Overview of China’s Automobile Market

China is the world’s largest new automobile market as measured by the volume of new automobile retail transactions in 2016, and is the world’s second largest automobile market as measured by the volume of overall automobile retail transactions in 2016, following the United States. In 2016, the volume of new and total automobile retail transactions in China reached 23.9 million and 31.6 million, respectively.

There remains significant room for growth in China’s automobile market. Despite the large volume and value of automobile retail transactions, the automobile density is still relatively low in China, as compared to some of the more developed markets, such as the United States. The automobile density in China, or the number of automobile ownership units per 1,000 persons, was 112.0 as on December 31, 2016, which is significantly lower than that of the United States (767.0).

The volume of automobile retail transactions in China grew from 17.8 million in 2012 to 31.6 million in 2016, representing a CAGR of 15.5%. The value of China’s automobile retail transactions grew from CNY2.2 trillion in 2012 to CNY3.8 trillion in 2016, representing a CAGR of 14.9%. Driven by the increasing consumption power resulting from China’s urbanization process and growth of disposable income per capita, increasing volume of used automobile retail transactions, and further penetration of sales channels into lower-tier cities, the automobile market in China is expected to expand further. The volume of automobile retail transactions is expected to further grow from 31.6 million in 2016 to 45.0 million in 2021, representing a CAGR of 7.3%. The value of China’s automobile retail transactions is expected to increase from CNY3.8 trillion in 2016 to CNY5.2 trillion in 2021, representing a CAGR of 6.5%.

Both new and used automobile retail transactions in China have been growing and are expected to continue to grow. However, the growth of used automobile retail transactions in China outpace that of new automobile retail transactions. The volume of new automobile retail transactions in China increased from 14.7 million in 2012 to 23.9 million in 2016, representing a CAGR of 12.9%, and the value of new automobile retail transactions in China increased from CNY2.0 trillion in 2012 to CNY3.3 trillion in 2016, representing a CAGR of 13.4%. The volume of new automobile retail transactions in China is expected to increase further to 30.4 million in 2021, representing a CAGR of 4.9% from 2016, and the value of new automobile retail transactions is expected to increase further to CNY4.2 trillion in 2021, representing a CAGR of 4.8% from 2016. The volume of used automobile retail transactions increased from 3.1 million in 2012 to 7.8 million in 2016, representing a CAGR of 25.8%, and the value of used automobile retail transactions in China increased from CNY191.4 billion in 2012 to CNY509.6 billion in 2016, representing a CAGR of 27.7%. In 2016, China’s volume of used automobile retail transactions contributed to only 24.6% of the volume of overall automobile retail transactions, while such contribution rates were much higher in the United States (68.2%), suggesting significant growth potential of China’s used automobile market. Growing automobile ownership and wider consumer acceptance of used automobiles will drive the growth of the used automobile retail transaction market in China. In 2021, the volume of used automobile retail transactions is expected to reach 14.6 million, representing a CAGR of 13.5% from 2016, and the value of used automobile retail transactions is expected to reach CNY1.0 trillion, representing a CAGR of 15.2% from 2016.

Fast Growing Online Automobile Retail Transaction Market in China

As China’s Internet and mobile Internet penetration rates continue to increase, people in China become increasingly aware of and receptive to online automobile transactions, which are facilitated through online automobile transaction platforms. The online automobile transaction platforms in China primarily operate in a to-business model or a to-consumer model. The to-business model primarily targets to serve auto dealers and other online automobile platforms. The to-consumer model, also referred to as the online automobile retail transaction platform, primarily targets to serve individual consumers.

The online automobile retail transaction platforms either (i) source consumers online and facilitate their automobile transactions, or (ii) facilitate the automobile transactions of consumers from various channels (including auto dealers) through providing online auto finance solutions. Compared with traditional dealership-based automobile retail transactions, online-platform-based automobile retail transactions possess multiple advantages. The online automobile retail transaction platforms provide consumers with easier access to a variety of automobile information and auto finance solutions. On the other hand, both online and offline components are essential to the entire automobile retail transaction process. Under the current retail transaction conventions and consumer preferences, many retail transaction steps such as vehicle condition inspection, transaction document signing, and vehicle delivery are still performed offline. Therefore, it is crucial for online automobile retail transaction platforms to have the ability to command and integrate online and offline resources.

The online automobile retail transaction market in China has witnessed a rapid growth since 2012. The volume of online automobile retail transactions was 1.0 million in 2016, representing a CAGR of 60.3% from 2012 to 2016. Such volume is estimated to reach 5.4 million in 2021, representing a CAGR of 39.2% from 2016 to 2021. Consistent with this trend, the value of online automobile retail transactions also has been increasing rapidly since 2012, reaching CNY100.7 billion in 2016, representing a CAGR of 65.5% from 2012 to 2016. Such value is estimated to reach CNY568.1 billion in 2021, representing a CAGR of 41.3% from 2016 to 2021.