GUANGZHOU, China (AP) — As car enthusiasts converge onthe annual Guangzhou auto show, few have
anything except a shiny new setof wheels in mind. But explosive growth that transformed China into
theworld’s largest auto market is also giving life to a new industry here:used cars.Chinese started
buying new cars in huge numbers aboutfour years ago, about the average length of time analysts say
driverswill stick with a vehicle before trading it in for a fresh model.Thesecondhand market is already
taking off, with sales growth last yearoutpacing that for new vehicles. By volume it is still dwarfed by
newcars, which outsold used vehicles three to one. In countries such as theU.S., that ratio is reversed,
highlighting the secondhand market’s vastpotential to make car ownership affordable for millions more
Chinese.Thechallenge in China is to develop a modern market for secondhand autos.The business is
dominated by thousands of small trading companies thatoperate out of big trading halls or open air
markets on city outskirts.Vehicles are sold tax free and ownership can be transferred in a day
butquality and fair pricing can be uncertain. By some estimates, four infive used car transactions take
place at these markets.Forforeign automakers, "the used car business in China is very different
toanything that you would recognize in the Western world," said MarinBurela, president of Changan
Ford, the U.S. company’s China jointventure.Global automakers have been slow to add used car sales
atdealerships but are now racing to expand into the business, which willdiversify their revenue and help
build brand loyalty.Liu Yu-chen,a 28-year-old snack food entrepreneur, plans to buy his firstsecond-hand
car after owning a series of new vehicles, the latest aToyota Prado SUV bought in August."After
conducting a goodinspection, you just need to figure out whether the car appears to havebeen in any
accidents," said Liu as he browsed vehicles at Guangzhou’sGuangjun Used Car Market, which houses
dozens of small auto tradingcompanies.He is budgeting up to 1 million renminbi ($164,000) fora used Land
Rover and doesn’t consider the price tag high. Luxury autostend to be more expensive in China because of
taxes and foreignautomakers pushing the limits of what they can charge."What Iwant to buy is a well
maintained car, no damage. Scratches don’t matter.If there’s no big problem with the bumpers, no weird
sound from theengine, then I’ll consider it," said Liu, who flew from his home in thecentral city
of Xian to car shop in the southern economic boomtownbecause he thought they would be cheaper.Last year
in China, usedcar sales rose 11 percent to 4.8 million vehicles, while new car salesrose 7 percent to
15.5 million. Ford’s Burela, speaking at the Guangzhouauto show which runs until Saturday, said the
industry expects used carsales of 6 million this year, about 10 million in 2016 and 20 millionby 2020,
putting it on par with new vehicle sales.About half ofFord’s 500 dealerships have been approved to sell
"certified" used carsthat come with warranties. The company has also opened six showroomsthis
year selling only secondhand vehicles.Dealers in China willneed to focus on used auto sales to raise
their profit margins as newcar sales start to plateau. In the U.S., about 55 percent of a
dealer’srevenue comes from new vehicle sales while 25-30 percent comes fromsecond hand sales, and the
rest from parts and servicing.But inChina, new car sales have accounted for 90 percent of revenue, said
IvoNaumann, Shanghai-based managing director of advisory firm AlixPartners.Chinesebrands, unpopular
because of quality concerns, will likely fall furtherbehind the dominant foreign brands including
General Motors,Volkswagen, Toyota and Nissan as the secondhand market develops, Naumannsaid."Some
people who probably historically would have bought anew car because they were first time buyers, they’ll
say: Well I onlyhave $8,000, I could buy a Chinese brand, low quality, or I could buythis second hand
car from Volkswagen. And then that can have an impacton the overall market," Naumann said.Because
China’s autoindustry is still new, there are bottlenecks holding back growth of thesecondhand trade. For
one, there’s no system of easily transferrabletemporary plates for dealers, constraining the number of
cars they canhave in stock.Another problem is lack of accurate and consistentinformation about prices.
Beijing-based Bitauto Holdings, which runs acar pricing and listing website, is teaming up with U.S.
company KelleyBlue Book to launch a China price guide next year using data on 1million transactions from
their other partner, the China AutomobileDealers Association.Some dealers have adopted the
latesttechnology. Dongfeng Nissan, the Japanese company’s China joint venture,has its own system to
assess trade-in values. Staff use iPads to carryout a step-by-step check. They can photograph scratches
or other damageand upload it."The system will automatically prompt an overallscore on this car and
a recommended resale price to staff," said deputygeneral manager Yasuhiro Konta.Currently, most
owners who want tosell a car will typically take it to between three and five traders toget an idea of
price, usually an estimate by a senior employee based ontheir own judgment, said Bitauto’s chief
financial officer Andy Zhang."The whole experience is fairly insecure," Zhang said. "It’s
very important to have those benchmark prices out there."__________Follow Kelvin Chan at
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