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

The auction firm announced the deal yesterday, saying it was a first step towards expanding its business in China's budding automobile auction market.

Manheim declined to reveal financial details of the deal but said it had acquired a controlling stake in the joint-venture, called Shanghai Manheim Guopai Motor Vehicle Auction Co Ltd (Manheim Guopai).

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

China's transaction volume for second-hand vehicles in 2005 was estimated at close to 2 million, representing a rise of about 10 per cent on the previous year but less than a third the volume of new cars.

That compared to a transaction volume of about 43 million second-hand cars and 17 million new cars in the United States, where Manheim is based.

Manheim Guopai will start its business in the Shanghai municipality and then expand into other Chinese cities where many cars are also being bought. The firm also expects to exert some influence on the rest of China by providing auction training and technology solutions, the company's executives said.

"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 join other Pacific Rim operations of the company 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 second-hand car transactions.

"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.

Currently auctions account for only a small proportion of used-car transactions. The majority of business is conducted through car brokers in a private setting.

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 with experience in such things as real estate, vehicles, financial assets and most recently, the confiscated goods of the Shanghai municipal government.

Manheim has 60 years of auction experience. It handles more than 9 million vehicles annually, across 115 countries and regions around the world. Manheim's total profit in 2004 reached US$2.4 billion.

(China Daily 04/21/2006 page12)