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  • 🚗 How eCarWash (e洗车) burned $20 million, created a fake demand, and crashed.

🚗 How eCarWash (e洗车) burned $20 million, created a fake demand, and crashed.

$20M → $0 (in 6 months)

Author

Admond Lee
March 23, 2025

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Hey Founders,

Welcome to The Runway Ventures — a weekly newsletter where I deep dive into failed startup stories to help you become the top 1% founder by learning from their mistakes with actionable insights.

Today’s story is about how the largest mobile internet car wash service platform in China collapsed because of burning cash that created fake demand. Let’s get to it! 🚀

Today at a Glance:

  • ☠️ 1 Failed Startup → eCarWash (e洗车)

  • ⚠️ 2 Mistakes → Burned cash that created fake demand

  • 🧠 3 Lessons Learned → Subsidised users ≠ Real demand

  • 🔗 The Runway Insights → 10 startups to watch from Y Combinator’s W25 Demo Day

  • 💰 Southeast Asia Funding Radar → Mito Health raises additional $2.2M (Seed) to help everyone live better, longer

☠️ 1 Failed Startup: eCarWash

🚀 The Rise of eCarWash

🇨🇳 Founded by Duan Dongren in 2012, eCarWash was an on-demand car wash service platform in the O2O (Online-to-Offline) car wash industry in China.

🫡 Founder’s Background

In 2012, when deciding to start another business, Duan carefully chose the car wash segment in the automotive aftermarket.

He analysed 3 high-frequency services — parking, refuelling, and car washing — ultimately selecting the car wash industry which he considered the least difficult.

His positioning for this industry was very clear → High frequency, essential need, low price, standardisation.

  • The Problem — 🚗 Traditional car washing required vehicle owners to drive to physical locations, which was time-consuming and often involved long waits.

  • The Solution — 🧽 eCarWash provided online booking for in-store and at-home car washing services through its mobile application.

    • For at-home (door-to-door) car washing, professional car washers would be sent directly to customers’ locations.

    • The promise was convenience — "Stay at home, and your car gets cleaned".

🧼 In short, eCarWash positioned itself as a mobile internet car wash service platform in China, leveraging the O2O model to offer on-demand car washing and maintenance services.

How customers could book an at-home car wash service using eCarWash’s mobile app

The parent company of eCarWash, Integral Network Technology Co. Ltd., received angel investment of 15 million RMB (~$2.4 million) from Boloni Home Decor’s founder (Cai Ming) and others in January 2013.

🔥 In November 2014, eCarWash officially launched. Surprisingly, in just 3 months, eCarWash:

  • accumulated over 1 million users

  • partnered with 3,000 merchants

  • reached daily orders of over 15,000 (with peaks of 30,000)

  • grew daily active users to 21,000, with a repeat use rate as high as 50%

💰 At its peak, eCarWash successfully raised $20 million (Series A) on 10 March 2015 led by PingAn Ventures with plans to launch maintenance and other services while cooperating deeply with Ping An.

With the crazy traction, eCarWash became the largest mobile internet car wash service platform in China.

📉 The Fall of eCarWash

However, the good times did not last long.

🚨 Suddenly, eCarWash shut down 6 months after it completed its Series A funding ($20 million gone?). Not just that, eCarWash’s CEO (recruited from Didi) also resigned halfway and the entire car wash O2O industry began to experience turbulence.

📌 Here’s what happened to eCarWash:

🧼 Let’s wash 🚗🚗🚗

  • Jan 2013 — 💰 eCarWash’s parent company Integral Network Technology Co. Ltd. raised 15 million RMB (~$2.4 million) angel investment.

  • Nov 2014 — eCarWash officially launched.

    • Accumulated over 1 million users

    • Hit daily orders of over 15,000

  • 10 Mar 2015 — 💰 Raised $20 million (Series A) led by PingAn Ventures.

🥵 No more wishie washie 💦

  • May 2015 — ❌ Suddenly, eCarWash’s CEO (recruited from Didi) — Zhang Jing resigned.

  • Jul 2015 — ⛈️ O2O car wash industry began to experience turbulence, and multiple car wash O2O platforms shut down, including:

    • Car 8 (车8) (peer door-to-door car wash service platform)

    • Smart Huihui (智富惠) (which advertised "one-yuan car washes”)

    • Cloud Car Wash (云洗车)

    • Dada Car Wash (嗒嗒洗车)

  • Aug 2015 — Market rumours suggested a potential merger between eCarWash and another company, but no substantial progress was made.​

  • Sep 2015 — eCarWash's door-to-door business reportedly ended.

    • Only about 20 employees remained and branch offices in other cities closed down.

  • 12 Oct 2015 — ☠️ Multiple media reported eCarWash closing door-to-door car washing and maintenance services, with hundreds of employees laid off or resigning voluntarily.

In less than a year, eCarWash went from being a highly promising startup (revolutionising the O2O car wash industry) to shutting down.

So what went wrong? 👇🏻

Want to learn more about eCarWash’s downfall?

⚠️ 2 Mistakes

Mistake 1: Burned cash that created fake demand

eCarWash followed the classic O2O playbook.

Subsidise first to capture the market, then figure out profitability later.

🩸 To attract users, eCarWash offered extreme discounts, including 1-cent car washes and $2 discounts per order. But this strategy had a fatal flaw:

  • Users came for the discount, not the service.

  • When subsidies stopped, users left.

  • The majority of customers were price-sensitive and wouldn’t pay full price.

  • Upselling was difficult — eCarWash hoped to convert users to higher-margin services like car maintenance and detailing, but most weren’t interested.

Mistake 2: Unsustainable business model

🔥 eCarWash focused on rapid expansion over financial sustainability. Instead of optimising its unit economics, it poured money into:

  • Aggressive user acquisition (burning cash to subsidise car washes)

  • Expanding too fast (launching in multiple cities before perfecting the model)

  • Hiring too many people (massive operational costs)

⚠️ Here’s how their unit economics were flawed:

  • A single car wash cost eCarWash around $8-$10 (including labour, travel, and materials).

  • The discounted price for users? $0.01 or $2 per wash.

  • Loss per order: ~$8-$10

  • No strategy to turn profitable, as users weren’t sticking around without subsidies.

Their assumption was that economies of scale would fix everything, but in reality, the losses only compounded with growth.

🧠 3 Lessons Learned

Lesson 1: Subsidised users ≠ Real demand

Many O2O (Online-to-Offline) startups assume that offering massive discounts will help them build a loyal customer base.

But in reality, subsidised users are often just bargain hunters — they stick around for the cheap deals and disappear when prices go up.

Sad, but true.

🌮 Key Takeaways:

  • 🧪 Test for real demand before scaling

    • Honestly, the best validation of real demand is when customers pay to use your service or product.

    • If you can get 10 paying customers when your product is still at a very early stage, it’s a strong signal that you might be on the right track.

    • The last thing you want to do is to scale before you have even validated if the demand exists.

  • 🤝🏻 Offer value beyond price

    • Value could be speed, convenience, or quality.

    • If your only advantage is being cheaper, you’re screwed when a competitor undercuts you.

    • For example, if you target premium customers, your value could be more on convenience over cost as high-ticket customers tend to value their time more.

  • 📍 Use targeted subsidies (not mass giveaways)

    • Didi Chuxing subsidised rides only in cities where they faced Uber competition — not everywhere.

Lesson 2: Profitability > Growth

eCarWash grew too fast before proving profitability.

Even worse, they misread demand. The moment they removed discounts, users left, revealing that growth was artificial, and not sustainable. By the time they realised their mistake, they had burned through cash — and it was too late to pivot.

🌮 Key Takeaways:

  • ☝🏻 Master your unit economics

    • Know your numbers. Every founder should track CAC, LTV, gross margin, and burn rate weekly.

    • If it costs you $50 to acquire a user but they only generate $30 in lifetime revenue, you might want to look into your numbers again.

    • Test profitability on a small scale. If you’re losing money at 1,000 customers, you’ll lose even more at 100,000.

  • 🙅🏻‍♂️ Stop relying on discounts for growth

    • If you can’t make money without subsidies, your business model is broken.

    • If you’ve already introduced subsidies, phase out subsidies gradually while introducing real value (e.g., better service, loyalty rewards).

    • Meituan (China’s Uber Eats) started with heavy subsidies but quickly transitioned to a model where they take a commission from restaurants and offer value-added services like advertising.

Lesson 3: Have a competitive moat

eCarWash was in a low-barrier industry — anyone could launch a similar car-washing service, and there was nothing stopping competitors from copying their model.

🚨 They failed because:

  • Car washing is a low-margin, highly competitive business.

  • No switching costs. Customers could easily switch to a cheaper or more convenient option.

  • No strong differentiation. The service was easy to replicate, and new competitors flooded the market.

🌮 Key Takeaways:

  • 🕸️ Leverage network effects

    • More Users = Stronger Business

    • Make your product more valuable as more people use it.

      • Notion leverages its community to sell to enterprises.

      • Many people are using Notion for free. And when they love it so much, they’ll evangelise and promote it to their companies for organisational adoption.

    • Create exclusivity and FOMO.

      • When Clubhouse was launched, people could only join by invitation.

      • This exclusivity created FOMO, making more people desperate to be part of the “club”.

  • 💟 Your brand is your superpower

    • If people trust your brand, they’ll pay more — even if a cheaper option exists.

    • Apple is the best example here — it wins in China despite higher prices because people see it as a status symbol.

    • People don’t buy Apple because of its features. People buy Apple because they want to be “different”.

🔗 The Runway Insights

  • 10 startups to watch from Y Combinator’s W25 Demo Day (Link)

  • Why you should consider talking to non-users for UX research (Link)

  • How to build your own software with AI (no experience necessary) (Link)

  • When should startups prioritise PMF score over NPS? (Link)

  • How to be a top 1% angel (Link)

  • The new way to build software (Link)

  • YC: The future of design with Figma’s co-founder & CEO (Dylan Field) (Link)

💰 Southeast Asia Funding Radar

  • Mito Health raises additional $2.2M (Seed) to help everyone live better, longer (Link)

  • BetterX raises $1.72M (Pre-Series A) for global expansion (Link)

  • Okapi Technologies, a Malaysia-based climate fintech startup, raises up to $2M (debt financing) to drive solar energy adoption in SEA (Link)

  • BetterFleet, an Australian EV startup, raises $23.7M (Series A) to expand its AI-driven fleet planning technology (Link)

  • Kyberlife, a Singapore-based B2B healthcare e-commerce startup, lands $3M to scale regional marketplace (Link)

🤝🏻 Before you go: Here are 2 ways I can help you

  1. Founder Office Hours: Book a 1-1 call with me, share your problems and questions, and I'll help you cut through the noise, avoid costly mistakes, and get clear next steps that actually work. I help early-stage founders with:

    • Validating ideas & building MVPs

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    • GTM strategy & fundraising

    • Finding PMF & growth hacks

    • Growing & monetising newsletters

    • Attract customers & investors by building a solid founder brand on LinkedIn

  2. Promote your business to 18,000+ founders: Acquire high-value leads and customers for your business by getting your brand in front of highly engaged startup founders and operators in Asia.

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That’s all for today

Thanks for reading. I hope you enjoyed today's issue. More than that, I hope you’ve learned some actionable tips to build and grow your business.

You can always write to me by simply replying to this newsletter and we can chat.

See you again next week.

- Admond

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