Beijing asks carmakers, trading platforms to clean up used-vehicle market amid price war
Beijing has stepped in to monitor the trading of used cars as
mainland China's automotive sector , saddled with overcapacity, is under pressure to improve profitability amid an escalating price war.
On Tuesday afternoon, the Ministry of Commerce gathered industry groups, major carmakers and trading platforms for second-hand cars to discuss issues surrounding the sale of 'used vehicles with zero mileage', according to Reuters.
The ministry was seeking to stabilise car prices in the world's largest automotive and electric vehicle (EV) market, according to two car dealers, where vicious competition has ensnared around 100 manufacturers. The ministry did not respond to a request for comment on Tuesday.
Typically, cars that have never been driven are bought by second-hand dealers from manufacturers at very low prices before they are sold to consumers as pre-owned vehicles.
'To summarise, carmakers sell [practically] new cars through dealers of used vehicles at much lower prices,' said Tian Maowei, a sales manager at Yiyou Auto Service in Shanghai. 'The sales [model] helps individual companies reduce their inventory, but it does no good to the market [when] lower car prices have made it difficult for most carmakers to break even.'
According to dealers, the second-hand cars that have never been driven are offered at prices more than 30 per cent lower than vehicles that are sold as new.
It is not clear if the Ministry of Commerce would continue to allow carmakers and dealers to use the second-hand sales model in question. The dealers said the sales model might not be defined by the ministry as bending the law.
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