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According to industry statistics, only 10% of profits in the global automotive sector come from new car sales, while after-sales services account for a significant 50%. Parts and components sales make up another 10%, and used car sales contribute around 20%. This shift in profit sources highlights a growing trend: the auto industry is moving away from relying solely on new vehicle sales toward more sustainable revenue streams such as service and used car trading.
Shanghai Volkswagen's recent used car initiatives in September are just the beginning. Industry insiders believe this marks a new phase in the market, signaling that the era of rapid expansion through new customers is over. Now, the focus is on building brand loyalty, retaining existing customers, and finding new ways to generate revenue. As market leader, Shanghai Volkswagen is setting the tone, and others are likely to follow suit.
This transition is driven by changing market dynamics. During the high-growth phase, one manufacturer’s increase in sales didn’t necessarily come at the expense of others, since the overall market was expanding rapidly. However, as growth slows, competition becomes more intense, leading to a zero-sum game where gaining market share often means losing it from competitors.
Experts like Jin Xuewei, a market analyst, point out that retaining existing customers is far more cost-effective than acquiring new ones. Studies show that winning a new customer can cost up to 16 times more than keeping an old one. This has led many automakers to rethink their strategies, focusing more on long-term relationships rather than short-term gains.
In China, although new car sales still dominate profits, signs of a shift are becoming evident. In Shanghai, for instance, the ratio of new to used car transactions has reached 1:1, compared to a much lower 3:1 nationwide. The used car market is growing rapidly, with Shanghai alone seeing over 144,000 used car transactions in 2003. Experts predict that by 2008, the used car market could surpass new car sales in volume.
The demand for used cars is also increasing due to faster vehicle turnover. In the past, people changed cars every 8–9 years, but now it's more common to replace them within 6–7 years. This trend is expected to continue, creating a booming second-hand market.
In developed countries, the used car market is already significantly larger than the new car market. In the U.S., for example, about 60% of vehicles on the road are used, and Americans change cars roughly 10 times in their lifetime. The average ownership period is less than three years, which shows how mature the used car market is in those regions.
China still has a long way to go, but the potential is huge. With more companies entering the used car space, the next year is expected to be a critical one for the sector. Many automakers are planning to expand into used car trading, turning their 4S shops into 5S models that include used car sales.
At the recent National People's Congress, Guangzhou Honda proposed reforms to improve the used car market, including liberalizing regulations and granting dealerships the right to trade used cars. Some dealers have already started pilot programs, training staff and preparing spaces for used car sales.
As the market evolves, competition will intensify, and the used car segment will become a key battleground. Whether through policy changes or company initiatives, the future of the auto industry looks increasingly focused on sustainability, customer retention, and the growing importance of after-sales services and used car trading.
October 03, 2025