Used cars are opaque and don’t make money. Why is there still value?


Editor’s note: This article comes from the WeChat public account “Lu Ming Finance” (ID: luminglab), the author Qiang Jiahong, editor Feng Cheng, 36 氪 authorized to release.The original title “Used car “priceless”” in China, the car regardless of who is new and old, only 孰贵孰贱.Nothing is more dangerous than answering the wrong question correctly.Before the advent of classical political economy, people generally paid attention to the use value of goods in the exchange process. For example, food can satisfy hunger and clothing can protect against cold.For this reason, in most people’s minds, second-hand use means the use value of the compromise and the lower price.There are exceptions to all rules.If we take into account the long-term property rights of housing, the scarcity of land resources and some policy factors, the property will not only depreciate for a period of time, but may have the phenomenon of the price of new and old houses upside down.The difference between a car and a house is that the house may appreciate, but the car is a consumable item, and depreciation is required every year until the day of retirement.However, in China, the car does not distinguish who is new and old, only 孰 孰贱.China’s auto industry’s monopoly era is a continuous highway, the peak of the city, the pickup trucks that can be seen everywhere on the roadside, and the parking lot that can be filled with no matter how big… The United States is well-deserved “the country on the wheel”Correspondingly, it is a more active used car market than a new car.Since 1990, the annual sales of used cars in the United States has stabilized between 40 and 45 million vehicles, about three times the sales of new cars.Even during the financial crisis, the performance of the used car market is more stable than that of the new car market. It is not an exaggeration to say that the US auto industry’s “Dinghai Shenzhen” is not too far.In 2010, 95,500 cars were added to the world’s congested traffic every day, and almost half of these new cars came from China.It was during this year that China’s passenger car sales reached 13.76 million, surpassing the United States as the world’s largest new car market.It’s full of prosperity and honor.Regrettably, the domestic second-hand car industry, even if you enter the line, can not understand how deep the water is, the scalpers tamper with VIM, adjust the odometer, hide the accident car, the bad spots, and so on, let alone the growth of the car marketengine.Different from the domestic one, the flag of the US used car market is the 4S shop of automobile dealers.According to data released by the NADA (American Automobile Dealers Association), nearly 40% of used cars are sold by new car dealers, followed by used car dealers.Source: American Automobile Dealers Association In fact, the wind of price hikes is not only prevalent in China.Since the dealer’s new car sales profit is about 5%-6% is already an open secret, consumers usually have the confidence to kill the end.Therefore, even in the United States, the profit of new car sales is not high, but it is slightly better than the price hung up by Chinese dealers.For the old American car dealers, the new car sales can’t make any money. What they value is the new car sales and the customers who have settled down, the professional management and exchange of consumer preferences, and the resulting replacement business.Unique advantage.After all, the profit margin of a used car is 10%-12%, and the profit ratio of new car sales is about 1:1.66. Second-hand car dealers are their main battlefield.However, the days of Chinese car dealers are far from being as good as their counterparts on the other side of the ocean. What they face is a more severe test of survival.The gross profit margin of new car dealers has been going down all the way. The Implementation Measures for the Management of Automobile Brand Sales in 2005 also dragged them into the mud of monopoly.On the surface, the brand licensing era that lasts for more than a decade is the world of car dealers. Here, we will not repeat the details of how 4S shops attack the city and sweep the country. We are seeing active cars, car stores and car stores.The car sales model in the county market is dying out.It is very different from the automobile sales market in the United States, Japan, Germany and other countries.The original intention of the “old method” is to conform to the trend of specialization and branding of the automobile industry. However, we all know that there are time lags in the macro policy, and the youngsters of the Dragon Slayer may also become dragons.According to the provisions of Article 6 of the “old method”: “The network planning of the same automobile brand is generally formulated and implemented by a domestic enterprise”, which actually gives the vehicle manufacturer and the general distributor the power to set up and control the marketing network..With the promotion of the 4S model, China’s automobile distribution and after-sales market began to have various restrictions on competition, such as resale price restrictions, geographical restrictions, customer restrictions, tying, exclusive supply of after-sales original parts, and exclusive purchases.Can car dealers scattered over 9.6 million square kilometers of land make money?Source of data: The company’s financial report China’s auto industry is more than half a century at night.From the first domestic Dongfeng car developed by FAW to the famous red flag series, China’s automobile industry has passed a time of Jiazi, but still faltering.The independent brands of BYD, Chery and Geely have their own troubles. The mainstream status of FAW-Volkswagen, Guangzhou Honda and Shanghai GM is the joint venture automobile factory established in the early stage of reform and opening up. It is even more disappointing.The place is that, to this day, the word-of-mouth and quality guarantees in the market are still the German and Japanese cars that have been popular for a long time.The reality is that for Chinese consumers, whoever has the money to buy a domestic car must get the whole car to import.With the help of the Chinese market, Mercedes has created the highest monthly sales volume in the company’s history. BMW, Audi and Rolls-Royce also have considerable sales.These multinational auto companies have unified management of the nationwide distribution network by establishing wholly-owned subsidiaries in China as “general distributors”, and 4S stores are not subsidiaries of OEMs. In order to obtain brand authorization, they have signed unequal treaties more than one and a half points.4S shop does not have the right to sell a variety of car brands. It is not allowed to supply each other, nor can the original parts be sold separately to the seller. Unauthorized dealers cannot obtain the source of the car and are forced to withdraw from the market.Only multinational car companies.The tens of billions of used car market car market brand authorization for a long time.Car dealers did not break out in silence, but died in silence.According to the data in the White Paper on the Relationship between Chinese Passenger Car Dealers and Suppliers (2014), nearly 55% of car dealers in the year were unable to make profits in the new car sales segment, and 83% of the dealers were in a loss state when they built the store.“Price inversion has always existed in recent years, except that there were very few cars that needed to be ‘upside down’, but now there are more and more.” A sales person in charge of a Japanese brand 4S store said, “There are only a few hot models currently available.There are profits, non-selling models, old models have no profit, and the discount is even beyond the available factory rebates.” On the occasion of life and death, dealers only have to rise.In 2013, five veteran dealers of Shanghai Volkswagen Skoda retired from the network. The following year, the collective retreat from the Guangzhou-Guangzhou Mitsubishi dealers in Zhuhai to Dongfeng Honda, FAW Honda, Porsche, BMW dealers did not mention the car, and then to 16The elderly Anfu Hunan dealers and 28 imported modern dealers requested to withdraw from the network. In 17 years, FAW Audi dealers forced the court to ask for price increases. The battle between the OEM and the dealers has been going on for several years, and it has become increasingly fierce.In 1981, James Tobin, the Nobel laureate in economics, told us: “The eggs should not be placed in a basket.” Chinese dealers are obviously a bit slow in this regard, except for the large-scale service and accessories sales revenue and pitifulThe new car sales revenue, they have almost no other way of making money.When the car market that has been mad for a decade has suddenly stopped, China’s passenger car market has shifted from “incremental market” to “stock market”, waiting for them, is a high inventory (this has been buried many years ago)Hidden dangers) and the price hikes brought by price reduction promotions.Even in the traditional car market sales season at the end of last year, many new cars are not comparable to the quasi-new cars on the used car trading platform. Of course, this is not the classic value-preserving model like the Highlander and Mercedes-Benz E-Class.It is a common household model, including the BMW 3 Series GT 320 fashion, Toyota’s B-class Camry, and the Volkswagen model 408.It’s weird and crazy, realistic and cruel.In contrast to the hatchback, the sense of smell of capital must be sharper.The investment and financing boom of the used car industry in China began in 2012. With the digital transformation of the used car industry, the increasing market demand and car ownership have attracted all kinds of capital giants to lay out the used car industry.Source: Ai Rui, “China’s second-hand car e-commerce industry research report in 2019” According to the law, the replacement period of Chinese passenger cars is generally more than 4 years, and the peak of used car trading usually lags behind the new car market by about 4 years.According to data released by the Automobile Industry Association, 08-10 is a period of rapid growth in new car sales in China. The 13-year and 16-year new car markets have once again ushered in two jumps. In response, 14 years became the Chinese used car market.The actual starting point of the active trading began, and the scale of the transaction continued to grow in 16-18 years.Source: Automotive Industry Association, Automobile Distribution Association Since 1980, the US new car market has become saturated, followed by the decline in new car sales and the emergence of used car transactions.In the decade of 1986-1996, the sales of new cars by US auto 500 retailers fell by 8.8%, while the volume of used cars increased by 40%, and industry profits quickly climbed to 45% of the total profit of the auto industry.Time shift is easy. Today, according to the average transaction price of US$16,500 per used car, the used car market can contribute 60-700 billion US dollars to the US.China’s used car market has achieved a compound annual growth rate of over 22% over the past eight years.With the accelerated penetration of e-commerce channels, the restrictions and the weakening of the influence of the property rights system, and the shift in the consumption concept of car buyers, the second-hand car industry is expected to usher in a larger growth space in the “stock era” of passenger cars.According to estimates by the iResearch statistical model, the transaction volume of the used car industry will expand to the order of trillions this year.Source: Ai Rui, “China’s second-hand car e-commerce industry research report in 2019” There is a common saying in the domestic second-hand car industry conference, “according to European and American market experience, used cars are the growth engine of the car market”, new bottled old wine, long timeAnd the fragrance.Second-hand car transactions that are not for profit are all rogue business is a good business, but the bad is bad. In the process of promoting the digitization of the used car industry, the Internet platform is taking the marketing route of “big flood irrigation”, andThe old road of “first pollution and governance”.”The world’s martial arts, only fast and not broken”, has always been the eight-character rumor of the Internet industry.In TV, video, bus station, elevator room, the advertising words of magic brainwashing are endless: “big platform, more worry-free”, “no middleman to make a difference”, “good car does not sell with bad cars”, “15 days packageRetired… In the past two years, the market expenses of melon seeds, excellent letters and Renren have soared to 1 billion. The seeds and people’s cars have gone to court because of advertising slogans. The letter lineup of Youxin is enough to make a top.Variety.Data Source: The effect of the AdTracker multi-platform Internet behavior monitoring database (desktop and smart terminal) advertising war is significant.According to the mobile terminal usage of the car e-commerce platform, the used car e-commerce APP has occupied more than 70% of the total, and the frequency of use has nearly doubled.Data source: Usertracker multi-platform netizen behavior monitoring database (desktop and smart terminal) huge amount of advertising has played a role in improving its market share and education market, but the company’s tilt of resources and attention to the customer has led to its neglect of service.Improvement of quality and improvement of business model: The problem of lack of integrity and inefficiency in the used car industry still exists. Digitalization does not seem to fundamentally solve the pain point of the development of the used car industry.In Baidu, the search results of “how many pits are used in the used car e-commerce platform”, the search results are as many as 14.5 million, knowing that the title of “buying a used car is more expensive than a new car, whether it is selling a car or selling it.The column of the routine?”, 268 netizens liked it after the release of the month.The inspection of sky-high service fees, routine loans, perfunctory deductions, deliberate release of water, and adjustment of watches, many car owners finally found that buying a used car is more expensive than a new car, and even some people bought the accident car at the price of “quasi-new car”… CapitalThe market is like a jungle, a bull market, a bear market, and a crisis.The Internet has never lacked the storytellers. The Renren has completed six rounds of 760 million U.S. dollars in financing in four years. The melons have completed four rounds of $1,708 million in financing in two and a half years. UCI has knocked on the door of Nasdaq for seven years.But this is not enough. The speed of financing can’t fill the funding gap created by their crazy expansion and uncontrolled advertising.So the platform has to exaggerate the market share, and even continue to get financing if the data is fraudulent.Such as drinking and quenching thirst.The first article of the Wall Street Code, no one knows whether stocks are going up, going down, going straight or turning circles, even Warren Buffett is no exception.Investors are sometimes very emotional, seeing a little omen, silver will come in, sometimes sensible and scary, once they find that your story can not be seen at the end, the down limit will quickly break through your stock price.Yuxin’s “Blood” was broken four days after its listing, and the market value fell by two-thirds in the first half of the year. In mid-April, the stock price was again worn out due to a sudden short report; the car was “bankrupt” and “closed”The rumors of “reduction of layoffs” and “short-chain of capital chains” are very rampant. From the darling of capital to the second in the industry that shrinks life-saving, it is only half a year. In 2018, the seeds were turned from the line to the line, and opened 1 million square meters across the country.The offline store, in terms of area, has surpassed Wal-Mart and Carrefour to become China’s largest offline retailer, but it has either become China’s CarMax or is facing the risk of a capital chain break. In the true sense, it is “unsuccessful.”Chengren”.However, the fact that they are in front of them is that Youxin has to admit in its prospectus that “we have not made a profit since its establishment in 2011”, and the players in the track are not as good as B2B, C2C, C2B, C2B&B2C, mode.After changing one after another, you can’t find the one that makes money.In the United States, 2.3 used cars can be sold at the same time as a new car is sold. In China, the ratio of new car sales to used car trading volume is less than 1:0.5.In addition to the price factor, it is not unrelated to its sound, perfect and mature trading environment. From price inquiry, testing and evaluation to financial services, the mature trading chain makes used car trading a common occurrence.The “non-standard industry” has always been the external image of the used car industry in China. The opacity of the car is the deepest concern for consumers to buy used cars.Looking at the used car market in the United States, there are also many early-stage acts of re-selling used cars that are not suitable for re-entering the market into the market to earn unscrupulous profits. They have also gone from small to scattered, from scale to informationization.The long process of Internetization.To a certain extent, the latecomer is not without advantages at all, at least the actions and effects of the pioneers have a strong reference.In FY18, CarMax’s total revenue was 14.39 billion US dollars, an increase of 7.8%, and the profit was 2.33 billion US dollars, an increase of 6.7%. The analysis of the financial report was simple. CarMax’s operating income and gross profit mainly came from the used car retail business.This is not only because of the strong in-store execution, but also because of the continuous improvement of the website and customer experience. In addition, CarMax has always adhered to the principle of “Buy It Now” through continuous improvement of the price management system, and the strict control of prices is also its continuation.One of the magic weapons of profit.Brand monopoly, large supermarkets, chain operations, used car franchise, retail, consignment, leasing, auction, replacement, in the United States, used car operating systems and trading methods are diverse.There are two roads in a forest. One is more attractive and beautiful, but it disappears into the depths of the jungle. The other grass is very quiet, but it is not contaminated by footprints.The path is endless, and some choices determine the path of the company’s life..