Invest in a platform to trade used cars in China
The car portal offers access to a new and growing market in China where the industry needs a trusted partner that offers warranty.
Used Cars in China – An Overview of Our Unique Approach
Value Drive (驾值) is a used car platform with a very specific focus. It is geared to help all market participants to make dealing in used cars easier than it is today, at a time when used cars see a large increase in China.
To do so, the platform predominantly offers used cars that have been certified by the platform in conjunction with a world renowned certification agency from Germany. We are so convinced about this certification, that all cars come with a full warranty comparable to the manufacturer warranty.
Investors have a unique opportunity to be part of this high-growth venture with Value Drive.
Opportunities in China’s Car Market Today
China’s car market has grown tremendously over the last few years. The big winners of this increase have been foreign brands such as VW, GM, Ford, Audi, BMW, Mercedes, Hyundai, Toyota. However, the used car market has grown much less, for a very good reason – there simple were no used cars to sell. Only now that the formerly new cars are ageing, we are seeing a surge in used cars.
The used car market has also been hampered by regulatory restrictions, which have been lifted only a few years ago. Therefore the market so far has developed very differently to the European or the American used car market. Branded dealers of the brands named above play a minor role, and they are still focusing on new cars. The trade is done either by personal relationships, ie selling to friends, or by small used car dealers.
Some large used car dealers have sprung up, but they are heavy in investment in buildings and car stock. Also, several websites have established themselves, but mostly they are dumps of all kinds of used cars, good ones and bad ones. Also, there is no pricing guide in the market - at least no trusted one like in Europe and US.
The issue for a customer today is that they have no way to deal with their used car in a trustworthy way. Selling the car they don’t know whether they get as much as the car is worth, buying it they don’t know whether they pay as little as they should. Middlemen take their cut every step on the way, and they are not even trustworthy that they deliver a good car.
For the middlemen, who indeed deliver a service as they match up buyer an seller, it is also difficult to do business. As nobody trusts them, they have difficulties to convince their sellers and buyers that they do get a fair deal. For the manufacturers this also means that residual values are lower than they should expect.
Value Drive’s Unique Solution
Value Drive is there to deliver to the market what is required to overcome these issues. Value Drive will certify cars together with a European certification agency, it will guarantee the cars condition and will give a warranty. This way the used car market will get much more easy for all participants in the market.
The Lead Investor for Value Drive will be Sparrow Capital Pte Ltd, who has separately raised a total of $1,75M( approx.€1.37M). Additionally, we have a partner in China who has committed to join as a strategic investor.
Sparrow Capital is a privately owned company and is an associate of Link2ventures through one common founder. The investment philosophy is simple. Find an interesting idea that is scalable in a growing industry, passionate founders who know what they are doing, take an active role helping them develop an unique proposition and focus on helping them execute their plan.
Sparrow Capital invest largely its own funds but 'drag' along their friends who like their philosophy of investment. Investor quote === "The Industry is exciting and huge. The company's value proposition is unique and the founders Alex Klose and Paul Wang really understand the car industry in China." - Mr Choon Seng Tan
Co- Investment Opportunity
We are now offering this exciting co-investment opportunity to ensure financial liquidity of the company through the first expansion. Value Drive seeks to raise a total of $500,000 (approx. €393,000) . In order to see the details of the offering, along with further details on Value Drive, please see the attached documentation. You may also contact us via [email protected], and we can schedule a conference with you.
Third-Party Certification and Warranty - Our USP
As we want to offer certified cars and give a full one year warranty on them, we predominantly show European and American brands, which are younger than 6 years. These cars we know, and we can guarantee that we understand their benefits and issues.
We don’t claim like others, that we will do away with the middleman, as we think that used car dealers have their purpose under some circumstances. We empower, however, the individual seller and buyer to come together and trade directly, if that is what they want.
Our operating cost is low, as we do not invest in buildings. This allows us to offer our service at a very competitive rate, and to give benefits to the customer, which they don’t get elsewhere.
We also do not trade ourselves. This is a business principle, as our core business is certification and enabling trade. We can only do so if we are impartial to any market participant, and just help them to get together and trade more easily. If you are buying a used car, we will help you to select the car as well. Buying the right used car is much more difficult than buying a new car. The choice of prices and cars is so much larger. Our website is geared to make the choice easier, but still to give you all the information you want to have.
Market Environment Different to US and Europe – There is Space for Value Drive
Unlike Europe or the US, there is at present no party that dominates the used car market or dominates the internet search for used cars. Current platforms hold typically 100k vehicles, in comparison to millions of vehicles in the US or in Europe. We therefore think we are at the perfect time to set up a platform for certified cars, just as the market is supposed to take off at a speed higher than the growth of the new car market.
The Chinese economy has lately been growing less fast than before. It is, however, still growing at a pace much higher than Europe or the US. And even if the new car market would grow more slowly, the used car market will grow at a high speed, as it is fuelled by the new cars that have been sold in the past.
Chinese consumers are also very used to using the internet for their shopping. The recent IPO of Alibaba in the US has shown the potential for internet shopping and trading in China. In China, more and more shopping is done online, and it is a mere question of time when car shopping will be done online as well, whether used or new. Value Drive, which is a platform for certified cars, is in a perfect position to tap into the opportunity that this market is holding.
Full Operations to Start in March 2015
The business has been set up two years ago - setting up a company to be owned by a foreigner alone takes quite some time in China. However, the market was not ready yet for our approach. Hence, Alexander Klose and Paul Wang have started only last year to full time develop the business model, develop a mock up of the web site, define business processes, find partners for parts of the operations and get ready to full start the business.
We still need some time to get everything ready. Our critical path is the building of the website and a tool for the certification. This should be done by March next year, and then we are ready to go.
Operations will start in Shanghai in March. Certification will be done in the location of a dealership, which franchises the certification operations. Within 3 months, this will be rolled out to 5 further locations around the country, all with the same dealer group. At the same time one own location in Shanghai will be established. We will also work with a wholesaler to install a certification unit in their location, to get volume into the operations.
These kind of companies on a market like China can not be operated without a very experienced, knowledgable and trusted management.
Alex Klose, the CEO of Value Drive, used to be the CEO of Volvocars in China before the company was sold to a Chinese Company.
Paul Wang , the COO has worked with several car manufacturers in China, was CEO of a dealer group and knows every nook and cranny of dealer operations.
Tan Choon Seng, the director, has led various companies in South East Asia, and was last responsible for Wearnes, who owned a large distribution network for Jaguar, Land Rover, Volvo and others, including in China. He has supported the project since its beginning and has been instrumental in garnering support from the initial investors. Tan Choon Seng also represents Link2Ventures who recently have invested in FundedByMe.
China Used Car Market Report, 2014-2017
According to China Used Car Market Report, 2014-2017, sales volume of used cars in China is estimated to register a CAGR of 16.5% during 2014-2017, with transaction volume reaching 9.57 million in 2017. With the increase of car ownership, China’s used car market has been on a fast track of development. In 2013, 5.20 million used cars were traded in China, up 8.6% YoY and 1.9 times as that in 2008, generating a turnover of RMB291.6 billion, a year-on-year increase of 10.6% and 2.5 times as much as that in 2008. Based on the calculation that consumers change their cars every 5-6 years, China will step into the car-replacement peak in 2014, and the used car market will usher in accelerated growth.
In view of segments, used sedans hold the lion’s share, with transaction volume and turnover achieving 3.0475 million (or 59% of total volume) and turnover of RMB174.89 billion (or 60% of total amount) in 2013, respectively. Driven by the fast-growing SUV ownership, the used SUV market is booming, with transaction volume and turnover growing at high AAGRs of 28% and 35% in 2008-2013 to 166,800 and RMB26.96 billion in 2013, separately. It is expected that the used SUV market will freeze the high-growth status (around 30%) in both transaction volume and turnover over the next four years, thus becoming the fastest-growing segment among used cars.
1 RMB = approx. 163$
With regard to regional distribution, China’s current second-hand car trading is mainly concentrated in East and South China, which, featuring developed economy, high car ownership, more mature automobile consumer awareness and higher acceptance of used cars, together account for over 50% of total transaction volume. It is expected that the development of China’s used car market over the next few years will still focus on the two regions; meanwhile, North, Northwest and Northeast China will also pick up the pace.
In terms of trading pattern, used car trading market, used car dealers, online used car trading platforms and 4S stores are speeding up their layouts in used car market. Used car trading market is committed to expanding scale and upgrading functions, used car dealers are stepping up sales network construction, online trading platforms are exploring a more mature operating mode, and 4S stores are concentrating on old car replacement and used vehicle identification.