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The ongoing price competition within China’s automotive industry, the largest globally, has now expanded into the used vehicle sector, negatively impacting the operational efficiencies of dealerships. The depreciation of used new energy vehicles (NEVs) has been particularly significant.
Once a new car is purchased, its value in the pre-owned market drops sharply, often to about 80% of its original price. Some limited-edition models experience even steeper declines, according to reports from dealers. For instance, a model that was sold for nearly CNY340,000 (around USD47,500) two years ago can now be found for just over CNY150,000 on the used market.
Among used NEVs, the Nio ES6 Battery-as-a-Service (BaaS) edition is depreciating at the fastest rate. Several units now list for just above CNY100,000, compared to a launch price exceeding CNY400,000. The primary driver behind this sharp decline is weak demand; while Shanghai still shows some interest, other regions report little to no demand for these models.
The battery rental system is a significant obstacle for motivated buyers. Customers are required to pay CNY728 (USD100) monthly to rent a standard battery pack, a fee that remains applicable even if the vehicle is parked and not in use. This ongoing cost extends over seven years from purchase, impacting resale values. Dealers note that this billing cycle begins at the time of resale, affecting the pricing of used vehicles.
In contrast, Tesla’s used cars tend to retain their value better and exhibit more stable pricing. This stability is attributed to consistent strong demand, which allows for quicker turnover and prevents dealerships from being stuck with excess inventory. While profit margins on used Teslas are relatively slim—around CNY3,000 to CNY5,000 (USD420 to USD700) per sale—dealers accept this as part of the business.
The used vehicle market has been undergoing ongoing upheaval since the COVID-19 pandemic began in 2020. Industry analysts describe this period as one of continuous reshuffling driven by pandemic impacts, macroeconomic fluctuations, and a surge of new energy vehicles on the market, leading to notable adjustments in overall performance.
Lower prices for new vehicles and negative coverage concerning used autos have caused some consumers to shift their preferences toward new cars. Additionally, tighter negotiation margins and rising operational expenses have further challenged the profitability of dealerships.
Recent data from the China Automobile Dealers Association indicates that nearly 90% of the top 100 used car dealers in China reported gross profit margins of less than 6% per transaction this year. About half of these dealers achieved margins between 4% and 6%, while the number of dealers with margins below 4% increased from 29 to 35 over the past year.
Most small- and medium-sized used car dealerships are operating at a loss, with some having transitioned to different business areas. Industry leaders point out that the sector remains highly unsettled, with a number of dealerships closing down as the market consolidates.
The overall industry landscape reveals that many used car outlets have exited the market, evidenced by the rising number of closed stores, and only a small fraction of remaining dealers are turning a profit.
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