Healthcare, Financials, Automotive Author:Feng An May 13, 2019 04:37 PM (GMT+8)

"No middlemen" may be just the business story Guazi originally peddled to the capital markets. Guazi is also looking to make a switch from a C2C model to a B2C model, acknowledging the importance of car dealers in the industry.

Moving Car. PHOTO Credit: Unsplash

Guazi, one of China's largest two used car platforms, recently announced that it will launch an internal anti-corruption campaign following media reports that one of its salesmen absconded with huge sums of money from several dealers - in the latest blow to the scandal-ridden company.

It also has established a major security department to investigate internal graft and report directly to the CEO.

The stated mission of the newly founded department includes standardization of a whole-chain process, improving the company's information security system, strengthening data analysis, upgrading staff management, among other measures.

Guazi was responding to a report published by 36Kr on May 13, which says that several of Guazi's salesmen had recently made off with an unspecified huge amount of money from second-hand car dealers.

Six car dealers bought second-hand vehicles including models of Mercedes-Benz and BMW from the sales staff of Guazi, one of the largest two players in China's pre-owned cars market, said the 36Kr report. The cars were displayed in Yanxuan, Wufang and Dazhong temple stores in Beijing.

In a separate but similar incident, the Southern Metropolis Daily reported on May 8 that a second-hand car dealer surnamed Huang who had bought several cars from the sales manager of Guazi's Yanxuan store in Longgang, Shenzhen was unable to pick up his cars after making payment in March.

Police found that the money, instead of being remitted to the company account, ended up in the sales manager's personal bank account, said Huang.

He added that the losses totalled 890,000 yuan and that several other colleagues shared his experience. Police in Longgang said the salesman surnamed Gao was detained on suspicion of fraud, and the case is under investigation.

Guazi responded by saying it had received reports about Gao pocketing an unspecified amount of money without authorization. The suspect has since been remained out of touch. Guazi explained that it has also suffered huge losses, to the tune of at least millions of yuan.

The company confirmed that Gao deceived his victims with falsified contracts pricing the cars far below the market rates of similar vehicles. He deviated from the standard industry practice of signing intermediary service contracts under the company's name.

The duped dealers then wired money to Gao's designated private bank account.

In order to secure/extract more sales commissions, salespeople of Guazi tend to sell to car dealers in bulk. And then the dealers can check the cars before individual buyers can visit Guazi's offline showrooms. 

By streamlining the channels of distribution,  the used car platform and the dealers hope to optimize their benefits through the economies of scale.

"No middlemen" may be just a glamorous business story Guazi originally peddled to the capital market. Guazi is also looking to make a switch from a C2C model to a B2C model, acknowledging the importance of car dealers in the industry.

In March 2018, Guazi's parent company Chehaoduo Group, facilitated the procedures of its auctions based on a competitive bidding model for used cars.  Apart from Guazi, Chehaoduo also operates a new car platform called Maodou.

In addition, Guazi has realized the need to make its foray into auto finance and after-sale auto services to build a sustainable used car industry ecosystem.