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Is the New Car Brand Losing its Luster in China?

China’s used car market has been picking up speed over the last few years, having gone beyond purchases directly from used car lots to successful online purchase and trading platforms, connecting countless sellers to buyers.

Cheyipai is the current leader, boasting the largest number of transactions (over 500,000) at the end of 2014. Most recently, the e-commerce firm announced the completion of a series D round of financing, which was valued at US$110 million.

china cars

A good portion of this success is due to Cheyipai’s increasingly extensive car dealer network and valuation services offered throughout China—something that has been generally lacking in the used car market until recently. Key among these services is its own system of training and providing inspectors to test cars for interested buyers, thus injecting more regulation and consumer confidence into the used car market. In addition to its team of approximately 800 inspectors, the company has also established four main operations centers around the country, along with dozens of smaller service centers. In total, Cheyipai’s sales network reportedly reaches over 300 cities throughout China, enabling it to “sell a used car anywhere across the country within 15 minutes.”

“The goal of Cheyipai is to make sure that no used car in China remains unsold and make it easier for anyone and everyone who wants to own a car to be able to achieve that dream,” said Cheyipai CEO Yang Xuejian.

Breakdown of Funding for Cheyipai Since 2011

Series D – US$110 million     
2015:  Morningside Group, CITIC Capital Holdings, Matrix Partners China, Sequoia Capital, and Renren Inc.

Series C – US$50 million       
2014:  Morningside Group, CITIC PE, Matrix Partners China, and Sequoia Capital

Series B – US$20 million     
2013:  Matrix Partners China

Series A – US$5 million     
2011:  Morningside Group

Overall, since 2012 the used car market has actually outpaced new car sales in terms of percentage of growth. Will this put the brakes on the increasing amount of new cars hitting China’s streets every year? Probably not. But we may see a marked difference some 5–10 years from now, assuming that used car sales continue to increase, a trend that companies like Cheyipai have influenced.

For now, the stigma surrounding buying used goods such as cars is alive and well for many in China. New car ownership is still a powerful status symbol, and the overall volume of new cars sales is still significantly higher than secondhand. However, as new car ownership becomes even more expensive and restricted (particularly in the larger cities), buying a pre-owned yet new-looking vehicle may seem like an increasingly attractive option.

H/T: PR Newswire