China will be the world’s used car salesman

The country is set to upend the global secondhand market in everything from autos to apparel


A Chinese company in Guangzhou recently exported 300 used cars to buyers in Cambodia, Nigeria, Myanmar and Russia. 

The shipment was a first for China, which till now had restricted large-scale exports of used cars in deference to manufacturers, who feared that poor vehicle quality could damage their reputations. 

There will be more such shipments -- and their impact will reverberate well beyond the mainland’s used-car lots.

Rich countries from Japan to the US have shipped at least some of their older vehicles to developing nations such as Mexico and Nigeria for decades now. The trade has done more than get polluting autos off the roads; it has helped boost new-car sales by reducing the supply of secondhand alternatives.

Compared to domestic sales, of course, the numbers are quite small: The US exported just under 800,000 used cars last year, a number that’s remained relatively steady since 2013. Nevertheless, that accounted for nearly a third of the passenger vehicles and light trucks exported from the US in 2018. Japanese exports often approach 1 million vehicles annually. Singapore, Korea, several European countries and Canada also export a significant number of used cars.

It makes sense that China would join them. For one thing, inventory is building. In 2018, China sold 28 million new cars and nearly 14 million used ones. Soon, the ratio will flip: China is home to more than 300 million registered vehicles -- the largest fleet in the world -- and it's just a matter of time before more of them are resold. The quality of Chinese cars has also improved to the point where many developing-world consumers may well choose them as a cheaper alternative to used Toyotas or Fords.

At the same time, China’s automobile industry is in a slump and policymakers are keen to find ways to boost it. Used-car exports, the government says, can "stimulate the vitality of the domestic automobile consumption market."

And cars are just the beginning. Just as China's factories drove down the cost of new goods over the last three decades, the growing piles of used stuff purchased -- and now unloaded -- by Chinese consumers will exert downward pressure on the price of used and new products everywhere.

Data on China's used-clothing exports are thin, but in 2015 it officially exported $218.2 million in used apparel, while the US shipped $575.5 million. Within the industry, it's widely acknowledged that China is the fastest-growing source of used clothes globally. Traders in West Africa claim that the recent surge in Chinese clothing imports has undercut the market for new and used clothes.

China's secondhand car exports are starting modestly and the country will take time to catch up to more established players. But this isn't semiconductor manufacturing; long-term, China will have more used cars to sell than anybody and its export business will inevitably grow into the world’s biggest. Global automakers might want to strap on their seatbelts.

    Bloomberg