the entire automotive industry, which in turn affected the used car industry.

BBA brand (referring toBenz、BMWandAudi) as an example, according to media reports, in offline 4S stores, the starting prices of some BMW brand models are reduced by more than 160,000 yuan compared with the official guide price, and the starting prices of many Mercedes-Benz models are reduced by more than 100,000 yuan compared with the guide price.

A used car market

Mr. Chen, a used car dealer, mainly trades used performance cars of the BBA brand. He has rented 22 parking spaces in the aforementioned used car trading market, and now he has 25 used cars waiting to be sold.

Mr. Chen told Red Star Capital that in the past few years, the market for used performance cars of BBA brands has been relatively stable, but since this year, "new car (prices) have collapsed quite sharply, which has had a huge impact on used cars."

For example, the 2019Audi S4Mr. Chen said that if the mileage of this used car was about 50,000 kilometers, it could be sold for about 300,000 yuan last year, but this year it can only be sold for about 200,000 to 250,000 yuan.

"Audi and BMW are better off, but Mercedes-Benz is completely wiped out, and not a single one is profitable." Mr. Chen said that he now has a total of 9 second-hand Mercedes-Benz cars, all of which he bought before April this year, and are destined to lose money. "We will not buy Mercedes-Benz after April."

At present, the one that has been in Mr. Chen's hands the longest is a 2018 Mercedes-Benz C200 coupe. "This type of car is relatively rare. It is a two-door four-seater coupe. I bought it for 190,000 yuan in January. At that time, I thought I could make a few tens of thousands of yuan and then sell it. As a result, I found that no one in the market wanted it. Now it may be sold for around 160,000 to 170,000 yuan."

Like Mr. Chen, Mr. Yang also focuses on second-hand car transactions of BBA brands.

He told Red Star Capital that all the cars he bought earlier this year were sold at a loss. "When the market price dropped, we also lowered it. We lost 10,000 or 20,000 yuan, or 20,000 or 30,000 yuan on each car. (In the past few months) we have lost more than 300,000 yuan."

(two)

Some people move to places where rent is cheaper

In fact, it is not just BBA brand used cars that are affected.

The used car store run by Mr. Li sells a wide range of models, including cars worth tens of thousands of yuan, as well as cars worth hundreds of thousands or even hundreds of thousands of yuan. In previous years, this store could sell an average of 30 used cars per month, but only 11 were sold in July.

Among them, there is a car in his store that has been in stock for 4 months.MazdaUsed cars: "In 2021, these cars were the best-selling ones. They were sold after being bought back and posted on WeChat Moments within a day or two. People were still scrambling to buy them. Now it's different. Low-priced cars are not selling well either."

Mr. Li analyzed to Red Star Capital Bureau that "Now all platforms are saying that new cars are cheap and have preferential policies, so there are fewer people looking at used cars recently. Everyone is paying attention to new cars. Ordinary people know that new cars are cheap, so they all go to buy new cars."

A used car market

However, another used car dealer, Ms. Xia, told Red Star Capital that their customer base is relatively young, and used cars priced under 50,000 yuan are selling better, while used cars with relatively higher prices are not selling well.

"(Everyone) may think that we can make a lot of money by selling used cars. In the past, we could really make money. The profit of a car was basically 10% to 20%. Now we are basically breaking even. Some cars make losses, and some cars make profits." Ms. Xia told Red Star Capital Bureau.

Now, she has set a 30-day turnover period - if a used car has not been sold after 30 days, she would rather lose money to sell it as soon as possible. "We buy a car based on the recommended price and preferential price of new cars. If it (referring to the price of new cars) changes, we will lose money."

Since some used car dealers adopt a heavy asset model and a large amount of funds are used to purchase cars, once the transaction is not smooth, the funds are stuck in the used cars and cannot be converted into cash in a short period of time. They also need to deal with storefront and parking space rentals, etc., and may fall into a cash flow difficulty situation.

The Red Star Capital Bureau noticed that near Mr. Li’s store, the interiors of several second-hand car stores had been emptied, and the multiple parking spaces in front of the doors were surrounded by yellow warning lines. Some store signs were replaced with “investment hotline” advertisements.

Mr. Li revealed to the Red Star Capital Bureau that among these emptied stores, some people no longer work in the used car industry, while others have reduced their scale and costs and moved to markets with cheaper rents.

Among them, a used car dealer who has moved away told the Red Star Capital Bureau that the parking space rental fee in the used car market was close to 1,000 yuan per parking space (the storefront was counted as one parking space). In order to save costs, they moved to a market with cheaper rent in July.

(three)

Some brands have taken measures to stabilize prices, and the price war may have slowed down

Cui Dongshu, secretary general of the Passenger Car Market Information Joint Branch of the China Automobile Dealers Association, once published a statistical article stating that from January to May this year, 6, 29, 49, 54 and 10 models had price cuts respectively. The scale of price cuts in the first five months of this year has exceeded the total scale of price cuts in 2022 (85 models).

Amid the fierce price war for new cars, when Red Star Capital asked used car dealers about their views on the future development of the industry, most people answered: It depends on whether new car brands continue to engage in price wars.

Mr. Wang, a used car dealer, told Red Star Capital Bureau, "This year, no matter what brand, new cars are all dropping in price and are in hot demand. They can't do business with used cars. As long as they buy a little more expensive (referring to the purchase price), they will definitely lose money if they take the car back."

Mr. Wang believes that if new car brands continue to engage in price wars in the future and the gap between the selling prices of new cars and used cars does not widen, according to the views of most customers, they would rather buy new than used, so business in this industry may still be difficult to do.

A used car market

The Red Star Capital Bureau noticed that at present, some executives of new car brands have publicly called for putting the brakes on the current "simple and crude price war", and some brands have already taken action to press the "pause button" for this round of price war.

A blogger once revealed that due to the price war, BMW stores suffered heavy losses and would reduce sales volume from July to stabilize prices and ease the operating pressure of stores. BMW China responded that in the second half of the year, BMW will focus on business quality in the Chinese market and support dealers to make steady progress.

According to China Business News, a salesperson at an Audi 4S store revealed that the manufacturer will soon introduce policies to reduce dealers' sales targets and reduce inventory, and it is expected that terminal promotions will soon be pulled back to a certain extent.

A research report from Huachuang Securities also mentioned that the price war among automakers has entered a seasonal rest period, with BBA, Volkswagen,ToyotaHowever, it is expected that with the arrival of the peak season, industry discounts may continue to rise at the end of the third quarter.

At present, the price war among new car brands may have slowed down.

Mr. Kang, a large used car dealer, told Red Star Capital that he owns an underground garage of more than 10,000 square meters. When the inventory was at its highest, he had about 180 used cars. As some brands have taken steps to stabilize prices, their sales have been relatively good recently.

"(New car brands) have begun to stabilize their prices and are no longer competitive. Once prices are stable, consumers will no longer hold on to their money and wait and see." Mr. Kang believes that in this price war, the ones that will be hit hardest are some husband-and-wife stores and brother stores that deal in used cars.

(Four)

Used car dealers collectively turn to online

Red Star Capital Bureau noticed that apart from the impact of price wars brought by new car brands, the used car industry itself is also changing.

Several used car dealers told the Red Star Capital Bureau that in the first half of this year, as the used car market naturally saw a decrease in customer traffic, they would sell some used cars to non-local counterparts in a wholesale manner, earning only a meager profit.

Among them, Ms. Xia told Red Star Capital Bureau, "In previous years when the market was good, we sold at least 50 to 60 used cars a month, all of which were direct retail customers; this year, we may only sell 20 to 30 cars a month, and most of them are wholesale to peers in other provinces."

Ms. Xia estimates that for every 10 used cars she has sold this year, at most three were sold through retail, "and that's considered good business."

At the same time, in the used car market, operating a Douyin account has become an advanced option.

Red Star Capital Bureau noticed that in April this year, Zhou Hongyi publicly auctioned his car——MaybachS600. At that time, many second-hand car dealers participated in the auction and recorded the scenes of going to Beijing to participate in the auction and the auction process on the Douyin platform.

This incident brought a lot of heat to the entire industry and made more used car dealers aware of this customer acquisition channel.

The store where Mr. Yang works has a dedicated person to operate the Douyin account. He said that most of the customers in their store come from Douyin. If they only rely on the used car market itself, the daily traffic will not be large.

However, Mr. Yang said that operating Douyin also requires costs, such as merchant certification (otherwise there may be a risk of account blocking), hiring dedicated operators, etc. The cost per month may be approximately between 20,000 and 40,000 yuan.

Regarding new ways of acquiring customers, Ms. Xia believes that there are good people and bad people in every industry, and some people will spread false information on social media to attract traffic; Mr. Yang believes that the information that customers can obtain on social media is very transparent, and it is easier to make wise choices in comparison.

Red Star News reporter Yang Peiwen Zeng Han photojournalist Song Yuebai

Editor: Yang Cheng