the foreigner in used car business

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THE FOREIGNER IN USED CAR BUSINESS

THE FOREIGNER IN USED CAR BUSINESS

Candy Lim Chiu

Graduate School of Economics, Kyoto University

Room 208 Syatorudohaitsu, Sakyo-ku Yoshida Nakaoji-cho 1,

Kyoto-shi, Japan 606-8313

candyonthecover@yahoo.com

ABSTRACTThis study unveils how used car businesses bring about to foreign traders in a foreign land and how used cars are bought, sold, and traded is a story that this research describe comprehensively. It reports on the empirical investigation of the perspective of used car businessmen as to their actual experiences and beliefs in engaging to used car business. These viewpoints were elicited during face to face, semi-structured interviews lasting between 1.5 to 2 hours accompanied by intensive visits to used car auctions in Japan and used car businesses in the Philippines. The businessmen illustrated the actual happenings within used car auction companies in Kyoto and Osaka, Japan and the business of buying and selling of used car from traders in the Philippines until the customers can drive home his dream car.

Keywords: Used Car, Trader, Auction, Private Sale, Japan, PhilippinesINTRODUCTION

Used car industry is a never ending talk of the town especially motoring journalist have been lashing the used car industry and citing safety concerns. However, does anybody give a little importance on a used car that has been formerly drove by one of the reader of this study, trade-in for a new one and left the poor thing in the hands of a new owner or in a recycling division where it will tear-off the whole thing into pieces of dust. And does anybody care about the history of used car market that was started by Henry Ford before he introduced the ever popular mass production of automotive industry in the world. Researchers tend to focus more on the market, trade, used car as lemons, scrappage rate, and opposing views regarding used car.The automotive society owes a great deal to independent businessmen, who risked everything they owned to get into the car business. The early pioneers had accepted the law of business cycle, if you cannot be the inventor of a car, you can be the seller of the car just to be part of the billion dollar business. Used car traders were visionaries who were able to peek into the unrecognized market and see the vast availability of land and road criss-crossing within and beyond the borders. They always were able to figure out how to make a sale. It has traditionally taken only a modest amount of money to get into the used car business.This study unveils how used car businesses bring about to foreign traders in a foreign land and how used cars are bought, sold, and traded is a story that this research describe comprehensively. It reports on the empirical investigation of the perspective of used car businessmen as to their actual experiences and beliefs in engaging to used car business. These viewpoints were elicited during face to face, semi-structured interviews lasting between 1.5 to 2 hours accompanied by intensive visits to used car auctions in Japan and used car businesses in the Philippines. The businessmen illustrated the actual happenings within used car auction companies in Kyoto and Osaka, Japan and the business of buying and selling of used car from traders in the Philippines until the customers can drive home his dream car.

It shows how fascinating the business of used car of Japan and Philippines, expose how used car are bought, sold and traded describing behind daily events, explaining everything from Nintendo joystick use in Japanese auction companies to kick tyre process of buying a used car until the customers sign the contract and drives-off home his dream car.

This study is for everyone who wondered whats with used car, who started it, why it has been the buzz of the town, how traders play the game inside the auction house, or how to remarket a junk and made it as a goldmine. This study illustrates the story behind these questions. It reports back from Japan and Philippines to reveal used car businessmen are playing and making a billion dollars worth of industry. It buffers the myths surrounding some of todays biggest controversies on used car importation that buzzing the world and shed light on how used car shape our day-to-day lives, often without our knowing it. The truth about used car business world is shown in a true delight.

LITERATURE REVIEW

Overview of Used Car Business in the World

In 1891, Henry Ford became an engineer in Edison Illuminating Company and after his promotion to Chief Engineer in 1893, a month later Ford builds his first experimental engine. In June 4, 1896, Ford conducted secret test of his car on the streets of Detroit. Ford self-propelled vehicle known as the Quadracycle, a water cooled, four stroke, two cylinder engine made about four horsepower with a top speed of 20 miles per hour (MPH). In order to finance the building of his second car, Henry Ford sold his car to Charles Ainsley of Detroit for US$200. Later, when Ainsley sold that car to bicycle dealer A.W. Hall, it becomes the first used car of record (Genat 1999, 105).Historically, trade in used cars was limited to high-end vehicles such as antiques, limited edition or vintage cars that were sold to restricted market of the affluent people. The nature of used car business, more used cars than new cars have always been available, and as more new cars were invented and released in the market each year, the inventory of used cars continually grew. How these cars are bought, sold, and traded is a story that continues today.

The reasons why used car are trade: (1). Automotive industrialized countries like America, Europe and Japan tend to protect their own industry and businesses for continues consumers demand for new cars, (2). Owners may sell their old cars in exchange for cash than holding for years, (3). Owners may also sell it as a trade-in for new cars to escape the inconvenience of maintaining the old one, (4). Changes of owners preferences due to trends and wants, (5). The quality and models deteriorate with age over time, so owners may sell it to update to their preferred quality, and (6). Fuelled by developed countries increasing sophisticated used car market and a hunger for cheap, reliable vehicles in developing countries.

The start of used car dealership in US, Mad Man Earl Muntz made his start in life in the mid 30s as a used car salesman in Illinois. In the early 40s, Muntz moved his operation to Glendale, California. This was the beginning of the most colorful, outrageously successful merchandising promotion in the used cars. In 1941 during the war in Los Angeles, he became the biggest used car dealer in the world. By 1947, Muntz had continued in his command of the used car market, but had taken on the largest Kaiser-Frazer dealership in the US. In 1947, he sold US$72 million worth of new and used cars (www.americansportscars.com/muntz.html). So the auto-export revolution is taking shape.

International trade is not limited to new products only but a wide variety of used and refurbished goods that are sold beyond the borders especially used cars. In the US and Europe, there are three used cars sold for every new one (Zaun and Singer 2004) while in Japan, the export of used Japanese cars are on massive scale began in the 70s. The used car market in America, Europe and Japan has entered the matured period and showed the following market characteristics (Chen 2004): (1). Large business volume and has formed effect of scale. Volume of used cars in developed countries is more than the volume of new cars. In mature auto market, the average vehicle discard cycle is about 8 to 12 years, but the average of vehicle renew cycle is less than 4 years. (2). Lower price and balance of supply and demand quantity in the market. In the 21st century, cars have become an essential transportation for the people in different levels with different demands. (3). The systems organize well and promote the market to be developed. Used car market in the developed countries is fully established. Governments formulate laws that would protect the interest of its own domestic car makers and consumers rights.In America, the annual sales volume of American used car is already 2.5 times of its new car sales volume. Human auctioneers in the US take three minutes or more to sell a car in a face-to-face system resembling a cattle auction (Zaun and Singer 2004). In 2001, total used unit sales including franchised dealers and private transactions reached a record of 42.6 million used cars compared to 17.2 million new cars. (see Figure 1).

Figure 1: Record Number of Used Car Sold in US

Source: The Manheim Used Car Market Report (2002).According to Webb (2002), we believe it will be a decade long expansion of the used vehicle market. Indeed, with demand increasing on the strength of US household formation growth, and scrappage rates continuing to decline, we project that the used vehicle market will add 600,000 transactions per year, or six million additional transactions by 2010. Used vehicle net profit rose to US$230 per retail unit 50 percent more than was earned on a new unit because used car inventory costs less on a per unit basis and turns faster than new vehicle inventory, used car dealers return on invested capital from used cars is far superior to that of new cars (NADA, 2002).

In Europe, the used car market is well established in all European economies. Sales of used cars reached 5.5 million units by 1992 and continues increased from 6.2 million units in 1993 to 7.9 million units in 1995 with 27.4% increased compared to new cars with 5.6% increased within the same year. Table 1: UK Car Sales Volume Trends 1993 to 1995

Millions of Cars199319941995% Increase 93-95