Business

Jaded owners and film stars push sales of luxury used cars

By Wang Chao (China Daily)
Updated: 2010-07-29 16:31

The gleaming silver Rolls-Royce 101 EX convertible is only a few months old, but it is already on the used-car market in Beijing - with a price tag of 8 million yuan, or $1.2 million. It sits in a plush, air-conditioned showroom of the First Station Second Hand Car Co Ltd, unlike a ubiquitous dealer's yard where offerings often bake in the sun, or, in winter, get covered with snow.

Moreover, First Station is just one of 13 used-car dealers operating from the 7,200 sq m well-appointed showroom, known as Limo Hall, all trading in used luxury vehicles.

And the Roller is just one of thousands of luxury cars that have gone into China's booming prestige used-car market, especially for vehicles priced at more than 600,000 yuan, this year.

Guo Jian, First Station's owner, said Beijing's wealthy apparently get tired of their limousines quickly. The Rolls-Royce, for example, was bought at the Beijing auto show in only April, where it cost 12.8 million yuan.

"Maybe that's why the market for second-hand luxury cars is flourishing in Beijing," Guo said. Among the main suppliers of these cars: film stars.

But Guo said private owners are not the only source of the almost-new limousines. "Some big dealers have contacts within authorized manufacturers' dealers, where they can get demonstration models, which are in good condition," he said.

Guo rents a quarter of Limo Hall, where he stocks 80 cars priced from 600,000 yuan to 9 million yuan, with a total value of 70 million to 80 million yuan. Guo, who has been in the business since 1996, has built various channels to acquire high-end cars.

Limo Hall is part of Beijing's 337,000 sq m Huaxiang area where the largest used-car market in China operates.

"All cars sold at Limo Hall are above 600,000 yuan, although they are second-hand," Wang Meng, a director of the Huaxiang market, told China Daily. "And most are under two years old." All look virtually new, after a bit of spit and polish.

At any one time at Limo Hall, which opened only in May, about 200 luxury used vehicles await new owners, with some spending barely a few weeks there before being driven off.

Mu Shuai, the owner of Huijinxiang Old Motor Vehicle Brokers Co Ltd, rents only enough space to exhibit 10 cars at a time, but he manages to turn them over in under six weeks, with price tags ranging from 800,000 yuan to 1.5 million yuan for each vehicle.

"By buying these cars, customers can save on paying tax on new vehicles, which can cost hundreds of thousands," Mu said. For example, the purchase tax on a new BMW X6, which costs 1 million yuan, can be 130,000 yuan.

This month, he sold a two-year-old Mercedes-Benz S300 for 750,000 yuan. The car's sticker price in 2008 was 930,000 yuan, as well as a two-year-old Mercedes-Benz S600 for 1.6 million yuan. The car's new price: 2.7 million yuan.

Mu said that most people who come into Limo Hall end up in buying a car that day. "Many come from outside Beijing, mostly Shanxi and Inner Mongolia, so they prefer to close a deal in one trip," he said.

The China Automobile Dealers Association said sales of used cars in China notched an increase of 12 percent from January to May over the same period last year.

Last year, the association's records show that 3.5 million used cars were sold throughout China, but this figure may not include private sales. New car sales reached 13.7 million last year.

Wang Meng said all signs indicate that the used luxury car market is growing faster than the regular second-hand market.

Some dealers who used to operate independently said that since they took up space at the Limo Hall, sales have increased.

Ma Hongguang, manager of the Source of Old Motor Vehicle Brokers Co Ltd, said cars priced at about 600,000 yuan go "quite quickly".

"This bring us a rapid capital flow," Ma said.

Even Guo conceded he has to sell at least one or two cars every day to maintain cash flow.

The dealers' association said the average price for each used luxury car transaction is 442,000 yuan.

But rental cost at Limo Hall isn't cheap. To rent enough space to exhibit 20 cars, a dealer may have to pay more than 1 million yuan a year.

Sellers outside Limo Hall, however, lament a shortage of buyers for pricey, though much less expensive, cars priced at about 300,000 yuan.

"When the market was good in 2008 and 2009, I could sell more than 10 cars every month," a salesman, who didn't want to be named, said. This lasted until November, when the government introduced a policy to encourage the purchase of low-emission cars.

"Now, even though we have dropped prices by 10 percent, we can hardly attract half as many customers

"Fewer people come here for used cars since they can buy a brand new car at a quite reasonable price."

China Daily