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In mid-August, the air in Beijing was a little cooler after the beginning of autumn. The atmosphere in the Huaxiang used car market on the South Fourth Ring Road was as quiet as the cooler weather.

"It's difficult, very difficult. Compared with previous years, the profit of the store this year has shrunk by half." Talking about his used car business, Zhang Wei helplessly told the reporter of "Daily Economic News" that he is still relatively lucky among his peers. At least he has kept the store. Many used car dealers have already terminated their leases and closed their stores because of huge losses.

The latest data released by the China Automobile Dealers Association shows that from August 12 to August 18, the average daily transaction volume of domestic used cars continued to drop to 59,300 vehicles, down 2.29% from the previous week and 3% from the same period in July. Behind the subtle changes in data, the complexity of market adjustments is hidden. More than 60% of used car dealers said that the customer flow in August was average or poor, and 30% of used car dealers said that the transaction volume was lower than in July.

The data confirms the severe challenges facing the market and also erodes the confidence of used car dealers. "If the price war continues like this, I don't know how to buy cars." Zhang Wei believes that "the terminal price of new cars fluctuates too much. The car I bought back this month may be more expensive than a new car next month."

The once valuable car has also depreciated

The repeated "price wars" in the new car market have touched the sensitive nerves of used car dealers.

"I have stopped buying cars since last month. I plan to quit after clearing out the dozen or so cars in my inventory." Xiao Yu, who runs a used car dealership in a second-tier city, told reporters, "Affected by the price cut of new cars, it is difficult to sell the used cars I bought. Now the monthly loss is about 30,000 yuan."

Xiao Yu's situation is not an isolated case. The car "price war" that started in early 2023 is still going on, and there are many models with price cuts of up to tens of thousands of yuan. "Last year, a second-hand Mercedes-Benz C-Class from 2015 was sold for 160,000 yuan, but this year it was sold for just over 100,000 yuan." In Zhang Wei's opinion, the reason for the nearly 60,000 yuan difference in the second-hand car's transaction price is the excessive fluctuation in the terminal sales price of new cars.

Zhang Wei said that taking a popular second-hand car worth about 100,000 yuan as an example, the transaction price this year and last year differ by 20,000 yuan. If it is a special model, the price difference is even greater. "I still have a 2019 Corolla in good condition and low mileage. I bought it for 80,000 yuan. I might have made some money by selling it last year, but now the price of new cars has dropped to 79,800 yuan. It is highly likely that I will not be able to sell it in a short time." Zhang Wei said that the longer he delays selling this second-hand Corolla, the more he will lose.

Image source: Photo by Liu Guomei of Daily Economic News (file photo)

In the past, many Japanese cars were considered hard currency in the used car market, but when the "price war" in the new car market started, such value-preserving and best-selling cars could not escape depreciation. "The prices of the original value-preserving used cars have collapsed. The biggest impact this year is on those models that were originally considered value-preserving and best-selling, such as Highlander and Lexus ES," said Zhang Wei.

A salesperson at a GAC ​​Toyota 4S store in Beijing told reporters: "The price of Highlander was still strong last year. Now the gasoline version has been reduced by 40,000 yuan, and the dual-engine version has been reduced by 35,000 yuan." At the same time, some dealers are offering large discounts on the Lexus ES, with the highest discount amount reaching 50,000 yuan, which means that the minimum starting price of this model has dropped to 256,900 yuan.

"The price reduction of new cars will first stimulate the demand for car replacement, leading to an increase in the supply of used cars. On the other hand, the preferential prices of new cars will attract some people who were originally planning to buy used cars, resulting in a decrease in the demand for used cars. The combination of the two will deepen the contradiction between supply and demand in the used car market." A relevant person in charge of Guazi Used Cars told reporters.

Used car dealers struggling to survive

"My friends often ask me when you used car dealers have ever lost money and which car can not make money, but now it is true that many are losing money." Zhang Wei runs a sizable showroom in the Huaxiang used car market, but in the past year, only the months with good business have achieved break-even.

Both Xiao Yu and Zhang Wei are surrounded by used car dealers who have quit the industry. "Since last year, more than 10 dealers in my used car market have closed down. Most of them could not adapt to the current reality of the inverted price of new and used cars. To put it bluntly, they did not compromise with the market. When the price of new cars drops, the price of used cars must follow suit." According to Zhang Wei's recollection, many of the used cars he sold in the past two years were sold at the cost price or at a reduced price.

In Zhang Wei's opinion, many second-hand car dealers are still stuck in the mentality of making money on every car. For example, they could make 20,000 yuan on a second-hand car in the past, but now they have to lower their psychological expectations and can sell it as long as they make 10,000 yuan, or even at cost price. If they don't sell it, they can only wait to lose money.

"We used to sell used cars on a weekly basis, but now we sell them on a monthly basis," said Zhang Wei. "Now if we can sell a used car within 20 days, it's considered fast."

Image source: Photo by Liu Guomei of Daily Economic News (file photo)

In order to avoid risks, Zhang Wei changed his car purchase strategy. "I basically don't purchase cars that have just been launched or new brands of new energy vehicles. For example, last year I purchased a new energy vehicle from a new car brand. The invoice price was 340,000 yuan, but I paid less than 200,000 yuan. Even so, it was still a bit difficult to sell it." According to Zhang Wei's observation, the number of new energy second-hand cars in Huaxiang's second-hand car market has decreased a lot since this year.

A person in charge of a joint venture brand said in an interview with reporters: "Electric vehicles have lowered the threshold of the automotive industry. In the past, there were many new entrants. If the technical conditions and thresholds do not change in real time, the competition in the industry may still be very fierce. If there is capital support, there may be a steady stream of new entrants. Therefore, in the field of electric vehicles, 'price wars' will still be the norm."

Signs of recovery emerge

After more than a year of "price wars", the new car market has finally shown signs of slowing down. Recently, many car companies including BMW, Audi, and NIO have quietly increased their terminal discounts. Many car brands have withdrawn from the "price war", and the difficulties of some used car dealers have been alleviated.

Zhang Wei, who has been working in the used car market for more than ten years, has keenly felt the changes. "I just sold a used BMW X5 a few days ago. No one asked about it before, but recently many people have asked about it. It may be because the price of new cars has increased a bit, so some people have started to consider used cars."

Judging from the data, the used car market is also developing in a positive direction. After experiencing a fierce "price war" in the new car market, the transaction price began to stabilize in July, and the scale of price-for-volume will be reduced. This phenomenon has been transmitted to the used car market. According to the data of the China Automobile Dealers Association, the average transaction price of the domestic used car market in July was 65,100 yuan, a slight increase of 700 yuan from June.

Image source: Photo by Liu Guomei of Daily Economic News (file photo)

The relevant person in charge of Guazi Used Cars told the reporter: "The price of new cars is undoubtedly the key factor affecting the pricing of used cars. It will eventually affect the selling price of used cars through the market mechanism. However, under the regulation of market supply and demand, vehicle prices will eventually stabilize in a reasonable price range."

In addition, from the perspective of used car inventory, the average inventory cycle in July was shortened to 54 days, 2 days less than 56 days in June. The China Automobile Dealers Association believes that with the improvement of weather conditions in late August, market traffic is expected to gradually recover, thereby driving the growth of used car sales, but car dealers are still facing inventory pressure and need to continue to pay attention to and effectively manage inventory levels.

In response to the national "Consumption Promotion Year", the national and local governments have introduced a series of car trade-in policies. The China Automobile Dealers Association believes that these policies not only provide consumers with substantial car purchase subsidies, but also encourage a large number of old vehicles to be replaced and updated, thereby directly increasing the supply of the used car market. With the in-depth implementation of the trade-in policy, the used car market is expected to see a significant improvement in the fourth quarter of this year.

(At the request of the interviewees, Zhang Wei and Xiao Yu in this article are pseudonyms)