Chinese Auto Aftermarket Shows Great Potential

Compared with the extremely rapid expansion of the Chinese market for new cars in recent years, the auto aftermarket has been sluggish. Its potential, however, is huge.

The China Association of Automobile Manufacturers (CAAM) reports that total auto ownership in China topped 61.22 million units at the end of June this year, and predicts that annual sales will amount to 8.6 million units in 2010 and 17 million units in 2020.

Burgeoning auto ownership has created a huge demand for aftermarket services (the sale of parts, repair, maintenance, cleaning, etc.), which are expected to have a market scale of 190 billion yuan (or renminbi) in 2010.

Right now, though, the development of the auto aftermarket in China is facing a number of restraints:

1. Impact of the economic crisis: With the ravages of the global financial tsunami, auto sales in China have plummeted, casting a shadow over aftermarket prospects.

2. Inconsistent product quality: Some operators use substandard materials to maximize profits, creating serious risks for consumers and eroding their confidence.

3. Uneven service quality: Many of the auto beauticians that have sprung up in recent years lack adequately trained service personnel, brand image, professional equipment, and quality services.

4. Lack of industry standards: A lack of industry standards has led to wildly differing charges (the prices charged by some operators yield a profit of up to 200%). Some operators, for example, charge 4,000 yuan for a leather seat that costs them only 1,500 yuan, and 500 yuan for a fabric seat cover that costs only 100 yuan. Windfall profits and deceptive practices hamper the long-term healthy development of the industry.

The large "auto cities" that have emerged in coastal areas in recent years generally offer better services, such as the following:

1. Complete product line and one-stop service: The "auto cities" are like hypermarkets with a complete range of products carrying a variety of brands, thus offering one-stop shopping.

2. Frequent promotional events offering large discounts: Like large retail outlets of other kinds, big "auto cities" frequently hold promotional events featuring deep discounts, trial drives, driving contests, and other activities.

3. Quality assurance: The managers of big "auto cities" screen quality strictly before allowing companies to set up new shops. They also enforce rules designed to protect consumer interests.