The author | Bai Qian
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On January 1, 2016, at the behest of Li Shufu, the founder of Geely Automobile, Liu Jinliang, head of Geely's new energy sector, led the team to start the internal incubation process of Cao Cao Special Vehicle.
In the same year, the giant war in the ride-hailing market came to an end, and Uber chose to withdraw from the Chinese market; the launch of the Guiding Opinions on Deepening Reform and Promoting the Healthy Development of the Taxi Industry established the legal status of the ride-hailing platform. Within a year, the compliance policies and market entities of the online ride-hailing industry will be implemented at the same time.
In Liu Jinliang's view, this means the closure of the C2C window of the track, and the opening of the B2C window.
Taking the Beijing market, which is fiercely contested by online ride-hailing platforms, as an example, the policy requires drivers to hold Beijing household registration and driving certificates issued by Beijing Municipality, which means that the threshold for compliant drivers is extremely high, and Caocao Chauffeur, which focuses on professional and compliant admission, has more market gaps to break through.
For example, Cao Cao Chauffeur emphasizes its own mature driver training mechanism. The "Cao Cao Academy" will provide services, communication, first aid and other professional knowledge, and even every driver must undergo a personality test before taking up his post.
From the perspective of development speed, since changing its name and expanding its business scope in February 2019, Cao Cao Travel seems to have embarked on the fast track. On September 6 this year, Cao Cao Chuxing completed a 3.8 billion yuan B round of financing, at the press conference, Cao Cao Chuxing CEO Gong Xin released the N3 strategy - representing the intelligent ecology represented by customized vehicles, new energy, car networking and intelligent driving technologies.
Under the dual iteration of financing rounds and strategic planning, CaoCao Travel seems to be expected to seize the short window period of the C2C online ride-hailing market. In fact, Cao Cao travel itself still has many contradictions to be solved.
01 Business Model: ToB or ToC?
From beginning to end, Geely has not taken CaoCao Travel as a breaking point in the competition for the market share of online ride-hailing, but as a breakthrough in the strategic transformation of Geely Automobile.
Liu Jinliang once explained in a public speech the logic of Geely Automobile's entry into the travel platform - capital in various industries is falling into the "car-making mania", making air conditioners, doing energy, doing the Internet... If Geely wants to survive in the next thirty years, it cannot regard the car as a means of transportation, but chooses to transform and upgrade, and provides travel solutions through the car, in order to find a place in the future automobile market of electrification, intelligence, networking and sharing.
Of course, this is an important reason for Geely Automobile's entry, but looking at the back of the "Treasure Book of the Wind and Moon", the logic will become clearer - Cao Cao Special Car is a reform product of Geely's response to the stock crisis of the automobile market.
Since 2010, with the end of the climax of "cars going to the countryside", the growth rate of domestic automobile sales has declined sharply. With the improvement of automobile penetration and the improvement of residents' consumption level, people are no longer satisfied with the needs of ordinary transportation tools for low-end models, but pursue more use functions, and the incremental era of the domestic automobile market has entered the end. After 2017, the relevant data once turned into negative growth.
In Geely," this logic is even more profound.
Geely Automobile's public data shows that in the year before the planning of Cao Cao's special car admission (2014), Geely Automobile's sales fell sharply. In that year, Geely's auto sales were only 417,900 units, a year-on-year growth rate that plunged to -24%.
In 2014, Geely threw out the slogan "Build everyone's boutique car", and put product logic into consumption upgrading, and brands such as Bo Rui came into being.
In 2015, Geely Automobile set its sights on the travel platform, and the strategic structure of Cao Cao Special Vehicle took shape.
In essence, the entry of car companies into the online ride-hailing industry is a measure to deal with the crisis of the red sea of automobiles, and the production capacity is put into market operation through the B2C travel platform, which can replace the depreciation loss of excess inventory. At present, this track brings together Geely, FAW Hongqi, SAIC, Dongfeng, Changan, Jiangling and other car companies, rather than saying that car companies are eyeing the travel cake, it is better to say that this is a group warming under the cold tide of the market.
This also brings a split to the brand logic of Cao Cao Travel - is Cao Cao Travel a to C product or a to B product?
On the one hand, Geely Automobile relies on Cao Cao travel to obtain data feedback. Liu Jinliang said that the driver feedback of Cao Cao's car has led Geely to make a number of model adjustments for the B2C travel market, such as the adjustment of the passenger seat. As of April 2018, Cao Cao Chauffeur has provided hundreds of model development proposals for Geely.
In addition, the travel platform is also providing advertising effects for car companies. In the process of travel, users can experience geely's different models, including new energy vehicles, which is equivalent to the test drive of 4S stores to some extent, and indirectly completes the publicity of Geely Automobile.
On the other hand, Cao Cao Travel is absorbing social capital and is suspected of releasing two years after the B round of financing to achieve the goal of turning losses into profits. This means that in addition to the B-end value, CaoCao Travel must build a set of mature C-end service capabilities, including peak capacity scheduling, safety prevention system and so on. Compared with the mature C2C travel platform with massive data accumulation, Cao Cao Travel is obviously inferior.
At the B round of financing conference in September, Cao Cao's statement also reflected this problem - with the expansion of capacity and the influx of part-time drivers into the platform, Cao Cao Travel needs to focus more on getting private drivers to use Geely's customized new models, rather than expanding its market share.
This shows that Cao Cao Travel's strategic intention is more to occupy a small number of online ride-hailing market shares and solve the sales and research and development dilemmas for the parent company, rather than to fight head-on with opponents in the online ride-hailing track. Even after several financings, Geely's equity ratio was diluted, but Cao Cao Travel's strategic planning remained unchanged.
02 Market Share: Short-lived or Steadily Cannibalizing?
At the B round of financing conference, Gong Xin said that 20% of the market share is the "life and death line" of the online ride-hailing platform in a single city. Up to now, Cao Cao Travel has won 20% of the market share in some cities.
This seems to indicate that Cao Cao Chuxing's steady expansion strategy in the market segment has achieved initial results, but on the other hand, Cao Cao Chuxing has also encountered many problems in the expansion process.
Enterprise investigation data shows that since October 11 this year, the administrative penalty record of Hangzhou Youxing Technology Co., Ltd., the main operator of Caocao Travel, has risen rapidly, and on November 1 alone, CaoCao Travel has received 8 consecutive administrative punishment messages. Among them, the punishment units are mainly the Shenzhen Municipal Transportation Bureau, the Nanjing Municipal Transportation Bureau, and the Beijing Municipal Transportation Commission, and the vast majority of the punishments are based on the fact that Cao Cao's travel drivers have not obtained a taxi driver's license.
The background of the punishment is the accelerated expansion of Cao Cao Travel in some cities. In the short window period of the online ride-hailing market, full-time drivers cannot meet the needs of Cao Cao's rapid expansion of transportation capacity, and the volume of part-time drivers is growing.
From the advantage point of view, this part of the capacity provides support for CaoCao Travel's rapid competition for market share; but from the disadvantage point of view, Cao Cao Travel' product image as a B2C travel platform, its safe, professional and service capabilities is gradually diluted under the growth of non-full-time drivers.
Prior to this, Liu Jinliang had summarized the advantages of Cao Cao's B2C model as a strong ability to control vehicles and drivers and provide strong service capabilities in the asset-heavy model. However, according to the Economic Observation Network, there is a chaotic driver management mechanism in Cao Cao Travel. Some drivers said that in addition to the one-week time required for car inspection, drivers who joined the car only needed one morning of training. This is far from the external propaganda image of Cao Cao Academy that strictly trains drivers.
On September 1 this year, the Ministry of Transport, the Ministry of Public Security and other departments interviewed major online ride-hailing platforms, including Cao Cao Travel, T3 Travel, and Meituan Travel, pointing out that some platforms used a variety of marketing methods to viciously compete, and recruited or induced drivers and vehicles without licenses to "join the car", carry out illegal operations, disrupt the market order of fair competition, affect the safety and stability of the industry, and damage the legitimate rights and interests of drivers and passengers. The interview requires that each platform should achieve "platform licensed operation, vehicle licensed passengers, drivers holding certificates", immediately stop recruiting non-compliant vehicles and drivers, and speed up the removal of existing non-compliant vehicles and drivers on the platform.
This means that Cao Cao Travel's move to quickly absorb capacity through the momentum of the B round of financing is encountering a sharp rise in compliance risks.
In addition, in the strategic map of Cao Cao Travel, the platform always occupies the market segment under the giant game, rather than the new market. Liu Jinliang expressed this as saying that the C2C platform has cultivated user habits by burning money, and Cao Cao travel does not need to burn money here, and can specialize in services.
The location of the administrative punishment unit represents the main direction of Cao Cao's travel expansion capacity to a certain extent. From this point of view, Cao Cao Travel mainly expands its capacity in Beijing, Shenzhen, Nanjing and other cities, and lacks a layout for the sinking market with lower penetration rate of online ride-hailing. To a certain extent, this is related to the layout of Geely Automobile's products and offline service facilities, but it also proves that in the future online ride-hailing track, Cao Cao Chuxing will not enter the first echelon.
03 Profit prospects: hematopoiesis or transfusions?
Relevant reports show that before the exposure of the B round of financing, Cao Cao Travel has proposed a strategic plan to turn losses into profits within two years.
At the 2018 China Automotive Forum, Liu Jinliang attributed Cao Cao's profitability to the high cost of professional operations - CaoCao's cars are inspected annually and handed over to operational insurance every year, while C2C online ride-hailing does not implement the same strict standards, which is the main uncertainty affecting Caocao's profitability.
After the completion of the B round of financing, Gong Xin clearly identified the top of Cao Cao's strategic framework as "attack". From the perspective of specific strategies, Cao Cao Travel is expected to give priority to competing for market share, establishing scale advantages, and then fully turning to profitability.
This also means that the time left for Cao Cao's travel transformation is not long.
Judging from the operating penalties of non-licensed drivers that have soared in many cities, after the B round of financing, CaoCao Travel has made additional subsidies, transportation capacity and other investments in cities with market share advantages.
According to the data given by Gong Xin, about 20% of the 62 cities that Cao Cao Chuxing has operated have reached 20% of the market share. If Cao Cao Chuxing wants to pursue a larger market share, it must stabilize the stock, look for increments, and strive to break through the 20% life and death line in more cities. The expansion of market fees means that it is difficult for Cao Cao Travel to form a profit in the short term.
Judging from the track of online ride-hailing, the entire market is facing the ceiling of customer unit price growth, and under the competition of public transportation, private cars and other products, the price of a single order for online ride-hailing must strictly follow the local consumption level. In addition, there is also a ceiling in the commission ratio of the platform, and once the platform excessively squeezes the driver's profits, it will inevitably lead to the loss of transportation capacity.
This means that relying on the online ride-hailing business alone, it is difficult for Cao Cao Chuxing to make a profit. After changing its name from Cao Cao Chauffeur in 2019, Cao Cao Chuxing diversified its business and introduced O2O e-commerce in the same city into the travel platform, behind which is the business design of users traveling - accumulating mileage - in exchange for e-commerce discounts.
In the ideal model of Cao Cao Travel's entire set of commercial closed loops, the travel platform is an important user entrance. Focusing on the user value behind travel means that the travel business must occupy a sufficient market share and maintain a high user stickiness in order to deliver user traffic to the e-commerce business.
The problem is that the current Cao Cao travel expansion relies too much on subsidies. Public information shows that Cao Cao Travel's subsidy means include, but are not limited to, newcomer benefits, membership cards, incentives for inviting new users, and discount vouchers. Once the platform enters the stage of pursuing profitability, the subsidy policy is gradually withdrawn, and user loyalty may decline significantly.
In addition, from the perspective of expansion planning, Cao Cao Travel follows a strict cost control strategy, insists on avoiding head-on combat with C2C online ride-hailing platforms, but expands in large cities where user demand is large enough and market share is easy to compete, focusing more on maintaining a stable and sustainable market share. With the limited expansion of part-time drivers, the market share climbing momentum formed by Cao Cao Travel's financing may come to an end.
Overall, the advantages of Cao Cao's travel lie more in the research and development resources of upstream car companies, as well as the cost advantages of local automobile procurement, operation and maintenance. However, from the perspective of strategic planning, Cao Cao Travel is closer to the identity of "leak picker" - relying on the upfront cost of C2C online ride-hailing platforms to pay for user education, and does not pursue competition for major market shares, but is keen on "guerrilla warfare" outside the main battlefield. In the future, Cao Cao Travel is likely not to be the core player in the travel track.