Japanese Auto Manufacturers Selling Off More Used Cars at Auction

Tokyo June 15, 2006; The Asahi Simbun newspaper reported that at a time when domestic sales of new cars are sluggish, major automakers are stepping up efforts to sell off the used vehicles traded in at their dealerships.

Many used cars are sold at at one of about 130 auction sites nationwide(Japan).

In 2005, the total number of vehicles auctioned increased to 7.96 million, up from 5.38 million in 2000.

More cars are being sold, partly because of the increased convenience offered by Internet tenders, industry officials said.

However, a number of vehicles offered for auction are in such bad condition they should be scrapped, the head of a used car sales outlet said.

He said some dealers are reluctant to take a chance on older cars because if they can't sell them, they have to pay a fee to get rid of them, in compliance with recycling legislation that came into effect in January 2005.

At the same time, people are more willing to drive older cars. Consumers now wait 6.8 years to replace their cars, up 1.4 years from 10 years earlier, according to a survey conducted in 2005 by the Japan Automobile Manufacturers Association.

With people hanging on to their cars longer, good-quality used vehicles are getting more scarce. Manufacturers are uniquely placed to take advantage of their nationwide dealership networks to find the best cars available.

Honda Motor Co., which became involved in auctions in 2001, established a sixth site in Hokkaido in November. In September, the company will relocate and enlarge its auction site in Sendai.

Honda sends cars that have been traded in at its dealerships to affiliated auction sites. Its ratio of successful auction sales is 80 percent, one of the highest in the industry.

Specialized auction companies now hold more than an 80 percent share in used car auctions. Some automakers are forming tie-ups with specialized auction companies.

Toyota Motor Corp. is among them.

In December, the company acquired a stake in CAA Co., a used car auction company based in Toyota, Aichi Prefecture.

Vendors must pay a membership fee in order to sell their vehicles with an auction house.

Starting in April, members of CAA were offered a discount in fees to sell their cars through Toyota Usec Corp., a Toyota subsidiary running car auctions. In return, Toyota Usec members got a discount at CAA. The maximum membership fee is about 94,000 yen.

By the end of the year, the companies plan to harmonize such areas as inspection criteria for cars sent to auction sites and to establish a shared distribution system.(