Used cars in China

We're used to big numbers in China's automobile market. Today, let's look at a relatively small number: 4.5 million.

That's the estimated number of used cars that changed hands in China last year. It becomes clear that this is a rather small figure when you look at it in relation to the almost 20 million new cars registered in 2013. While there are roughly four used car sales to every new car sold in Germany and the US, it's the other way round in China: people buy more new than used cars - at least so far.

The used car market is rapidly picking up speed. Sales have doubled in the last two years alone. And experts expect the market to double again by the end of 2016. Why is that?

The answer is simple: the Chinese automobile market only began to gain momentum a decade ago. Back then, bicycles and cars still shared Beijing's wide streets, but soon, more and more families could afford a car of their own. Today, only the very courageous or the very poor still ride their bicycles to work through the throngs of 5.8 million registered vehicles in the city. Many car owners on the Chinese market are now interested in buying a new model, partly because the big cities have strict environmental standards that the older cars no longer meet.

Rise in demand in the countryside

In just a few years' time, perhaps only electric cars will be allowed in Beijing. After all, the Chinese capital only allows electric motorcycles and scooters. All the same, there is great demand for used cars, as many people who live outside the mega cities have begun to think about buying a car, and second-hand cars are more affordable to them.

The spread of the automobile won't solve China's environmental problems, but it's apparent that a huge market is emerging in the countryside. A rise in demand for the number one status symbol - plus increasing wages in medium-sized cities and the countryside - have led car dealers to sense big business opportunities.

China's "4S" car dealerships - as in sale, spare parts, service and survey - have also begun to focus on used cars. This is a reaction to the slowing growth in its core businesses. It's good for this nascent market that professional dealerships have now discovered used cars. The established manufacturers' experience and quality are improving service in what has so far been a rather chaotic used car market.

A lack of trust

The used car market is still suffering from a lack of trust between seller and buyer - everyone knows how people in China drive and everyone knows that the Chinese don't necessarily take the best care of their cars. As a result, people don't readily believe that a used car is likely to have been accident-free or that the asking price is appropriate.

There's less mistrust now that professionals are helping develop the market, but trust is important in a market where bargains are rare. The prices that are paid for used cars in China are quite a bit higher than in the US or Australia.

A used car in China costs close to $10,000 (7,890 euros). Foreign investors, too, are convinced that the used car market will grow even more rapidly, so they are flooding the Chinese market with millions in investments. Even Alibaba - the world's largest online company that recently made the largest market debut of all time in New York - sells cars now. That will certainly benefit the share price.

DW columnist Frank Sieren has been living in Beijing for 20 years.