For the past decade, Western reports have portrayed Chinese car buyers as brand-obsessed and fad-driven. If it was new, expensive and made by a famous (foreign) company, then Chinese consumers had to have it. But that turns out to be only one part of the narrative, as the success of a new wave of apps targeting used car sales shows.
Putting the “Mobile” in Automobile Sales
Perhaps the best known of these apps is Renrenche, which literally means “everybody car.” A Renrenche user can simply download the app and browse over 200,000 cars, which have been listed by individual car-owners across the country. Renrenche then takes a 3% commission on the sale.
China’s used car market is expected to break 10 million annual sales by 2017, according to a September research report from Reportlinker. And investors are confident that apps like Renrenche will become the main conduit between buyers and sellers, supplanting the traditional dealerships and open-air markets, which are often located inconveniently in the suburbs.
These expectations have resulted in some serious capital injections for the 18-month-old company.
In August 2015, Renrenche closed its Series C financing with $85 million from Tencent, one of China’s top three internet companies, leaving the startup with a valuation of $500 million. (Its first two rounds raised $25 million.) Chinese smartphone maker Xiaomi’s CEO Lei Jun has also invested in Renrenche through his VC fund.
“We stand out in two main ways,” Zhao Tiejun, Renrenche co-founder and former Baidu exec, told sina.com last month. “Sellers get slightly better price points, while buyers get a one-year, 20,000-mile warranty. This makes them less stressed-out about buying a used car.”
Apps for App’s Sake
Much of Renrenche’s top brass cut their teeth at Baidu before launching their own firm. But despite these personal ties and considerable interest from the Chinese search giant, they decided to go with Tencent as one of their major investors instead. Why?
The answer probably lies in the company’s social media-heavy marketing strategy. Around 30% of Renrenche’s sales are generated by social media word-of-mouth, according to a July qq.com (also owned by Tencent) interview with Li Jian, Renrenche’s CEO.
Here’s how it works: Interested buyers can recruit their friends and contacts to help them “bargain” via WeChat, one of Tencent’s flagship products. By viewing the seller’s post and making comments on WeChat, the buyer can save up to 8,000 RMB off of their purchase. This means that for every transaction, Renrenche’s brand recognition is greatly enhanced. Not only do dozens of your friends know you bought a car, they know Renrenche was the platform you used to buy it.
But Renreche won’t simply race away with this market.
Chinese ecommerce giant Alibaba launched its own used car sales service last month (November 2015). After being rebuffed by Renrenche, Baidu has invested in another competitor, and several other Chinese websites and apps in this space have raised tens to hundreds of millions of dollars for their own expansions, according to the South China Morning Post.