China has a problem: The domestic market is producing so many cars that even new cars are being sold as used. However, this does not change the fact that there are significant overcapacities in China.
The Chinese car market, especially in the field of electric vehicles, is currently experiencing a massive price war. Due to overcapacities, brand new vehicles are often offered at greatly reduced prices even directly at used car dealerships.
Why are new cars ending up at used car dealers? Many used car dealers employ a trick. The Chinese government is said to support the auto industry so strongly with subsidies that dealers exploit these subsidies to resell the vehicles as used.
With purchase bonuses, scrappage bonuses, and financial support from local governments, the prices of new cars are driven down. In some cases, there are even further discounts directly in the factories.
This was reported by Tagesschau, which spoke with a Chinese dealer who is generously taking advantage of these subsidies but simultaneously explains that everyone is doing the same. The dealer stated:
I usually don’t like such tricks. But what should I do? Business is not good. I have to survive. Others do it too – money doesn’t stink.
Even car manufacturers benefit from this used car trick: Because manufacturers benefit in the short term since they can beautify their sales figures, which looks good in front of investors and banks.
What are the consequences? The consequences are not to be overlooked: Due to the high subsidies in the domestic market, more and more manufacturers have emerged that offer their cars for the market. And this has led to a price war, where many experts question who can even make money here. Because in addition, manufacturers are fighting each other with further discounts of 30 or 40% on the car prices.
The Escape to Export
The manufacturers’ response: The Chinese communist government wants to change the situation and among other things end the practice of selling brand new used cars. However, this does not end the fierce price war. The solution for many manufacturers: the escape to export, with consequences for other countries. China now sells as many cars abroad as no other country, and companies like BYD have long since surpassed Tesla in sales numbers.
European car manufacturers feel threatened by the pressure from China in the car market and are calling for tariffs and restrictions on the prices that could ruin their own prices.
Many EU countries are also arguing that the subsidies in China are distorting competition (via adac.de). In the end, the majority of the 27 EU countries voted for punitive tariffs against China. Germany, by the way, voted no (via Deutschlandfunk.de).
A car is a costly investment and one normally hopes to be able to use a new car for many years. But for a 24-year-old, it was already over after 2 days. And that, even though he had to wait 3 years for the car and made a down payment of about 80,000 US dollars: A 24-year-old had to wait 3 years for his car and paid 80,000 euros – 2 days after the first drive, the car was already dead
