The mysterious Chinese classic car market

With a population surpassing 1.4 billion, China tends to present a huge market for just about everything. The country is widely expected to surpass the United States as the world’s largest economy within the decade and is already the largest consumer (and producer) of new vehicles. Its luxury market is also on track to become the world’s largest and is presently estimated at roughly 1 trillion euro ($1.19 trillion), according to consulting firm Bain & Company.

Of course, that luxury market includes cars. Twenty years ago, China’s roads were a sea of locally made vehicles, motorbikes, and pedal bikes, but nowadays most luxury car brands see China as a land of opportunity. Despite high import taxes, China’s largest cities are inundated with new Ferraris, Lamborghinis, Bentleys, and other top models. Jaguar Land Rover sold more than 100,000 vehicles in China last year, making it the company’s largest market. Bugatti has sold a surprising number of their hyper cars in China.

Going by these trends, one would think China would be a major (if not the major) export destination for classic cars leaving the United States, Europe, and Japan. Yet this is not the case. The reasons point to much of what makes China unique among major automotive markets but also leave hope for expansion in the future.

Start with culture. The classic car hobby in many Western countries springs from a long and colorful history of cars on the road. In contrast, the car culture in China is just at its infancy. If you ask any Chinese person what their grandfather drove back in the day, 99.9 percent will tell you it was a bicycle.

As a consequence, Chinese car enthusiasts generally don’t have the same notions as their western counterparts. Ask the typical Chinese consumer what a Porsche looks like and, instead of describing a sexy shape of a 911, they would describe the Cayenne. Indeed, what often drives car buyers here is a desire to have the biggest and newest. China’s appetite for SUV and long-wheelbase vehicles is one of largest in the world. (It’s the only market where one can buy long-wheelbase versions of the Audi A4 and BMW 3-series.)

The law defines used car as any vehicle that is not brand new. Therefore, in theory, all collector and classic car are banned.

On top of the lack of automotive history and culture, there’s a whole lot of red tape. Chinese government legislation bans used car import, and used cars cannot be registered for road use. The law defines a used car as any vehicle that is not brand new. Therefore, in theory, all collector and classic car are banned.

Does this mean you cannot find any classic car in China? The answer is no. Again, there are more than 1.4 billion people here; even if only 0.01 percent of them are car enthusiasts, you have an addressable market of 1.4 million people. Some of these enthusiasts crave classic cars, and a few have found ways to get them.

The easiest way to own a classic in China is to find one locally. In historical pictures of The Bund in Shanghai from the 1930s, you can see many European and especially American classic cars. Diplomats from all over the world set up embassies in Shanghai and brought with them automobiles for private and official use. There are also classics produced domestically in the decades before China’s auto manufacturing emerged on the global scene. HongQi (literally translates to Red Flag) was the official limousine supplier for Chinese leaders such as Mao Zedong and Zhou Enlai. A 1965 HongQi CA72 won the Chairman’s Trophy at the Pebble Beach Concours d’Elegance in 2018. The car is owned by Zongmin “Jason” Huang, one of the largest private collectors in China and the man behind Sanhe Classic Car Museum in the city of Chengdu. There are other museum operators in China, such as the Shanghai Auto Museum, who keep a large number of classic and collectible cars.

Museums are critical for Chinese collectors for a simple reason: They can apply for an exemption to import classic cars as “exhibition pieces.” However, exceptions to the rule comes with hefty restrictions. The exhibition pieces require a large sum prepaid as a custom bond, so in the event the car “disappears,” the bond will be confiscated. The museum itself is setup as a bonded warehouse, meaning the imported piece must be transported directly into the museum and nowhere else. In some cases, to avoid the exhibition piece being driven at all, the engine may have to be removed. Finally, these cars can stay in China for no more than six months. They have to be packed up, leave the country, and come back in another container, for another six months!

Other than museums, race tracks are also setup as a bonded warehouses. In theory, Chinese collectors can import a classic or collectible car into one of the many race tracks in China and actually drive them. Of course, the same six-month limit applies.

The third group of classic and collectible cars were either bought new in China or self-imported by individual enthusiasts. Needless to say, cars that come in illegally and lacking paperwork run constant the risk of being confiscated. The government can, furthermore, prosecute the individual for tax evasion and illegally importing restricted items. These cars, few in number, spend most of their lives hidden in their private garages.

Another category of collectibles in China are modern classics. Plenty of vehicles from the 1990s and early 2000s are appreciating in value in the West, and some of them were sold new in China. For instance, in 1993, Italian Motors, the Ferrari dealer in neighboring Hong Kong, sent a 348TS to the Beijing International Conference Center in support of Beijing’s 2000 Olympic aspirations. This first Ferrari was sold to Li Xiaohua, one of China’s very early self-made millionaires.

“No one knew what it was. People only knew a little about Ferraris from newspapers and magazines, but had never seen one of them in the flesh,” Li remembers, adding, “People thought, ‘It’s too short, it only holds two people!’ Nonetheless, this Ferrari started-up the whole luxury sports car market in China.”

Li’s 348, which was signed by a number of foreign heads of state and dignitaries, including American Presidents Bush (father and son) and Clinton, British Prime Minister Margaret Thatcher, and Russian leader Vladimir Putin, would be a prize for auction houses around the world. In China, however, he’d have a tough time finding a buyer. (Not a problem for Li, who says he is keeping the car “forever”.)

Almost all luxury cars from the past get squirreled away. The books and tools of course are missing; in some cases, even the key is gone.

You may ask, why? The Chinese are brought up in a culture that wants to “save face.” The idea of selling one’s old car will automatically make your friends and relatives think you are “cash-tight.” Similarly, buying an older model of a supercar or luxury car would also signal that you “cannot afford the new one.” So, driving a Ferrari 599 around town will only make your friends wonder why you can’t afford a 812 Superfast.

As a result, the majority of older luxury and sports cars—the booming modern classic or “young timer” market in the West—simply disappear in China. Almost all luxury cars from the past, be it a 599 GTO, a 575M SuperAmerica, even an F50, get squirreled away. Many of them have been forgotten, with absolutely no service done to them for decades. The books and tools of course are missing; in some cases, even the key is gone. Often, the titles and registration is missing (or ambiguous), making them impossible to sell.

If the present state of car collecting in China sounds rather grim, the future is bright. Flocks of foreign-educated Chinese nationals return to the mainland year after year. These ‘Haigui’, (literally: “Sea Turtle,” a slang term for Chinese students who have returned from studying overseas), have brought home Western cultures, including the notion of collecting classic cars. These individuals have quietly started to buy up quality classic cars in China. Temporarily imported or locally obtained classic cars are showing up at track day events around the country.

These foreign-educated, affluent collectors are generally young (less than 40 years old), and their numbers are growing quickly. They can afford to buy the best new or classic available in China, as well as classics from abroad. These collectors have abundance of time and money. They can afford to buy and ship their Pagani Zondas to join the European rally organized by the factory. They can choose to temporarily import an F40 and enjoy it on a race track in China.

The other ray of hope for classic car enthusiasts are growing economic links to Hong Kong. The former British colony, deemed a Special Administrative Region of China since the handover in 1997, maintains a different—far more lax—set of rules for classic cars.

It is not hard to imagine, in the near future, Hong Kong becoming a hub for classic car buying and selling.

Unlike China, Hong Kong allows trading in foreign currency, making buying and selling internationally possible. Cars of any age (limited to right-hand drive) can be registered and driven in the city, while unregistered classics (left- and right–hand drive cars over 20 years old) can also occasionally be driven in Hong Kong upon applying for a movement permit. The city also has a longer automotive history than the rest of China, meaning it has more established service and restoration centers.

Critically for potential collectors on the mainland, recent legislation announced by the Chinese central government will open up the opportunity for Hong Kong registered cars to be driven freely into the Greater Bay Area of China.

Some Chinese collectors have already been buying and storing cars in Hong Kong. It is not hard to imagine, in the near future, the city becoming a hub for classic car buying and selling and an avenue for Chinese collectors to, at long last, make their presence felt in the collector car market.

Kenneth Wong started his automotive career as a consultant and operation manger for the first classic car auction house in Hong Kong. He is also the founder of CLASSIC INSIDER LTD (www.classicinsider.com), a classic and collectible cars brokerage service specializing in private sales. He is a regular contributor to various upmarket automotive media.