Manheim Auction Inc, the world's largest used car dealer, has established a joint venture second-hand car auction company with Shanghai International Commodities Auction Co Ltd (Shanghai Guopai).

The deal, announced yesterday, is a first step towards expanding Manheim's business in China's budding automobile auction market, company executives said.

US-based Manheim declined to reveal details other than it had a controlling stake in the new company, called Shanghai Manheim Guopai Motor Vehicle Auction Co Ltd (Manheim Guopai).

Executives said they expect the company to be profitable in its second year.

An estimated two million second-hand vehicles were traded in China in 2005, representing a rise of about 10 per cent over the previous year but less than a third of the new car market.

The US trades about 43 million second-hand cars and 17 million new cars a year.

Manheim Guopai will start business in the Shanghai municipality before expanding into other Chinese cities. The firm also expects to provide auction training and technology solutions.

"We will continue to look at additional opportunities in China and we feel this is an important start," said Michael J. Langhorne, senior vice president of Manheim International Business.

Manheim's operations in China will be coordinated with its Pacific Rim businesses in Thailand, Australia and New Zealand.

The establishment of the joint venture comes a few months after China issued regulations aimed at loosening control in the sector.

"The measures for the administration of second-hand car distribution introduced in October 2005, in particular, recognized the auction as the primary method for used-car transactions. We believe Manheim's entering the sector will help increase the number of auctions in used-car transactions," said Shen Jinjun, secretary general of the China Automobile Dealers Association.

Auctions currently account for only a small proportion of used-car transactions. The majority of business is conducted through car brokers.

In 2004, 1,652 vehicles were auctioned through Shanghai Guopai, the company's latest available figures show. Established 18 years ago, Shanghai Guopai is one of the largest auction companies in China. It conducts auctions for commodities including real estate, vehicles, financial assets and more recently, goods confiscated by the Shanghai municipal government.

Manheim has 60 years of auctioneering experience. It handles more than nine million vehicles annually across 115 countries around the world. Manheim's total profits for 2004 were US$2.4 billion.

(China Daily April 21, 2006)