The used car market in Japan is a huge business with an annual transaction volume of about 5 million vehicles. However, the industry's structure is undergoing significant changes due to diverse consumer needs and the spread of the internet. Emerging players and challenges for existing ones contribute to the dynamic state of the used car industry.
The industry leader in the used car sector is Big Motor, operating around 1,000 stores nationwide with sales reaching 580 billion yen. Nevertheless, the company faced challenges, including a fraudulent accounting scandal in the fiscal year ending March 2022, leading to a loss of trust and financial difficulties. Estimated operating profit for the fiscal year ending March 2023 is around 30 billion yen, with a net profit of around 20 billion yen, and a cash reserve of only around 30 to 40 billion yen. The company could potentially face a crisis if the situation persists.
Noteworthy rivals to Big Motor are Nexstage and IDOM (Gulliver), both utilizing the internet for used car buying and selling services and experiencing rapid growth. However, their performances also present challenges. With a sales cost ratio of about 80% and an operating profit margin of around 5%, these figures are impacted by the unique characteristics of the used car trade.
The used car buying and selling business involves either purchasing used cars from consumers and selling them in company stores or selling them through inter-dealer markets. While selling through company stores yields higher gross profits, it incurs costs for inventory management and store operations. Selling through inter-dealer markets reduces inventory risks and costs but leads to lower gross profits. Handling the diminishing value of used cars over time is the key aspect of this business.
The used car industry needs to be adaptable to consumer needs and market conditions, which is not an easy task. Big Motor lost credibility due to fraudulent accounting, while Nexstage and IDOM (Gulliver) face challenges with their low profit margins and weak competitiveness. The intense competition in the used car industry is expected to persist in the future.