"Circle Layer" Fan Jun
Edited by Chen Ji
Chunjiang Plumbing Duck Prophet, the mainland automobile market space is huge, as the automotive aftermarket of the automotive service field, but also pregnant with huge market opportunities, and the ongoing Tuhu car application for listing progress continues to affect the nerves of the market.
At the beginning of the Year of the Tiger in 2022, Tuhu Car applied to go public in Hong Kong, impacting the "first stock in China's digital automotive aftermarket", which attracted widespread attention from the market and reopened the market's thinking on the value of the automotive aftermarket.
Driven by the large and growing car ownership and increasing age, China's automotive service market grew at a CAGR of 12.3% from 2016 to 2020, making it one of the fastest growing countries in the global automotive services market.
According to the China Insight Consulting report, according to GMV calculations, the size of China's auto service market will be 1.03 trillion yuan in 2020, and it is expected to reach 1.65 trillion yuan by 2025, with a compound annual growth rate of 10%. In recent years, with the strong demand for auto service business, there are many entrants who aim at the fertile land of the automotive aftermarket, who can "laugh at the rivers and lakes" in the trillion market?
Automotive aftermarket: trillion scale
Social development is changing with each passing day, but "food, clothing, shelter and transportation" is an eternal focus of people's lives. Among them, automobiles are the preferred consumer goods that people "walk" in recent years.
In recent years, the number of cars in mainland China has been growing. According to statistics, from 2015 to 2020, the number of cars in mainland China increased from 172 million to 281 million, a huge number. After the completion of the delivery, the car entered the automotive aftermarket, which also laid a solid foundation for the development of the mainland automotive aftermarket industry and expanded demand.
According to information recently released by the Traffic Management Bureau of the Ministry of Public Security, the number of motor vehicles in the country will reach 395 million in 2021, including 302 million cars; the number of motor vehicle drivers will reach 481 million, of which 444 million will be car drivers. In 2021, there will be 36.74 million newly registered motor vehicles and 27.5 million newly licensed drivers nationwide. By the end of 2021, the number of cars in the country will reach 302 million. In 2021, there will be 26.22 million newly registered cars nationwide, an increase of 1.98 million over 2020, an increase of 8.16%.
In terms of passenger cars, according to the china insight consulting report, China has ranked first in global new car sales for 10 consecutive years. As of December 31, 2020, China's passenger car ownership reached 242 million units, and China has become the world's second largest automobile market.
The automotive industry on the mainland still shows huge room for growth. According to the China Insight Consulting report, the mainland's passenger car ownership per 1,000 people is only 171, lower than developed countries such as the United States (775 per 1,000 people) and EU member states (553 vehicles per 1,000 people), and China's passenger car ownership is expected to continue to grow, and will further reach 347 million by 2025.
With the steady growth of the total number of passenger cars in China, the age structure of passenger cars has also gradually changed, and older vehicles generally require more car services than new cars, especially repair and maintenance services. The average age of passenger cars in China increased from 4.5 years in 2016 to 5.6 years in 2020.
China Insights Consulting expects that by 2025, the average age of passenger cars in China is expected to reach 7.6 years, while the average age of vehicles in the United States and EU member states in the same year is 12.2 years and 12.1 years, respectively, which indicates that there is room for further growth in the age of passenger cars in China, and the growing number of passenger cars in China and the average age of vehicles mean that the demand for car services will also increase.
China's automotive service market grew at a CAGR of 12.3% from 2016 to 2020, making it one of the fastest growing countries in the global automotive service market. According to the China Insight Consulting report, according to the GMV, the size of China's automotive service market will be 1,026.8 billion yuan in 2020, and it is expected to reach 1,650.8 billion yuan by 2025, with a compound annual growth rate of 10.0%.
With Tuhu's Hong Kong stock listing application, a paper prospectus unveiled the automotive aftermarket, clearly clarifying the current situation of the industry and the profit model. According to Tuhu's prospectus, in China, the value chain of automotive services consists of two channels, namely the authorized dealer channel and the independent after-sales service supplier channel (or IAM channel).
Authorized dealers and IAM stores are major DIFM service providers in the Automotive Services market in China. In 2020, there were about 30,000 authorized dealers and 684,000 IAM stores in China, accounting for 59.5% and 40.5% of China's automotive service market (by GMV) respectively.
Whether the car is under warranty is one of the key factors influencing the owner's choice of an authorized dealer or IAM store. OEMs typically offer a warranty period of three years after the sale of a new passenger car, after which owners are more likely to choose IAM stores for convenient and affordable service.
According to the China Insight Consulting report, by the end of 2020, China's passenger cars with expired warranties accounted for about 69.9% of the total ownership, and it is expected that by the end of 2025, this figure will reach 77.2%. As a result, GMV in IAM stores is expected to grow at a higher rate than authorized dealers, accounting for 54.1% of the automotive services market (in terms of GMV) by 2025.
Car ownership is concentrated in first- and second-tier cities, resulting in a potential automotive service aftermarket. As of the end of June 2021, 74 cities across the country had more than 1 million cars, an increase of 5 cities year-on-year, 33 cities exceeded 2 million, and 18 cities exceeded 3 million. Among them, the number of cars in Beijing exceeded 6 million, and the number of cars in Chengdu and Chongqing exceeded 5 million. The number of cars in Suzhou, Shanghai and Zhengzhou exceeded 4 million.
The battle for scale: online + offline competition
With the rapid development of China's automotive aftermarket industry, new business models continue to emerge, especially in the past decade, various innovative formats in the automotive aftermarket have emerged in an endless stream.
China's automotive services market includes services for all passenger cars registered on the road, a key part of user demand throughout the vehicle lifecycle. The car service business is extensive, including car repair and maintenance, car wash and car beauty, and accessories to be installed.
For the automotive aftermarket industry of more than trillion levels, the industry has gone through ups and downs several times, from the rise of the Internet around 20214, the wave of auto service O2O companies began to count, as of now, the automotive aftermarket track has probably experienced three investment inflection points: the O2O model is wildly sought after, supply chain companies frequently obtain financing, and return to the terminal retail service network (that is, return to offline stores).
As early as 2016, the automotive aftermarket track was bustling, the number of financing reached a peak, and a number of Internet car maintenance platforms emerged. Internet players such as Alibaba, JD.com, Meituan, Didi, and Tuhu Have long since entered the automotive aftermarket competition. At present, the main operators of Tuhu Car and Tmall Car Platforms- Jiangsu Kangzhong Auto Parts Co., Ltd. (hereinafter referred to as "Xinkangzhong") and Jingdonghui are still active in the public vision.
For example, Tuhu Has been in existence since 2011 and received 16 rounds of financing between 2013 and 2021. Judging from the round of financing completed by Tuhu In September 2018 alone, the total financing amount is about US$450 million, led by investors and enterprises such as Tencent, Carlyle Capital and Sequoia Capital, and co-invested by CCB International, CICC Qiyuan and old shareholders Joy Capital, Yuanyi Capital, Qiming Venture Capital, Goldman Sachs, CICC Jiazi and Huiqin Capital.
Before the IPO, Tencent held 19.41% of the shares, making it the largest shareholder of Tuhu Yangche; Joy Capital held 8.98%, Sequoia China held 7.56%, Baidu held 2%, and CICC held 2.32%.
Looking at Xinkangzhong, it is mainly backed by the ecological operation of Ali car, making "Tmall Car" the fastest growing auto repair chain brand in China. According to the data, from 2014 to 2021, Xinkangzhong completed 8 rounds of financing, with a total financing of more than 6.5 billion yuan. Among them, in 2018, Yunfeng Fund, Alibaba, Jingu Shares (002488. SZ), Warburg Pincus Investment invested 1.6 billion yuan in Xinkangzhong. Up to now, the enterprise investigation data shows that in the shareholding structure of Xinkangzhong, hong Kong company Quality Car Service Limited holds 94.14% of the shares, Jingu shares hold 3.38%, and the remaining three companies hold about 2.5%.
Xinkangzhong's 8 rounds of financing
(Source: Qi Cha Cha)
It is worth mentioning that in addition to holding shares in Xinkangzhong, the company's wholly-owned subsidiary "Auto Superman" has also been deeply cultivated in the automotive aftermarket for many years, and has established a certain first-mover advantage and high market visibility in the industry. According to the announcement of Jingu shares, New Kangzhong, in which Jingu shares, has the exclusive operation right of Tmall and Taobao aftermarket business (except auto supplies) and shares the owner data of Tmall auto aftermarket retail platform.
In the scale competition of the automotive aftermarket, relying on capital advantages, online traffic + offline terminals have become a must-compete place. The strategic logic of Xinkangzhong mainly focuses on the playing method of "competing for terminals + ratio efficiency", and builds the largest one-stop platform for rear-car in China;
With a customer-centric model and an efficient supply chain, Tuhu Provides a one-stop, all-digital, on-demand service experience to create a vibrant automotive service ecosystem composed of car owners, suppliers, auto service stores and other participants.
The auto superman under Jingu Co., Ltd. mainly uses the drainage of the new retail business of the store through the online platform, combined with the nationwide coverage of offline auto superman's "directly operated direct control" stores and shareholding (including the participation of the participating company), to achieve a new interaction of "online and digital" in the traditional auto repair service industry.
In the eyes of the outside world, the competition between Tuhu and Xinkangzhong is very fierce, especially the offline store chain system, Tuhu car and Tmall car have formed a direct confrontation in many aspects. Both sides are committed to developing into enterprises that have developed into ecological platforms, and both are fully competing for the traffic and service entrance of the automotive aftermarket, that is, offline maintenance stores.
From the perspective of the scale of offline stores, Tuhu Car occupies a clear advantage. According to the tuhu car prospectus data, as of September 30, 2021, tuhu workshop store network under Tuhu yangche includes 202 self-operated stores and 3167 franchised Tuhu workshop stores (managed by 1538 franchisees). In addition, the company has 33,223 cooperative stores across China, covering most prefecture-level cities.
According to the China Insights report, as of December 31, 2020, Tuhu Yangcheng ranked first among all auto service providers in the number of stores in China, and its automotive service revenue ranked first among IAM participants in China. In the field of automotive services in China, it occupies a market share of 0.9%.
In contrast, as of September 2021, Tmall has opened a total of 1,023 cars, including 326 old stores (accounting for 31.9%) and 697 new stores (accounting for 68.1%), of which 81.3% of the store area is between 200-800 square meters.
Looking at Auto Superman, as a digital auto service chain brand created by Jingu Shares, at present, auto superman stores have been gradually rolled out in Hangzhou, and the number of stores has reached more than 30, and will be expanded in more cities in the future. The Beijing Auto Club is a professional car maintenance service store launched by Jingdong in 2018, and the data shows that as of now, the number of stores of the Beijing Car Club has exceeded 1400.
Profit Puzzle: The Curse of Loss
In the face of the trillion-dollar automotive aftermarket, enterprise competition has intensified, reshuffling has accelerated, and many enterprises have become a problem while expanding their scale.
According to the Tuhu Car Prospectus, in 2019 and 2020, the operating income of Tuhu Car was 7.040 billion yuan and 8.753 billion yuan, respectively, and in the first three quarters of 2021, the company's revenue was 8.441 billion yuan, an increase of 41.8% compared with the same period in 2020. Among them, "integrated automotive products and services" as the main source of revenue, accounting for about 95%.
From the perspective of net profit, Tuhu car increase does not increase profits. In 2019 and 2020, the annual loss was 3.428 billion yuan and 3.928 billion yuan, and the loss in the first three quarters of 2021 was 4.435 billion yuan, with a total loss of more than 11.7 billion yuan, and the adjusted net loss in the same period was 1.036 billion yuan, 971 million yuan and 902 million yuan, respectively.
The loss of New Kangzhong is also continuing to expand. According to the annual report of Jingu Shares in the first half of 2021, the operating income of Xinkangzhong in the first half of 2021 was 2.673 billion yuan, an increase of 36.66% year-on-year; the net profit was -321 million, but the year-on-year loss increased by 63.78%.
Judging from the data of the past three years, after Xinkangzhong obtained alibaba's capital injection in August 2018, it achieved rapid development, and the revenue growth rate in 2019 was as high as 96%, while the net profit has been a loss for three consecutive years. The continuous huge losses are estimated to exceed the psychological expectations of Jingu shares, the second largest shareholder of Xinkangzhong, and "scare away" Jingu shares.
In this regard, Jingu shares continued to reduce their holdings in Xinkangzhong, reducing their holdings by 1.048% in September 2019, with a transfer consideration of 147 million yuan and an after-tax transfer income of 79.2334 million yuan; in 2020, they reduced their holdings by 1%, the transaction price was 150 million yuan, and the after-tax transfer income was about 84.3047 million yuan; in June 2021, Jingu shares announced that they would continue to transfer the equity of Xinkangzhong, and intended to transfer no more than 9.39% of the equity of Xinkangzhong, with a transfer income (pre-tax) of about 1.037 billion yuan.
Tianfeng Securities once said in the research report that "Xinkangzhong + Auto Superman" is the forerunner of industry digitalization. In 2018, Jingu Co., Ltd. strategically reorganized its supply chain business, which accounts for a relatively large proportion of its auto superman revenue, and Alibaba's Tmall station and Kangzhong auto parts-related businesses to establish "New Kangzhong"; after the strategic merger, Xinkangzhong mainly became an industry infrastructure builder by providing online traffic and supply chain warehousing capabilities; after divesting the supply chain business, Auto Superman, empowered and transformed offline auto repair stores through information digital means.
However, in fact, as a wholly-owned subsidiary of Jingu Shares, Auto Superman is still in deep losses. In this regard, Jingu shares said on the investor interactive platform on June 22, 2021 that in 2021, Auto Superman will continue to take offline "direct control" stores as the business center, effectively enhance customer stickiness and improve customer consumption frequency through smart store systems. With the increase in the number of stores, it will gradually reduce losses and achieve a turnaround.
Nowadays, the automotive aftermarket has changed from the incremental expansion of the racecourse to the refined operation of stores. Tuhu's application for listing also seems to have brought hope to the industry. Today, there are still some companies that lay out the automotive aftermarket business in an attempt to get a piece of the pie. Anche Testing (300572.SZ) announced that the company and Shenzhen Shengde New Energy Technology Co., Ltd. signed the "Joint Venture Company Formation Agreement" in Shenzhen on January 24, 2022, and intends to jointly invest in the establishment of Shenzhen AXA New Energy Operation Service Co., Ltd.
The announcement shows that this investment is conducive to the company's further expansion of the automotive aftermarket service business, focusing on the car testing business in use, and organically integrating business functions such as "photovoltaic power generation, battery energy storage, electric pile charging, automobile maintenance, automobile sales, second-hand tram evaluation, automobile recycling and dismantling, automobile beauty, and automobile insurance" to create a comprehensive automobile service ecological park.
Just after the Spring Festival of the Year of the Tiger in 2022, new opportunities for the automotive aftermarket will also be officially opened. The market is changing, who is smiling and proud, wait and see.