Chinese auto aftermarket scale to reach ￥1 trillion as arbitrary charge to be removed

Automobile aftermarket has increasingly become the hottest place for investing in China. It had been recorded that Chinese nearly 2 billion US dollars had been invested between the years of 2006 to 2014 in automobile service field, which is of huge potential and scale, but also of much chaos.

In a narrow sense the current automobile aftermarket covers automobile maintenance, decoration, modification, car washing and other related services. According to the statistics of China Automobile Dealers Association, the aftermarket scale has exceeded 700 billion yuan, which is expected to reach one trillion yuan in five years.

But these profitable chances will not be given equally to all the existing dealers in China especially for the situation that almost one out three dealers is predicted to shut down in the near future. The automobile ownership in China reached nearly 150 million vehicles allocated with 460,000 dealerships, while US vehicle ownership is 253 million units with relatively much less dealerships of 170,000 units.

Shadowed under the Chinese auto industry recession, an array of 4S dealerships and automobile maintenance enterprises have shut down this year. The hidden reason for the dealership’s adverse situation is the sudden disappear of business of public servant’s official vehicle maintenance, which is forced to be cut by 10% by the government reform policies.

Many automobile maintenance companies of a long history in China have always mainly depended on the public servant’s official vehicle maintenance business, which is extremely profitable. The offering price in China auto industry varies in a wide price range and vehicles with small defects will undergo very complex and big maintenance, which are the two big problems in the aftermarket in China. This kind of disorder gives rise to the irrationally high profit in the public servant’s official vehicle maintenance business.

Now that a policy began to reform the arbitrary charge in the public servant’s official vehicle maintenance business, it will accelerate the pace of some automobile maintenance companies’ bankruptcy thus further release the potential of the aftermarket.