Sieren's China: Used car market gathers pace

Alibaba officially became the largest public offering in history last year, its $26 billion (22 billion-euro) value dwarfing even that of Facebook's. But in terms of market performance, other companies have been even more successful, chief among them Bitauto.com, which in 2014 boasted the highest price on the New York stock exchange of any Chinese internet company, rising 135 percent over the year compared to Alibaba's 59 percent.

William Bin Li obviously knew what he was doing when he founded Bitauto.com in 2000 at the age of 26. It cornered two markets that are already the biggest in the world and that still have the potential to grow further: the car market and the internet.

Some 630 million people use the internet in China. Not even half the population. But there are still more users in China than on the entire continent of Europe. In 2015 their numbers are set to swell to 850 million – more than in Europe and the US combined.

Used cars are catching up

The world's biggest since 2010, China's car market is also booming. Over 40 million vehicles left the assembly line in the last four years and the market continues to witness double-digit growth. Established carmakers are gaining ground across the country and investing heavily in its relatively poor western half, home to around 50 percent of the population. A growing number of people can now afford a car if they want one – and they do. To most Chinese, owning a car is as much of a status symbol as owning an apartment.

But the newest development is the emergence of a used car market. Now that 200 million Chinese will soon belong to the middle class and new legislation will banish petrol-driven cars from the cities to make way for electric cars, plenty of people in rural areas will be happy to pick up a second-hand Skoda, however scorned they used to be. Away from the cities, these are still roadworthy and even more importantly, affordable.

Canny business model

China's urban classes like to use their tablets and smartphones to research and buy cars online, be they new or used. So of course they need a platform that allows them to compare deals offered by new and used car sellers. That's where Bitauto.com steps in – much to the delight of the manufacturers. How else will someone who lives in the outskirts of Beijing find out that the best deals are to be had in the city center? Bitauto.com also helps users research categories and markets. By price, usually.

Bitauto.com monetizes mainly thanks to online advertising, in contrast to Western competitors which generate revenue with buyers' fees. The platform also enables dealer subscribers to raise their profile by creating their own online showrooms. In 2013 company turnover reached $240 million and rose to $400 million by last year.

Alibaba founder Jack Ma is clearly impressed: Alibaba has added used cars to its sales portfolio.

DW columnist Frank Sieren has lived in Beijing for 20 years.