With revenues of 10 billion yuan and 30,000 channels, Tuhu Car is firmly in the huge and decentralized automotive aftermarket
Text | Jennings
After 11 years of establishment, China's leading digital automotive aftermarket service provider is sprinting for an IPO.
Founded in Shanghai in 2011, Tuhu Car started with a tire sales business, and now covers all aspects of the automotive aftermarket, providing online reservation + offline installation of car maintenance, and officially submitted a prospectus to the Hong Kong Stock Exchange on January 24.
Tuhu's 10 billion revenue is favored by capital. According to the prospectus, Since its establishment, Tuhu Has obtained 16 rounds of financing, raising a total of more than 9.1 billion yuan, and has been blessed by Baidu, Goldman Sachs, Sequoia China, Qiming Venture Capital, Joy Capital, Legend Capital, CICC, Haitong Kaiyuan, CCB International and other institutions.
With small profits and high sales services, Tuhu Car Has formed a scale effect and broken through the fierce automotive aftermarket competition. In 2016, the number of track financing in the auto aftermarket reached a peak, and a number of Internet car maintenance platforms emerged, followed by intensified internal competition, industry reshuffle and acceleration, and Tuhu car maintenance sat firmly in the top spot.
Abundant cash flow, misunderstood "loss"
Tuhu's revenue grew at a relatively high rate, with total revenue reaching RMB8.44 billion in the first three quarters of 2021, compared to RMB5.95 billion in the same period last year, an increase of 41.8% year-on-year, compared with RMB7.04 billion and RMB8.75 billion in 2019 and RMB8.75 billion in 2020.
According to the prospectus, Tuhu Covers most of the passenger car models sold in China, covering 239 brands and more than 44,000 models, meeting the full range of car service needs from tire and chassis parts replacement to car maintenance, repair, and car beauty. Continue to comprehensively improve the system automation capabilities, increase offline coverage, the introduction of outstanding talents and other needs.
It should be known that even if Tuhu Has achieved tens of billions of sales in 2021, in the trillion-dollar automotive aftermarket, the market share is still low, and the market share is promising.
According to the Ministry of Commerce, the consumption scale of China's auto aftermarket will exceed one trillion yuan in 2020. With the increase in car ownership and average age in China, the market size will continue to expand.
The online reservation + offline installation represented by Tuhu Car Maintenance is becoming more and more habitual way for consumers to maintain cars. Deloitte Consulting expects that in parallel with the increasing popularity of digital technology and the gradual expansion of offline chain stores, the independent automotive aftermarket channel will develop rapidly in the next 5-10 years, the maturity will be further improved, the market share of 4S stores will be compressed, and the market share of the independent aftermarket is expected to exceed that of 4S stores.
According to the net loss figures disclosed in the prospectus, net profit losses of 3.4 billion, 3.9 billion and 4.4 billion yuan were lost in 2019, 2020 and January-September 2021, respectively. According to the adjusted net loss figures, Tuhoo's losses in 2019, 2020 and the first nine months of 2021 were only 1.03 billion, 970 million and 900 million yuan, so what is such a huge difference between this "adjusted net loss" and "net loss", and which is the real loss?
The loss figures seem huge, but it should be pointed out that this is related to the principle of accounting and bookkeeping - because of the continuous development of the company's performance, the convertible shares issued to investors in the past private financing have continued to appreciate, resulting in the actual value being much higher than the price issued at that time, so according to the International Standards on Auditing, the appreciation part will form a loss on the account, that is, "the change in the fair value of convertible redeemable preferred shares", and many startups have recorded seemingly exaggerated book losses when they are listed.
The question of "how much money Tuhu has lost" has been clearly explained, and the "adjusted net loss" in the statement is the real loss figure, that is, at the level of about 900 million per year, compared with Tuhu's revenue of nearly 10 billion, which is not exaggerated.
So, Tuhu's annual loss of about 900 million yuan means that Tuhu burns 900 million yuan of cash in operation every year? The answer is also no, from a financial point of view, to determine how much cash a company wants to spend, not to look at the income statement, because the income and expenses on the income statement are based on certain accounting standards, not the actual cash income and expenditure caliber.
According to the data disclosed in the cash flow statement, which "operating activities (used)/net cash flow" corresponds to the cash actually spent on Tuhu's operations, it can be seen that Tuhu only operated out of 250 million cash in 2019, earned 330 million cash in 2020, and about 460 million cash outflows in the first nine months of 2021.
On the whole, in two years and nine months, only about 380 million yuan of cash has flowed out of the operation. The prospectus also discloses Tubu tiger's cash and bank balances, which are 6.06 billion by the end of September 2021, indicating that its cash reserves are abundant.
At the same time, Tuhu is continuously optimizing its product mix to improve profit levels. For example, the gross profit margin of exclusive brands and private brands is higher, and Tuhu has launched 33 private product brands and 34 exclusive product brands, and is increasing investment.
Reflected in the results, the overall gross profit margin of Tuhu Car increased from 7.4% in 2019 to 12.3% in 2020, and further increased to 15.5% in September 2021.
Stores are expanding rapidly, with more than 30,000 stores nationwide
Large volume, good growth, but the industry concentration is low, the development is in the early stages, Tuhu car maintenance track has been the main area of the automotive aftermarket - in 2020, there are about 30,000 authorized dealer stores nationwide, and independent third-party stores such as mom-and-pop stores, father-son stores, etc., about 684,000.
"Sooner or later, such an industry will usher in changes, just like the previous home appliances, 3Cs, books. Opaque will become transparent, and non-standard will become standard. Channels will gradually integrate, non-standard, multi-level channel providers, indeed will be slowly integrated into, standardized, into the scale of dealers. And what follows must be the reduction of the overall mark-up rate, manufacturers cede more profits to channels and stores, and give more benefits to consumers. Chen Min, founder and CEO of Tuhu Yangche, said.
What Tuhu Car is doing is to integrate channels in a digital way: in 2019, Tuhu Car has a total of 20,166 stores, which increased to 25,773 in 2020, and by the end of September 2021, this number has become 36,592, and online and offline integration.
Deloitte Consulting pointed out that Internet players generally have open source and open empowerment genes, as a high-quality offline network, cooperation and integration can fully obtain high-quality supply chain and traffic empowerment, choose more, and low-quality offline network challenges are huge, through cooperation or integration, with the help of strong platform empowerment to enhance all-round service capabilities or production capacity is the only way out in the future.
The scale expansion of 1 to N has begun to bear fruit, Tuhu Car has become a huge automotive aftermarket service provider, the next step, from quantity to quality, do a good job in fine operation is Tuhu's focus.
In the financial statements of the prospectus, Tuhu disclosed the specific circumstances of all its expenses, advertising and promotion-related expenses, and the proportion of this account was stable at about 6% in terms of proportion to revenue. At a time when various platforms burn money for traffic and the cost of customer acquisition is getting higher and higher, Tuhu has maintained a steady, user-centered business development model.
Tuhu Car said in the prospectus that the funds raised are expected to enhance supply chain capabilities, improve data analysis technology and improve operational efficiency; expand store networks and franchisees, and provide car services to new energy vehicle owners for related investment and working capital.
In its prospectus, Tuhu acknowledges that the popularity of autonomous vehicles and shared cars may reduce the need for collisions and repairs. However, new energy vehicles are a huge potential market, and the huge channel scale is the confidence of Tuhu Car when facing the transformation of the times. In August and October 2021, Tuhu Yangche signed strategic cooperation agreements with Zero Run Automobile and Jihu Automobile to provide after-sales network support for the latter.
As Chen Min said, digitalization can help brands, distributors and stores, in terms of user reach, supply chain management, inventory management, and even capital management, etc., there are very large efficiency improvements, "the last efficiency improvement will definitely return to our business results." "