Used car market bucks nationwide slowdown

From January to May, China's used car sales reached 8.1 million units, up 2.3 percent year-on-year, with a total transaction value of 531.37 billion yuan ($73.2 billion), according to data from the China Automobile Dealers Association.

In the same period, retail sales of new passenger cars stood at 8.15 million units, dropping more than 20 percent from 2025.

Sales of secondhand NEVs jumped 25.7 percent to 685,400 units during the same period, becoming the engine of growth in the sector.

Cui Dongshu, secretary-general of the China Passenger Car Association, said that since January 2026, the halved purchase tax on NEVs has raised the cost of buying a new NEV, while used NEVs remain exempt, giving them a clear price advantage and boosting secondhand demand.

In June, China streamlined used car transfers by rolling out a nationwide "one-certificate" policy for passenger vehicles. Under the new rule, buyers from other cities can complete ownership transfers with only their ID cards, eliminating the need for residency permits, while vehicle records are transferred online, allowing interprovincial deals to be finalized in a single visit.

With an improved trading environment, used cars have substantial growth potential and transactions should pick up notably in the second half of 2026, Cui added.

In the first half of 2026, trade-in policies continued to unlock consumer demand and a larger number of NEVs entered the secondhand market. The industry is shifting from sheer scale expansion toward a phase focused on quality, efficiency and value discovery, a report of the CADA noted.

Despite volume gains, the used car market faces persistent headwinds. Continued price cuts on new vehicles have spilled over into the secondhand segment, depressing resale values and squeezing dealer margins.

According to Luo Lei, vice-president of the CADA, a total of 177 models saw price cuts in 2025, with NEV prices dropping 10.8 percent and fuel-powered vehicle prices falling 8.9 percent. The price war escalated in the first five months of 2026: 82 models slashed prices, NEV depreciation expanded to 12.5 percent, and fuel-powered vehicle price cuts rose to 14.6 percent.

A CADA report also shows that the three-year resale value of electric models fell to 45.2 percent in the first half of 2026 from 54.7 percent in 2023, while that of petrol-powered cars dropped to 52.7 percent from 67.6 percent in 2022.

Among top-selling compact sedans, the Volkswagen Lavida, Sagitar and Toyota Corolla ranked as the top three in three-year resale value, yet none exceeded 50 percent. Among electric compact cars, the Volkswagen ID.3 led the list, but its rate of less than 45 percent was nearly 5 percentage points lower than that of the Lavida, the best-performing fuel counterpart.

The pressure has disrupted profit structures at new car dealerships. In the composition of gross profit, new car sales accounted for 19.7 percent in 2022. However, by 2025, this figure had turned negative at — 25.5 percent. In contrast, after-sales services and financial insurance contributed 80.8 percent and 24.3 percent, respectively.

For used NEVs, consumer concerns persist regarding battery degradation, the testing standards of the "three-electric" system — which contains batteries, motors and electronic controls — and long-term residual value.

To address these issues, the industry has introduced specialized "three-electric" inspections in certified programs. Automaker-backed warranties now cover batteries and dealerships employ professional testing equipment.

As the NEV fleet continues to expand, industry executives see room for used NEV growth, particularly among younger consumers.

Luo said that despite short-term challenges, the long-term positive trends in the used car industry remain unchanged. China's vehicle population of 360 million serves as a steady supply pool and the current 6 percent share of used cars suggests substantial growth potential.

Lang Xuehong, deputy secretary-general of the CADA, said that vehicle exports also help digest inventory, narrow regional price gaps and improve domestic supply. The export drive pushes the industry to standardize inspection processes, which in turn raises domestic standards and improves the consumer environment at home, she added.

caoyingying@chinadaily.com.cn