(Ecns.cn)--A mass default on loans by Wenzhou businessmen came with a domino effect: consumption of big ticket items in October and November took some twists and turns. First luxury cars flowed into the second hand market, then mid-market cars joined the reselling club, and poor sales afflicted the new car market and property markets, reported Southern Weekend on November 24.
Can you believe a Mercedes-Benz S600 worth 2.6 million yuan can be had for 400,000 yuan? This has been the case in Wenzhou's used car market since late August. Wenzhou Car City is the largest car market in Wenzhou, and arriving near its location on Ouhai Avenue, you could hardly miss the legions of luxury cars or fail to recognize brand names like Maserati, Rolls Royce and Lamborghini. Limited editions of top-of-the -line vehicles rarely appeared on the lots, but now the models are lined up, exuding the air of luxury once breathed only by the privileged few. Luxury car prices here range from around 500,000 yuan to tens of millions.
"Many used cars over a million yuan were on sale before October 1, the National Holiday", says Chen Xia, the chairman of Wenzhou Used Car Deal Business Chamber, "But now the deals center on cars worth hundreds of thousands of yuan."
Car dealers: harvest time
For used car dealers, there has been a bumper crop of good cars since some cash-strapped private business owners in Wenzhou exchanged what valuables they had in hand for cash, including their luxury cars. The creditors who were involved in usury also had cash flow problems and drove their own cars to the second hand lots.
Chen points out that despite seeing no significant growth in actual used car sales, the volume of revenues in Wenzhou's used car market soared to 100 million yuan (15.7 million U.S. dollars) in September 2011, double the same period last year.
"Days before our business chamber held an organizing meeting for our annual dinner party, members donated about 200,000 yuan, an amount more generous than we've seen before, says Chen Xia, "which tells me the good times are here for Wenzhou's used car dealers. "
"Cases of high-end cars being surrendered to our company have been climbing since September," says Li Xia, a used car lot employee. Two Rolls Royce were sold there in October, whereas in the past it was unusual to see one such car all year.
It isn't the car owners who bring the vehicles to the dealers; rather they are sold by agents, pawnshops or bonding companies. The sellers usually want cash, and the used car companies also require ownership to be transferred on the spot. "We are cautious about the recent spate of deals", says Li, "because if the ownership can't be transferred on site, we feel obliged to refuse the car; we don't want to lose money over ownership disputes."
Good cars pay for debts
The used car dealers are excited about the high-end car deals, but bonding companies frown at the situation. An anonymous source in a bonding company says he also collects many good cars such as Mercedes-Benz, BMW and Land Rovers as payments on debts, and at present he still has overdue loans of 30 million yuan. Once when he asked for repayment, the indebted party took off his watch and said: "It cost me 480,000 yuan, and now it's yours."
Poor sales of new cars
In a luxury expo hall in Wenzhou City, the many high-end cars on display include the brands Lincoln, Porsche, BMW, Mercedes and Land Rover. The most expensive is worth over six million yuan. Despite a hall packed with luxury brands, not a single prospective buyer drops by.
Sales manager Jiang Jie and her colleagues were reading online news sites to pass the time in the small office behind the empty expo hall. She says: "Some people came for new cars in August, but no one has come since September."
Depression fills the air
Next to Jiang's car company a convenience store named Feeling has obviously closed its doors. "It shut down in early October", says Jiang, "and we learnt from the newspaper the boss had already escaped." Jiang Honglin disappeared in October, leaving his chain of 60 convenience stores behind.
Upstairs is a branch of 21st Century Property Group, the largest property agent in Wenzhou and one that has been in operation for 13 years. Employees disclosed they haven't been paid for three months, reported Wenzhou City Daily on November 20. The property agent is still open for business.
Over two hundred property agencies closed in the second half of this year, confirms Lin Shouming, chairman of the Wenzhou Property Association. About one hundred firms remain open, many of them keeping only one employee at an outlet.
As for new construction, only eleven new buildings are being promoted for Wenzhou's market in November, according to data from the Wenzhou Department of Housing Management.
