SHI Wei, a 38-year-old engineer, worries when driving his second-hand car, even though the four-year-old Santana 2000 works well on the road.

He took his used car to be checked twice and no problem was found, but Shi could not escape his concerns about the car he bought three months ago.

"My friends told me a second-hand car has no quality guarantee. The dealer try to help skirt any problems the car may have," said Shi.

Shi's worry is shared by many of those in Shanghai who have decided to buy a second-hand car.

Such customers also face confusion over the price of "pre-owned" cars.

Shanghai's seven authorized second-hand car dealers issue a price list each month for all makes and models of cars, based on age and condition, but customers are often stunned when they are asked later to pay a much higher price by illegal sellers.

An employee of Shanghai's largest second-hand car dealer said the gap between the list price and the asking price lay in poorly conceived appraisals that don't take into account the high demand pressure on prices. He admitted that illegal dealers - who make up a big part of the second-hand market - actually charge a much higher price due to limited availability of second-hand vehicles.

"Worries remain, but the market is nevertheless booming, due to an excess of demand for second-hand cars," said Sun Jian, consultant from AT Kearney (Shanghai) Co Ltd.

There were 154,393 second-hand cars sold in Shanghai's market in 2004, making it the largest second-hand car market in China. The general manager of Shanghai-based consulting firm Comengine expects a larger wave of used-car buying will hit Shanghai in 2006.

Alluring growth

The vibrant market and weakness of local competitors have attracted international players like the world's largest, Manheim.

"Projections in the new-car market are 10 per cent growth through 2010. Even if only one used car is bought for every new car sold, that's still an 8-million car market," said Neville Green, head of Manheim's Shanghai office.

Atlanta-based Manheim has 115 sites worldwide, running online and in-person used-car auctions for wholesale buyers and sellers.

"In most countries we have state-by-state variations. We would like to help develop a Chinese system that allows for variations if they need them. We can certainly point to best practice," said Neville.

After several years of research into China's used car market, the giant is looking for Chinese partners to establish a joint venture.

Neville told the Shanghai Star the used car joint venture is expected to open later this year.

Manheim may be a crouching tiger, but Quinland has already taken a bite out of the cake.

The Japan-based used-car company has established a joint venture in Shanghai with the Xietong Second-hand Auto Company which will open April 28, reports Shanghai's Jiefang Daily.

Experts say that the big international players, including Manheim and Quinland, are aiming higher. Shanghai is just their first step into the entire China market.

Although the year 2004 proved to be a cold winter for China's auto industry, the country's second-hand auto market experienced continuing growth. Analysts say the sector will continue its rapid growth as China's new auto trade policy helps realize the sector's potential.

A total of 1.34 million used vehicles were sold in 2004, a year-on-year increase of 20.21 per cent over 2003 and the figure is 4.7 percentage points higher than the sales of new vehicles in 2004.

Still, second-hand vehicles only account for one-third of total auto sales each year in China, while the sales volume of used vehicles often double the number of new autos sold in the United States and other Western countries.

"One of the biggest challenges for us entering the market is the regulations on used cars," said Neville.

Manheim can't do business in China yet because used cars are sold only through government-owned markets. Second-hand dealers are not allowed to operate without government permission.

There are only seven second-hand auto dealers in Shanghai so far.

Foreign auto dealers need a Chinese partner to open new-car dealerships.

The good news is the government is relaxing regulations on the used-car market.

According to auto industry policy promulgated last June, trade of second-hand vehicles will be encouraged and individuals as well as auto manufacturers will be allowed to enter the sector.

The new policy also requires that the sellers of used vehicles provide after-sale service, a condition absent from previous related regulations.

The Ministry of Commerce said on its website that as long as a business can legally obtain fixed space and facilities and is able to offer appraisal and insurance services for consumers, it is qualified to sell second-hand cars.

Analysts say the new policy lowers the second-hand auto market entrance standards and will allow more foreign auto giants, not only the auto maker but also auto dealers, to flourish in China.

"Whoever enters the market, I just want to buy a good-quality car with after-sale service," said Shi.