news

Text |Liu Dongxue
Editor |Li Huanhuan

Operations |Potato

The Central Asian used car market, where the myth of "wearing a Rolex for a month" once brought good fortune, is now losing its aura of wealth.

Cui Guodong found that last year, the sales of a Volkswagen,ToyotaThe four-wheel drive SUV of brands such as the SUV of the same brand can make a net profit of nearly 30,000 yuan, while the profit of the same model this year is only 5,000 to 6,000 yuan. Li Bing, who entered the industry earlier, felt a greater profit gap. "In 2022, the export of oneGeely Xingyue LI used to make $10,000, but now I can only make $1,000."

In July last year, when the company was approved as a pilot enterprise for used car export, Cui Guodong concluded that the business of exporting used cars to Central Asia was "low risk and high profit."

Although it is called a used car business, Cui Guodong actually runs a parallel imported car business. Car traders buy new cars from the domestic market and complete tax payment, registration and other formalities, and then sell them overseas in the name of used cars.

China's used car exports are mainly concentrated in Central Asia, the Middle East, Africa, and South America. Among them, Central Asia is more favored by used car dealers. The main reason is that since 2015, the Eurasian Economic Union (including some countries in Central Asia) has adopted unified customs tariffs, trade rules and technical standards. It is very convenient for goods to flow between different countries in the union. "You only need to complete customs clearance in one country, and you don't need to do customs clearance in other countries." Li Bing, head of a used car export company, explained to Auto.

In addition to convenience, low tariffs are also a major reason for attracting traders. "Bishkek has the lowest tariffs. If the value of goods is 100,000, it is no problem to quote 9,000."

Due to the low difficulty of international trade, the three Central Asian countries (Uzbekistan, Kyrgyzstan and Tajikistan) have become China's largest used car export market.

About a year ago, the government launched a tax refund policy to encourage the export of used cars. About 30 days after the export process, 13% of the tax could be refunded. At that time, the export of used cars was a business that was sure to make money.

Earlier, China opened the door to trade with Central Asia. On January 8, 2023, the Horgos Port resumed full customs clearance. After that, the export of automobiles here showed a blowout growth. According to statistics from Horgos Customs, in 2023, the port exported 304,000 commercial vehicles, a year-on-year increase of more than 3 times (307.5%); the highest single-day export volume of commercial vehicles reached 1,302, a record high.

Take Cui Guodong's company for example. It was only officially in operation for four months last year, and Cui Guodong exported more than 600 vehicles to Central Asia, an average of 150 vehicles per month.

The record high export volume brings real money. A cross-border payment platform shows that the amount of funds received from the export of used cars in 2023 increased by nearly 900% compared with the previous year, and the average customer unit price was close to US$1 million.

Li Bing remembers that when he first visited the Bishkek used car market at the end of 2021, there were only more than 100 businesses there, and only seven or eight of them were Chinese bosses. Now this number is 10 times the original number.

"Last year, the entire industry experienced a breakthrough from 0 to 1, which is the best time for newbies to get started." Li Rong, who came from the Internet industry, entered the used car export industry almost at the same time as Cui Guodong.

Cui Guodong recalled that Central Asia was still a seller's market at that time. "Customers usually paid 100% of the full amount, and few customers required immediate delivery of the car. Most people could accept a certain period of time for ordering a car."

After two years of vigorous development, Chinese-made cars have become household names in Central Asian countries. "If you go to Central Asian countries now, basically all 4S stores will display cars from China, otherwise it means losing a lot of customers."

As awareness increased, so did internal competition. A large number of practitioners poured in, which made the balance that once tilted towards Chinese businessmen tend to balance, and the supply and demand relationship underwent a subtle change.

"Customers have become smarter." This is Li Bing's most intuitive feeling. Behind this, fellow countrymen played a big role.

Li Bing remembers that in 2022, a business of "bargaining for foreigners" emerged in Central Asia. "Some Chinese people specialize in teaching foreign customers how to check the suggested prices and preferential prices of new cars in domestic automotive media, and even help them calculate freight and costs." Even the "secret" that automobile exports can enjoy tax rebates was leaked to foreign customers. "In the past, we took the tax rebates ourselves."

These "cost consultants" who teach foreigners how to bargain earn a lot of commissions from foreign customers by taking advantage of the information gap.

Under the operation of consultants, the profit margin of automobile foreign trade dealers has been extremely compressed. Cui Guodong heard that some of his peers only made $500 from selling a car. Even so, such low-profit orders would be rushed to be accepted.

Escape from Central Asia, Escape from Russia

The shrinking profits have caused many practitioners to consider quitting. Including Li Bing, Cui Guodong, and Li Rong, several foreign traders that Auto has come into contact with have plans to flee the Central Asian market. Today, the entire used car export industry is filled with a strong wait-and-see atmosphere. Li Bing predicts that this business will not last long.

Li Bing has a friend named Lao A, who does pure second-hand car business in China and has never done foreign trade. The gold rush of second-hand car exports made Lao A eager to make a move. Since 2022, Lao A has been watching. Because he has no experience, Lao A is very cautious and keeps asking people in the industry for market conditions. Unexpectedly, in just two and a half years, the Central Asian market has become unprofitable, and Lao A finally gave up.

In his own words, the wind blew past me.

In addition to profit factors, policies that have boosted the export of used cars and led to a surge in the number of practitioners are also reasons why many people have fled.

2019 is the first year of China's used car exports. The Ministry of Commerce, the Ministry of Public Security and the General Administration of Customs jointly issued the "Notice on Supporting Used Car Export Business in Regions with Mature Conditions". Beijing, Tianjin, Shanghai, Zhejiang (Taizhou), Shandong (Jining), Guangdong, Sichuan (Chengdu), Shaanxi (Xi'an), Qingdao and Xiamen became the first regions in China to carry out used car export business. At that time, there were only 46 companies with export qualifications.

In the following three years, the scope of used car export business gradually expanded. By the end of 2022, the number of companies with export qualifications in the third batch of used car pilot companies announced by the state had increased to 471.

In March this year, China's used car export qualifications were fully liberalized. From the announcement on used car export related matters issued by the Ministry of Commerce and other five departments (hereinafter referred to as the "Announcement"), it can be seen that distribution companies can apply to carry out used car export business if they have at least three used car appraisers and have experience in automobile sales or trade.

The threshold has been significantly lowered, leading to a surge in the number of practitioners, which has greatly changed the supply and demand relationship in the Central Asian market.

With the implementation of the announcement, the structure of companies involved in the export of used cars has also changed. During the pilot phase, used car exports were mainly trade companies and circulation companies, but the announcement added "manufacturing companies", that is, OEMs. In the past, OEMs only provided the source of cars and watched the wealth flow into circulation companies. Now, the cake is finally in front of them.

Cui Guodong can clearly feel the change in the attitude of the OEMs, especially the new forces. Some new forces limit the order quantity of traders and will only ship cars when they reach 50 units. Some new forces may delay delivery or even refuse transactions when they find that the other party's business attributes include used cars.

Li Bing analyzed that this is a signal that the OEMs are about to take action. New cars exported as used cars enjoy lower tariffs and are usually sold at a lower price than official channels in the local market. The reason why new forces restrict the export of used cars is to control the price system in the local market.

Kang Kai, a partner of a used car export company, told Auto that Central Asia is actually like a transit station for China's used cars. "The vehicles are first sold to Central Asia, and then flow into the Middle East and Russia. Central Asia can only consume about half of the goods."

Those real destination markets affect the entire used car export industry chain. Although the used car import policy in Central Asia has not changed, Russia has changed, which has also prompted used car dealers lingering in the Central Asian market to flee.

Last year, if you wanted to export cars to Russia, you needed to get the manufacturer's formal authorization and OTTC certification (Russian Vehicle Type Certification). This year, the policy was tightened again, and Russian Decree No. 152 required that "cars entering Russia through transit through the Eurasian Economic Union countries must pay the corresponding tariff difference."

At the same time, according to Russia's "Auto News", the Russian government plans to increase the cost of scrapping cars from October 1, 2024, with an estimated increase of 70%-85%, which will also indirectly affect the entry of overseas cars into the Russian market.

Li Bing lamented that the trend originated from policies and will eventually die out with policies.

In Li Bing's eyes, the biggest advantage of doing foreign trade is flexibility. If the market doesn't work, you can change regions; if the product doesn't work, you can change tracks.

About 20 days ago, Li Bing reached a cooperation agreement with a two-wheel electric vehicle factory in Wuxi, planning to build a CKD factory (completely knocked down assembly factory) in Kuala Lumpur. Because Li Bing found that Southeast Asia lacked strong local two-wheel electric vehicle brands, which gave outsiders an opportunity. "If the transmission and motor are replaced there, the speed can reach 70 to 80 kilometers per hour, which can fully meet the needs of local users."

Unlike automobiles, two-wheeled electric vehicles have a simple structure and can be broken down into parts for export. Both tariffs and logistics costs are much cheaper than exporting complete vehicles. Li Bing estimated that the export cost of a vehicle can save 200 to 300 yuan. At the same time, the cost of building a factory and labor costs in Southeast Asia are also lower than in China.

Li Bing does not plan to create his own brand, but to move the domestic supply chain over. "Customers put forward requirements, they register their own brands, and we are responsible for production."

According to this model, Li Bing's factory can not only produce two-wheeled electric vehicles, but also Laotoule (the common name for four-wheeled electric vehicles). "Perhaps our factory can incubate 10 or 20 brands."

Cui Guodong is still engaged in the used car export business, but the target market has been changed to North Africa (Egypt, Libya, Tunisia, Algeria, Morocco, Sudan, etc.), and the model has also been switched from to B to to C.

Cui Guodong's first store in North Africa is located in New Cairo, Egypt. The Egyptian auto market is small, with annual sales reaching about 300,000 vehicles in good years, which is only equivalent toBYDOne month's sales. In recent years, due to factors such as Egypt's foreign exchange shortage, its automobile market has shrunk significantly. According to Egypt's official passenger car registration data, annual sales in 2022 and 2023 fell to 163,000 and 96,000 vehicles respectively. Even so, Egypt's automobile market size is already among the top in Africa.

In order to reduce the difficulty of the start, Cui Guodong only introduced well-known brands in Egypt, such as Volkswagen,SkodaWaiting for German cars and BYD.

In Egypt, car sales is a high-paying job, with the average person earning around 5,000-10,000 Egyptian pounds (about RMB 728.5-1,457), but working in a 4S store, the monthly salary may reach US$900 (about RMB 6,454.5).

"In Egypt, almost all those who can work in car sales are top students from well-off families." Cui Guodong added that the store manager and sales staff of his new Cairo store are all locals and have their own resources.

Unlike the extremely involuted Chinese auto market, Egyptian auto dealers have a strict control over profit margins, and terminal sales prices are relatively stable. Cui Guodong gave an example, "From December last year to now, the price of Volkswagen ID.4 has been between 1.8 million and 1.85 million Egyptian pounds, and has basically not changed." In such a market environment, even if Egypt's second-hand car B-end market prices are volatile like Central Asia, it will not have much impact on itself.

Li Rong has retained a small stake in the used car export company. Currently, she and her husband focus 90% of their energy on the new business - pre-prepared meals.

After the Lunar New Year this year, Li Rong tried to do real second-hand car export business, but she found that this business was already very crowded, and many former colleagues also had their eyes on this piece of cake. "It is very difficult to find pure second-hand cars this year, and the purchase price will probably go up in the future."

It is foreseeable that after a period of time, pure used cars will repeat the mistakes of quasi-used cars, experience a brief boom, and then quickly fall into internal circulation.

JC's company started to engage in the export of used construction machinery in March this year. It started when an old used car customer asked him about used construction machinery. In Li Rong's words, used car exporters are like purchasing agents, and they export whatever the customer needs.

After personally completing the entire process, JC found that whether in terms of export procedures or profit margins, construction machinery is much stronger than the used car business. Moreover, the business of used construction machinery is growing very fast. "In just four months, the business volume of used construction machinery has been on par with that of used cars." More importantly, used machinery is a non-standard product, and the profit is more controllable than that of used cars.

JC believes that this is a process of elimination. “Companies without sufficient supply chain management capabilities, capital strength and compliance capabilities will gradually exit the market.”

In his opinion, the used car market in Central Asia will develop into a stable market dominated by a few large-scale enterprises in the future. Although the era of huge profits is gone, there is still room for improvement. There will definitely be OEMs and large foreign trade companies on the table, but it is difficult for small players to appear.

(All characters in this article are pseudonyms)