Mainland pioneer navigates rough road in a young market Ma Xiaowei's husband likes telling people she is a used-car dealer. Even in the mainland, with less than a decade of widespread private car ownership, this profession ranks alongside journalism as among the least trusted and most ignoble. But Ms Ma and her partners are not just any fast-talking rust-bucket hustlers. They are the founders of IAuto, an online second-hand car portal that analysts describe as the holy grail of the technology industry - a profitable traditional business that can be reinvented and made more efficient with the help of the internet. In a strange reversal from most other countries, the internet is actually older than the mainland's second-hand car market. That translates into huge potential for companies that can set up shop at the crossroads between the two. After a few short years of explosive growth, the land of bicycles has overtaken Japan to rank No2 after the United States in terms of number of cars sold. With sales of 7.2 million vehicles last year, including 3.83 million passenger cars, China now accounts for 10 per cent of the global market. Because it is still so new, as attested by the manic construction of roads, the gleaming fleets of brand-new sedans and the traffic havoc wreaked by all the first-time drivers, second-hand car sales are still relatively uncommon. Last year, second-hand car sales jumped as high as 1.8 million units, up 34 per cent from 1.34 million in 2005. That was a faster increase than new sales which grew 25 per cent last year but the absolute number is still very small for such a large market. 'In the United States, only 2 per cent to 5 per cent of first-time car buyers pick a brand-new car,' Ms Ma said. 'In China 84 per cent of first-time buyers are buying new.' As all those new cars reach their use-by dates and their owners upgrade to newer models, the second-hand market is set to explode in a country where there are relatively few options when it comes to selling used cars. In Beijing, with a population of more than 15 million people, there are just two second-hand car markets, one with about 1,500 cars on display and another with around 3,000. The limited options are a result of strict regulations imposed by the Beijing government, which does not allow any other markets to set up and does not allow existing ones to expand. Even that is a recent improvement. Until the end of 2005, it was virtually illegal to sell second-hand cars privately. Citizens are now allowed to sell their vehicles at the side of the road, through the few existing markets - or through the internet using IAuto or one of its competitors. The model for these sites is US portal Autotrader which has annual revenue of US$500 million. IAuto was established at the end of 2004 by Ms Ma and three business partners with US$2 million in seed capital. The site provides information to potential buyers and sellers and will charge the seller a flat listing fee. It receives about 1,000 listings a day despite operating in what Ms Ma says is still a 'seller's market'. 'When second-hand car sales reach five million [units] a year in the mainland in the next few years, it will become a decent market and sellers will be willing to pay a premium to list their cars on our site.' There is also huge value in the information provided by car sellers that can be sold to used-car dealers, to say nothing of the traditional internet bread and butter - advertising. 'The main customers for car sales are mostly aged 30 to 40 years and they are at their prime in terms of earning potential,' said Morgan Stanley technology analyst Richard Ji. 'This is a very lucrative segment as far as advertising goes. These people have very high spending power and are upgrading their lifestyles at a much faster rate than the rest of the population.' About 70 per cent of mainland internet users are aged under 30 and 30 per cent have college degrees compared with 2 per cent of the overall population. Of course the rosy future and huge growth potential of the online car market has already attracted the attention of venture capitalists. So far, US$60 million has been invested by venture capital firms in online car companies, including a US$25 million punt on Chinacar.com by a Goldman Sachs-led group and another US$10 million investment in Bitauto.com from Nippon Venture Capital Corp and Doll Capital Management, both announced in September last year. IAuto itself received its last round of funding in October last year and is about to start raising money again with an eye on listing within the next five years.