Used Car Warranties in China – The Next Big Thing

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    Burgeoning used car industry is creating demand for additional services, specialist warranty is one to aid the sales and after sales process for dealers country wide.

     

    The Chinese Used Car Industry is somewhat of a Trojan Horse. With the boom of new car sales in the late noughties through to 2011, the number of cars in China has surpassed 85 million and continues to grow albeit at a slightly slower pace than those manic few years.

    In rough figures, this translates to between 6 and 7% of the Chinese population driving a car today. Compared to the USA, the UK or Australia where that number is closer to 70%, an enormous opportunity exists for all industries associated with passenger cars in this incredible consumer driven country.

     

    Considering civilian car ownership was only legalised in 1979, the mind boggles at how far the industry has come in such a short time. The manpower used to build the infrastructure required for distribution, sales, refuelling and servicing this number of cars has been tremendous. The amazing part is that this investment is now shifting from new cars and manufacturing towards catering for the used car industry as millions of near-new cars are traded in or upgraded.

     

    It is with little wonder why we now have professional services businesses – chains of them – springing up to service cars coming out of their factory warranty period. Huge new marketplaces are being built, both in private and in partnership with local governments, to trade used cars that comply with minimum standards. Finance companies are adjusting to the desire for used cars and looking for their own solutions to scoop up some of the money starting to flow.

     

    The used car industry has slipped into China – hidden by the desire for new cars being so huge that the glut of near new vehicles must find new homes – and is now presenting itself as a premium choice for many to build upon or integrate their business into.

     

    It is in the past 12 months that many 4S dealerships are now looking to retune their business model to cater for the fact the heat has come off the profitable new car sales. Some have visited other mature market countries and find a similar pattern; 4S dealerships often have a used car division that they rely on for its profitable financial contribution each month.

     

    Until 2012 there was a key piece of the used car industry missing: The back up and support post sale that would be considered normal when buying a new vehicle. Many used car dealers offered nothing other than a test drive and some assurance ‘it is a good car’. Some offered a ‘concrete warranty’ where as soon as you leave the concrete it’s parked on, there is no warranty. Enter: Used Car Warranty as an industry in China.

    Of course many savvy business owners want to sell a premium used vehicle and offer to help their clients after the sale, but have found that without terms and conditions they were often fixing things they shouldn’t be or simply giving a lower level of service than they wanted to offer.

    As always in life, necessity is the mother of invention. All across China there are smart business professionals who have decided they are going to raise the bar to attract customers and deliver a profitable repeatable outcome.

     

    Offering peace of mind is paramount to getting a great price. This can be achieved by lowering the customers’ concern or worries about the unknown. Many used cars are sold to first time buyers with little or no mechanical knowledge and alleviating their fear or anxiety is vital. Trust is one thing, but a contract that states in black and white what is covered helps the dealer and the consumer achieve a common ground. Warranty products, like their insurance cousins, are also a profitable way to add value through various sales strategies.

    Southern Cross Warranty is a division of Australia’s largest warranty, insurance and finance operation which caters predominantly toward the used car industry. Entering the Chinese market in 2012 it brought with it many years of Chinese market research along with 15 years of product development, sales concepts and ideas which have been adapted for China.

     

    It is safe to assume that like all other large mature car markets around the world, used car warranty will become a substantial industry in its own rite. Partnering with not only dealerships but repairers and roadside assistance operations adds additional dimensions, services and revenue streams for growing businesses. Southern Cross aims to be at the forefront, to help lead the development and trust pathway but it is also safe to assume it will have plenty of competitors in the next few years.

     

     

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