The Story We Could Have Predicted
One can only laugh and smile at those that bought Chinese cars 5 years ago and are now considering trading those old models in for a new Chinese vehicle. I have mentioned many times before my biggest concern all along has been the depreciation in value as these vehicles have no chance of holding any type of value. This is no different than having a 5 year old cell phone and is a throw away type item or close to that comparison.
A report has come out from one of the main Chinese vehicle holding distributing companies stating that many car owners are now being forced to hang onto their cars. The cars have depreciated so much that the finance owed after 5 years of payments does not cover the balance. The trade in values are so small the vehicle owners are now stuck. The words used was a mismatch between the trade in values and the outstanding vehicle finance.
The good news for those that hate anything Chinese is that statement 2 years ago that was made that the industry would cannibalize itself is actually coming to fruition. Whoever bought a Chinese car is finding out why it was actually a very bad idea. Once the safety standards for these vehicles are public knowledge which we all know those vehicles sold in South Africa have lower safety ratings try selling a vehicle then. This was a matter of time before the Chinese honeymoon blew up.
The other problem is that due to the steep competition and Chinese government supported subsidies for Chinese vehicle exports new vehicles are cheaper than ever. The second hard market is not interested in these 5 year old Chinese models which has pushed the vehicle valuations down even further. These Chinese vehicles in SA are mainly combustion engine models and the EV story with BYD is even worse with depreciation at an average rate of 45% for the first 3 years. Good luck selling or trading those models in 5 years time.
There are so many various brands and models in the Chinese vehicle sector that no one knows of one particular brand or model will perform better than others. The current trend is that every Chinese car owner is experiencing what they never anticipated and that is owning a vehicle that no one wants or deems it to have actual financial value.
The problem is that everyone else who does not own a Chinese car views them as pure crap being sub standard on all levels and this playing out is proving that case for them. A Chinese car is not an investment and you may as well drive it until the wheels fall off as there is no market for second hand Chinese vehicles.
When we were out shopping for a car earlier this year granny stupidly had me sweating when she paused to take a look at a Chery. The car was in very good shape being 1 year old and 8000km on the clock and cheap at just under $16K. what got me was the depreciation as I saw a 50% price drop on a good looking car. Definitely not a bargain knowing there would be another instant 20% drop if we purchased this and my argument along with common sense won the day. This deal was a marriage breaker as I would never drive a Chinese car full stop.
What the owners of these unsellable cars are now doing is creating a boom for Chinese spares as maintenance and service plans have now expired. I expect this news is going to hit hard for those who have not reached the trade in time and will try and sell their cars before hand or as soon as possible which will have the same results.
The problem is when you buy a vehicle because of the upgrades that come with the vehicle and not for the vehicle itself. There is a reason why certain brands like Audi, Toyota and Mercedes hold their values and it is these instances that could change how and what cars people buy. A Chinese car will never hold any value when it comes to reselling as the quality of build is just not there.