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BMW taps extra mileage in premium used cars

By Lu Nengneng | June 24, 2013, Monday | Print Edition

GERMAN carmaker BMW is striving to enhance its trade-in services and use attractively priced used cars to attract more customers in a volatile market environment.

Its Premium Selection program, which accepts only certified pre-owned BMWs and Mini cars five years or younger and with 120,000 kilometers or less on the odometer, has sold 35,000 units since 2006. The program now operates in 106 dealerships, including five used-car centers in China.

On a recent Premium Selection Day in Shanghai, more than 300 used BMWs and Mini cars were displayed outdoors near the BMW Brand Experience Center. Jonathan Zhang, senior manager of used-car management at BMW China Automotive Trading Ltd, explained to Shanghai Daily why older cars are becoming more attractive nowadays.

Q: How much profit is there in trading used cars, given their narrowing price gap with new ones under relentless discounting?

Zhang: Used and new cars don't have wide price differences now, but the latter are subject to additional vehicle purchase taxes (which are 10 percent of the retail price). Compared with a brand-new BMW 3-series model, whose price starts from 300,000 yuan, a one-year-old car is at least 40,000 to 50,000 yuan cheaper, and that money is equal to the car's maintenance fees over the next four to five years, which is quite a big savings.

Q: What underpins the development of used-car sales in China?

Zhang: China has a growing wealthy class. Five or six years ago, the people sitting behind the wheels of BMW 3 series were mostly entrepreneurs and corporate executives, but now we see more white-collar workers. These new customers, who probably have only one parking spot at home, will choose to upgrade their existing vehicles rather than buy additional ones in the future. We need to protect the residual values of used cars by finding them new owners, and it helps fulfill the dreams of many people who love BMW cars but cannot afford new ones. That is the case for most of our 3 series used-car buyers.

Q: How would you describe those interested in higher-end used models, like the X5 sports utility vehicle and 7 series flagship sedan?

Zhang: They could have bought new cars because they are not short of money. But some want to experience different driving pleasure by changing cars, while others want to avoid the fast depreciation of new cars in the first two years after purchase. They are sophisticated, affluent buyers looking for cost-effective offers.

Compared with Beijing, Shanghai has a bigger customer base for our used-car business because people here are very open-minded about new things.

Q: What about Zhejiang and Jiangsu provinces, where BMW has hard-core fans?

Zhang: We were once told that people in Wenzhou (a teeming entrepreneurial city in Zhejiang, known for its nouveaux-riches) would not buy used BMWs. But now, the Premium Selection program sells hundreds of cars there each year because the locals have learned to spend their money wisely.

Q: The Premium Selection program boasts of fair and transparent pricing and offers repair and maintenance services. Those are the same selling points of the used-car supermarkets of Carking. Could you comment on this rivalry?

Zhang: We don't see them as competition. Our dealerships are authorized by BMW to trade used cars with specific expertise in certification testing and after-sales maintenance. They make promises with the brand's reputation on the line.

The used-car supermarket facilitates the industry's development but not in the same way as we do. We hope dealerships will gain consumer trust by having carmakers backing their brands in the used-car market.

Q: BMW Premium Selection switched to a fast lane last year, with deliveries of 15,000 units, compared with the combined volume of 20,000 units sold between 2006 and 2011. Do you think such growth is sustainable?

Zhang: I think it is. The car parks of BMWs and Minis in China exceeded 1 million last year, half of which were sold in the past two years. That means we will have 500,000 cars going back on the market for resale in a couple of years, probably through the trade-in program at dealerships. On the buy side, I think everyone has a dream luxury car brand, and I hope more and more BMW fans will make their dreams come true.

Autotalk Special


 

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