How Used Cars Become the Second Growth Line in Automotive Consumption

The transaction trends in the automotive market resemble a race between hares and tortoises: the gap in transaction scale between the leading new car market and the rapidly catching-up used car market is narrowing. With the continuous expansion of the total number of cars in circulation, the used car industry is becoming a significant reservoir for the entire automotive market, promoting both domestic consumption and export. At the recent 2025 China Used Car Conference, Tian Tian, deputy secretary-general of the China Automobile Circulation Association, presented detailed data showing how the used car industry is increasingly becoming the second growth curve in China's automotive consumption market. The ratio of used to new cars is gradually decreasing, with the used car market maintaining double-digit growth rates annually, thanks to comprehensive national policies. Particularly since July 2024, government incentives for trade-ins and vehicle scrappage have begun to show their impact, with over 10 million new cars benefiting from subsidies, which has provided ample quality used car sources and further activated market potential. In the first half of this year, the domestic used car transaction volume reached 9.57 million units, a year-on-year increase of 1.99%, with a total transaction value of 623.24 billion yuan. The ratio of used to new vehicles continues to shrink, catching up to international levels. However, due to the continuous rise in the new car market and increased discounts, some consumers looking to buy used cars are shifting towards new cars, resulting in a slight increase in average inventory cycles in the used car industry. Despite the slightly weaker growth in used car transactions, leading used car enterprises are adjusting their inventory and operational efficiency to achieve sustainable development. The growth of the new energy vehicle (NEV) sector has also played a crucial role, with NEV sales penetration exceeding 47.6% last year, pushing used NEV transactions to surpass one million units for the first time. This year, NEVs continue to be a core driver of industry upgrades, with penetration reaching 44.3% in the first half of the year, laying a solid foundation for the continued expansion of the used car market. Since the second quarter, the monthly transaction volume of used NEVs has consistently exceeded 110,000 units. The used car sector is not only growing but also becoming more specialized. The market is seeing a gradual emergence of chain stores due to favorable policies, leading to a more compliant and tax-paying industry. Companies like Aokangda, Taoche, Shuaiche, and Kaitaichi are establishing chain models, while internet platforms like Dongche Emperor are also pushing for chain development. Dealers are focusing on fewer brands, often specializing in specific brands such as ABB and new energy brands. Additionally, there is a rise in specialized used NEV stores operated by younger entrepreneurs who are more aligned with the digital and electrified trends in the industry. The division of labor within the used car industry is becoming more refined, with the emergence of service providers specializing in trade-in outsourcing. The transaction model of most used car markets has shifted from a rudimentary rental model to a comprehensive service model, including inventory financing, mandatory inspections, after-sales services, and even dispute mediation offices. The digitalization of the used car market is also advancing, equipping dealers with digital tools for better management. As new car profit margins decline, dealers are increasingly investing in used car operations, with many forming dedicated used car companies. Manufacturers are also advancing the iteration of certified used car programs, enhancing customer trust and service offerings. A survey indicates that 41% of used car buyers prioritize cost-performance, while 37% value resale value. Most consumers buy used cars for commuting and family transport, with traditional dealers still holding a significant market share. Consumers also express strong demand for vehicle inspection reports, highlighting the need for transparency. The used car market remains dominated by German and Japanese brands, but domestic brands are showing strong potential. The development of the used car market faces challenges, including the need for integrity in business practices, service restructuring, and enhanced learning capabilities among industry players. As the market continues to evolve, collaboration among all stakeholders is essential for building a healthy ecosystem and sustaining growth in the rapidly changing landscape of the used car industry.