Image source @ Visual China
Wen 丨 pencil road, the author | Han Xiyan
After two years of rumors, the company finally decided to go public.
On January 24, Tuhu Yangche submitted a prospectus to the Hong Kong Stock Exchange and applied for listing on the main board.
Starting from selling tires, after ten years of development, Tuhu Car has developed into an online and offline integrated automotive service platform. According to its prospectus, as of the listing, Tuhu Has received nearly 9 billion yuan in financing. According to the revelations at the beginning of last year, The valuation of Tuhu Car was as high as $3.8 billion at that time.
From the data point of view, Tuhu Yangche can be called China's largest digital automotive aftermarket service provider. However, the giants also have their own troubles.
In the past three years, the adjusted net loss of Tuhu Yangche was 1.04 billion yuan, 970 million yuan and 900 million yuan, respectively. In the case of low gross profit and high cost, Tuhu Car is not yet profitable in terms of finances.
The car service track where Tuhu Yangche is located is an imaginative market: trillions of scale, sustained growth, large and scattered. This background adds some color to the listing of Tuhu Car. However, compared with the story, how Tuhu Car continues to grow under the guidance of the flywheel effect and break through the threshold is more important.
After two years of transmission, Tuhu's car was finally listed
Finally, Tuhu Made Up His Mind to Knock on the Door of the Hong Kong Stock Exchange.
On January 24, Tuhu Yangche submitted a prospectus to the Hong Kong Stock Exchange for listing on the Main Board, with Goldman Sachs, CICC, Bank of America Securities and UBS Group as joint sponsors.
According to the prospectus, Tuhu Car is an online and offline integrated car service platform that provides one-stop, all-digital, on-demand service experience to meet the diverse product and service needs of car owners, such as parts replacement, car maintenance, repair, car beauty, etc.
Although it started as a tire sales business, over time, Tuhu Has gradually established a solid offline network, and has now created a vibrant "car service ecosystem" that includes car owners, suppliers, service stores and other participants.
△ Source: Tuhu Car Prospectus
In fact, since 2020, the rumors of the listing of Tuhu Yangche have not stopped. In July 2020, some media reported that Tuhu Car built a VIE structure, which is considered to be in preparation for listing. However, Tuhu Yangche responded at the time: "The establishment of the VIE structure is to optimize governance, the company has sufficient capital reserves, and there is no listing plan." ”
After two years, the answer was finally officially revealed.
As an online and offline integrated automotive service platform, from the data point of view, Tuhu Car care occupies a leading position in the industry. According to the China Insight Consulting report, Tuhu Has become the largest independent car service platform in China based on revenue in 2020 and the number of auto service stores operated by the company, and Tuhu Has become the largest tire and oil retailer in China based on sales volume in 2020.
Tuhu's prospectus shows that as of September 30, 2021, the company's flagship app, Tuhu Car, and online interface had 72.8 million registered users. In the 12 months prior to September 30, 2021, the company had 13.9 million trading users, an increase of 35.6% year-on-year.
As an industry leader, Tuhu Car is also favored in the capital market. Shortly after its establishment in 2012, Tuhu Yangche received millions of yuan of angel round investment from Atomic Venture Capital.
According to tianyancha app, the company has obtained 9 rounds of financing in ten years, with a total financing amount of more than 9 billion yuan, and investors include Tencent, Goldman Sachs, Sequoia Capital, Hillhouse Capital, Legend Capital, Qiming Venture Capital, CICC Capital, etc. In October 2019, the last round of financing came from CICC Capital.
According to the prospectus, Chen Min, founder and CEO of IPO Prospect Tiger Car Network, holds 11.76% of the shares, another co-founder, Hu Xiaodong, holds 3.22% of the shares, and Tencent holds 19.41%, making it the largest institutional shareholder of the company.
3 years loss of 3 billion yuan
Even if it is an industry giant, Tuhu Car has its own troubles.
The first is a single source of revenue. According to the prospectus, Tuhu Mainly includes three major businesses: integrated automotive products and services, franchise services and advertising services. However, as of the first three quarters of 2021, the three major businesses are still dominated by integrated automotive products and services, accounting for 94.5%. Among them, the tire and chassis parts sales business is the most important source of revenue for Tuhu Car, with 54.6%, 48% and 43.6% of the company's revenue coming from in 2019, 2020 and January-September 2021, respectively. As for franchise services and advertising services, only 4.1% and 0.6% accounted for.
"At present, the main source of income for Tuhu Car is some business with small profit margins." An auto industry practitioner told Pencil Road that the real high gross profit is franchise services and advertising services.
Second, the automotive service market is large and fragmented. As one of the most well-known online and offline integrated vehicle service platforms in China, the scale of Tuhu Car Is Huge. It is understood that as of December 31, 2020, Tuhu Yangche ranked first in the number of stores and auto service revenue in China's independent automotive aftermarket, and it accounted for 0.9% of the market share in China's automotive service field.
In The Tuhoo service system, there are three main types of stores: Tuhu self-operated workshop stores, Tuhu franchised workshop stores and cooperative stores. Also according to the prospectus, as of September 30, 2021, the Tuhu factory store network includes 202 self-operated stores and 3167 franchised Tuhu factory stores (managed by 1538 franchisees). In addition, the company has 33,223 cooperative stores across China, covering most prefecture-level cities.
Third, high cost, low gross profit, long-term losses. Offline traffic entrance (store) is one of the lifeblood of Tuhu car breeding. Chen Min, CEO of Tuhu Yangche, once said that the online business relies on oligopoly to collect ground rent for profit, while the offline traffic depends on the type of product service, location and repurchase, which is a low gross profit, low threshold and fierce competition. "Our logic is not to acquire more customers with more investment, but to return to the core of offline business - costs, including overall cost control, inventory reduction, cash flow management."
But the word "cost" is not easy to control. Offline stores have put a high degree of operating cost pressure, the company's prospectus shows, "we have generated losses and negative cash flows from operating activities in the past, and we may not be able to achieve or maintain profitability or positive cash flow in the future." ”
Moreover, in the first nine months of 2019, 2020 and 2021, Tuhu's revenue growth lagged behind the growth rate of the number of stores, which also led to the belief that Tuhu's scale expansion has become increasingly difficult to exchange for corresponding growth.
With low gross profit and high cost, Tuhu Is not yet profitable in terms of finances.
According to the data, Tuhu Car recorded revenue of 7.04 billion yuan, 8.753 billion yuan and 8.441 billion yuan in 2019, 2020 and 2021 (as of September 30, 2021), and gross profit was 523 million yuan, 1.08 billion yuan and 1.312 billion yuan respectively. Losses attributable to shareholders were $3,428 million, $3,928 million and $4,433 million. Adjusted net losses were $1.04 billion, $970 million and $900 million, respectively.
Finally, the cash flow of Tuhu Car is also worrying. In 2019, 2020 and the first three quarters of 2021, Tuhu's net cash flow from operating activities was -252 million yuan, 331 million yuan and -455 million yuan, respectively. As of September 30, 2021, the Company had only $1.43 billion in cash and cash equivalents on its books.
"We have incurred losses and negative cash flows from operating activities in the past, and we may not be able to achieve or maintain profitability or positive cash flows in the future," Tuhu Yangche also said in the prospectus.
Therefore, in the view of some business people, Tuhu's continuous expansion comes from the support of high financing, but Tuhu is still in the stage of burning money and losses to maintain growth.
Unwilling and can not only be a "middleman"
It must be admitted that Tuhu Car is in an industry full of imagination.
In terms of the market, thanks to the continuous growth of China's car ownership, the increasing mileage, and the increasing age of the car, according to the Insight Consulting Report, the size of China's auto service market in 2020 has reached 1 trillion yuan, and it is expected to reach 1.7 trillion yuan in 2025, with a compound annual growth rate of 10.0% between 2020 and 2025.
"The automotive service market is on the eve of an outbreak, and the industry is expected to maintain a high-speed development in the next few years." One investor predicted.
No one will ignore this "fragrant feast". It is understood that at present, Ali, Jingdong, etc. have been laid out in this market, including The Beijing Automobile Club and Tmall Car, among which the franchise stores of Tmall Car have exceeded 1700.
And as Tuhu said, while the automotive aftermarket shows a blue ocean, it also ushers in uncertainties. In the risk warning section of the application, Tuhu Yangche clearly mentioned that its business growth in China was "affected by changes in customer demand and automobile consumption". Specifically, the popularity of autonomous vehicles and shared cars may reduce the need for collisions and repairs. In addition, the reduction in the frequency of driving travel caused by changes in users' travel habits (choosing public transportation) will also affect the car maintenance business they are engaged in.
Through the initial investment, Tuhu Car was born in a barren Chinese auto service market, and it is easier to maintain the existing market leading position in the later stage. However, Tuhu Car needs to continue to grow under the guidance of the flywheel effect and break through the threshold.
Tuhu Car is also trying to tell a new story. Judging from the prospectus, the use of the funds raised by Tuhu Car in hong Kong IPO is mainly divided into improving supply chain capabilities, enhancing research and development and data analysis capabilities, expanding store networks and franchisee bases, etc., and focusing more on providing automobile-related business services to new energy car owners in the future.
Under the outlet of new energy vehicles, Tuhu Yangche is laying out the aftermarket of new energy vehicles. In August 2020, Tuhu Yangche established Xinxiang Yuhu Information Technology Co., Ltd., which covers the wholesale of auto parts and the sales of new energy vehicles.
In October of the following year, Tuhu Yangche and Jihu Automobile signed a strategic cooperation agreement to provide the latter with a one-stop after-sales service ecosystem for new energy car owners.
For Tuhu Car, the listing is just the beginning. Through the accumulation of burning money in the early stage, there is already a certain market foundation, what to do next, more important than listing, "middlemen to earn the difference" is not a long-term strategy.