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Billion Dollar Unicorns: Guazi Leading the Chinese Online Used Car Market

Posted on Wednesday, Nov 16th 2016

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According to market research, the Chinese car market is the biggest passenger car market in the world. It attained that honor back in 2009 and has kept the crown since. In 2015, the number of cars sold in China grew 5% over the year to 24.6 million units. Compare that with the 17.2 million vehicles sold in the US. Analyst SinoMarketInsight estimates that the country is also seeing the growth in used car sales at a steady clip and used car sales in the country are projected to grow 17% annually to 9.57 million units in 2017. Billion Dollar Unicorn club member Guazi is the leading player in the online arena of this industry.

Guazi’s Offerings

Beijing-based Guazi is helping transition this market onto the online platform. Founded in 2014, Guazi has become a market-leading consumer-to-consumer used car trading platform in the country. Guazi.com was set up by online classifieds site Ganji.com, which later merged with its competitor siite 58.com. In November 2015, 58.com decided to spin off Guazi.com to help drive focus on the C2C used car trading platform.

Guazi believes that by removing the middlemen from the car sales model, it has managed to make a big difference on the price for a car sale. With the middle layer’s commission removed, both buyers and sellers are able to get a better deal on the car. Guazi has also implemented certain restrictions to ensure that the cars sold through its platform meet certain quality requirements. For instance, it does not allow cars older than 8 years or with mileage of more than 150,000 kilometers (~93,000 miles) to be sold through its platform. It also expects cars to go through rigorous testing before the sale can be made.

Since the platform became operational, it has helped make sales of cars worth more than 3.7 billion yuan (~$0.54 billion). It is currently present in more than 200 cities in the country and has a portfolio of more than 120,000 used cars for sale. Analysts estimate that Guazi holds nearly 80% of the used car market share in China.

Guazi’s Financials

Guazi is privately held and does not disclose its financials. It earns revenues by charging a 3% transaction fee from the seller. In March this year, a news report had cited that Guazi was trending at daily car sales of 1,027 used cars. The report also stated that the company had a turnover of nearly $12.9 million, but it did not specify the period when these revenues were recorded.

It has raised $454.5 million in funding so far from investors including Matrix Partners China and other undisclosed investors. Its latest round of funding was held in September this year when it raised $204.5 million at an undisclosed valuation. 58.com still retains 34% of Guazi’s stake post the funding. In March this year, it had raised $200 million at a valuation of over $1 billion. Guazi plans to use the latest funds to expand market reach. The company is targeting to attain a reaching monthly transaction volume of over 100,000 on its platform and to expand within the automobile financial services to help buyers make these purchases.

Analysts believe that Guazi is positioned very strongly to leverage the used car market growth. With its close ties with 58.com, China’s equivalent of Craigslist, Gauzi has access to local communities including mechanics for third-party assessments. They also expect Guazi to be able to successfully tie up with companies with bigger pockets to help expand the auto financing options that will help it grow rapidly.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

Photo Credit: Riley /Flickr.com

This segment is a part in the series : Billion Dollar Unicorns


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