Startup gets $50M to shake up China’s used car market

Chinese consumers are new to the concept of buying used cars, but they know the industry is dodgy and dirty. Just like in most other countries, a used car is a very risky buy.

There aren’t many second-hand cars on the market in China as the new car boom is continuing, albeit at a slower pace than in the past few years. Used vehicles accounted for 19.1 percent of total car sales volume in China in 2013 – compared to 72.4 percent in the US – but the market for pre-loved cars is growing fast.

“In 2015, the whole market will be over 10 million transactions,” says Lee Huang, the CEO and founder of used car sales site Mychebao. The year-on-year growth rate has been more than 25 percent in the past five years, he adds. Lee’s site wants to shake up the burgeoning market for old cars in China by making it less risky and easier to navigate.

Bidding war

Today, Mychebao revealed that it has pinned down US$50 million in series B funding to grow its website and service to more Chinese cities. After securing US$10 million in series A last year from Gobi Partners, the newest investment is led by Jiuding Capital and Addor Capital, followed by Gobi Partners, Nanjing Venture Capital, and Bank of Nanjing.

Mychebao has its own auto experts that appraise second-hand cars submitted by users, which are then added to the platform. Following that, car dealers can make offers on the vehicles to purchase or trade using a bidding system. Sellers can sit back and wait for the best bid to roll in rather than trekking to lots of dealer forecourts. Also, dealers can sell their cars to regular consumers on the site. All transactions are made through Mychebao and the startup also provides some after-sales support.

It’s not quite the same as the peer-to-peer marketplace startups popping up in the US for used cars, such as Beepi or Vroom, which connect sellers with ordinary buyers like you or I. Instead, Lee says Mychebao has a more involved set-up that involves brick-and-mortar stores and more staff – and it’s not a simple consumer-to-consumer model.

Part of Mychebao’s blockbuster new funding will go towards expanding the business from the current 12 cities to more than 50.

Lee’s startup sees 5,000 deals taking place each month. It makes money by charging a three percent fee on top of the transaction amount from the buyer.