Locals hunt for car bargains in FTZ
Interest in the parallelimport cars available at the China (Shanghai) Pilot Free Trade Zone is growing after the central government authorized sales there last month.
Now local residents as well as people from neighboring Jiangsu and Zhejiang provinces regularly pack the 3,000-square-meter trading center in search of a bargain-priced foreign car.
Seventeen Chinese companies began selling these at the Shanghai FTZ from Feb 10. These auto dealers must have been in business for at least five years, made a profit for three consecutive years, and have sales of more than 400 million yuan ($64 million) in the past financial year.
Parallel-import cars are bought directly from overseas to bypass distributors and 4S dealerships so that sellers can offload at discounts of 10 to 25 percent.
Zheng Yanghui has his eye on a Range Rover at the center. He said he has already test-driven the same model at a 4S store in the city.
“The service level here isn’t great but it’s only been open for a month. It still needs time,” said the 43-year-old sign manufacturer.
“They have a repair shop set up and they are moving quite fast. If I can save even a little bit on the price, it’s good enough for me.”
Zhang Xirong is a sales manager at the trading center. She wasn’t able to close any deals during Chinese New Year because the cars were only on display that week, but she said business picked up as soon as the weeklong holiday ended.
Since the trading center is the first of its kind in China and has only been running for one month, some tweaking is still required, especially in terms of service.
Some consumers complain that there are too few sales reps, only a dozen or so vehicles on show, and that prices are not clearly displayed.
Moreover, the cars are usually locked, meaning that consumers cannot take a look inside. Going for a test drive is usually out of the question.
Du Jiehui left the center after just 10 minutes in late February. The 47-year-old realtor is planning to buy a Porsche Cayenne this year but was frustrated upon learning that the model being sold in the FTZ is not available at other 4S stores.
“There was no way to compare the 980,000-yuan price tag to see if it was a good deal,” he said.
“There was no information about maintenance costs and I would be solely reliant on the repair center inside the FTZ.”
He said luxury car buyers care more about after-service than retail prices.
Chinese dealers of imported cars are facing more challenges this year, with inventories running high due to drop-off in demand over the recently ended Spring Festival, according to the February Vehicle Inventory Alert Index released by the China Automobile Dealers Association.
“The market share of imported cars has been falling since the start of the year but inventories keep growing,” said Wang Cun, a senior manager at China Automobile Trading.
“Demand began shrinking in the fourth quarter, with November the hardest-hit month. As a result, dealers slashed their prices by 10.7 percent on average in January compared to a median discount rate of just 6.8 percent in July,” he added.
“But the market barely reacted to the cut-rate prices. We predict it will take at least six months before the imported car market picks up again.”