As a unicorn enterprise of automotive aftermarket service company, Tuhu Yangche finally officially launched the IPO listing process in 2022.
Tuhu Car is a domestic online and offline integrated automobile service platform, relying on the integration of online and offline, the price is more transparent than the 4S store, and the service is more thoughtful than the self-operated auto repair. With 16 rounds of financing in 10 years, it has been recognized as a leading enterprise in automotive aftermarket services.
Nowadays, the domestic auto market is developing in a spurt, and the huge auto service market will also become a new outlet, but Innovationcases noticed the figures of Tuhu's prospectus, but it revealed the fact that it has been in a state of loss. Will Tuhu's IPO road go as smoothly as expected?
Automotive aftermarket with great potential
With the rapid growth of China's auto market, the automotive aftermarket has grown to the trillion level.
By the end of 2021, the number of passenger cars in China will reach 262 million, making it the world's largest automobile market. However, in 2020, the per capita passenger car ownership in mainland China is only 171 vehicles per thousand people, far below the average level in Europe and the United States. From the perspective of sales, the Chinese market has been the world's first new car sales for 10 consecutive years, and there is still a lot of room for growth in the future.
The automotive service market directly related to it will have a market size of 1,026.8 billion yuan in 2020, with a compound annual growth rate of more than 12% from 2016 to 2020.
In general, when the age of a passenger car exceeds the tipping point of 6 years, the cost of car service begins to increase significantly. According to the data, the average age of passenger cars in China will be 5.6 years in 2020, and it is expected to reach 7.6 years by 2025.
As a result, the automotive service market is on the eve of an outbreak, and the industry is expected to maintain rapid growth in the coming years.
Although the market space is large, neither end is strong. Its head space is still occupied by the 4S store system of major brands. They have a natural customer base advantage and technical base, but are often criticized for their services and prices. Roadside shops scattered in various cities can solve the problem, but compatibility, professionalism, and service awareness are not satisfactory.
Before the emergence of Tuhu Car, this market did not have a highly efficient, user-recognized, and large-scale channel.
Tuhu on the vent
Tuhu Car Maintenance began operations in 2011. In 2014, the Tuhu Car Maintenance APP was launched, providing more than 30 kinds of car services. In 2020, Tuhu ranked first among all car service providers in China in terms of the number of service stores.
Tuhu Car Maintenance has a customer-centric model and an efficient supply chain. Provide one-stop, fully digital, on-demand service experience, directly meet the diversified product and service needs of car owners, and build a dynamic car service ecosystem composed of car owners, suppliers, car service stores and other participants.
The company has more than 900 R&D personnel, led by experts in their respective fields, including data analysis, industry digital solutions and intelligent store management. Improve the company's efficiency for the entire automotive service industry by implementing a digital end-to-end industry solution that covers all aspects of the automotive service value chain.
From the perspective of service, the Tuhu car platform serves most of the passenger car models sold in China, and the business basically covers every link of the automotive aftermarket. Meet the needs of a full range of car services from tire and chassis parts replacement to car maintenance, repair, car beauty and so on.
According to the prospectus, Tuhu's car revenue has maintained a good growth rate in the past three years: the total revenue in the first three quarters of 2021 reached 8.44 billion yuan, compared with 5.95 billion yuan in the same period last year, an increase of 41.8% year-on-year; 7.04 billion yuan and 8.75 billion yuan in 2019 and 2020, respectively.
But it is worth noting that this growth rate is caused by the hard power of Tuhu car maintenance, or is it caused by standing at the mouth of the track?
"Compared to the traditional offline car service model that relies heavily on localized service needs, user interaction has been significantly improved by bringing together decentralized car service demand on one platform," Tuhu Car Maintenance said in its prospectus.
Three years of loss of 10 billion
Even in the wind outlet, it does not mean that Tuhu has no worries about raising cars. According to the prospectus, after more than a decade of financing rounds, Tuhu's profitability is still under pressure, with a net profit loss of more than 10 billion yuan in the past three years. On the income structure side, Tuhu's revenue is mainly divided into two categories: "integrated automotive products and services" and "platform services", of which "integrated automotive products and services" are the main source of income, accounting for about 95%.
From the perspective of net profit, the increase in Tuhu's car maintenance revenue has not increased profits. Losses for the full year 2019 and 2020 were $3.428 billion and $3,928 million. 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. Adjusted net losses for the same period were $1,036 million, $971 million and $902 million, respectively.
In this regard, Tuhu Car Maintenance said in the prospectus: "We adjust the expenses paid for shares, the proceeds from the injection of intangible assets into the associated companies, the change in the fair value of the convertible redeemable preferred shares, and the losses arising from the repurchase of convertible redeemable preferred shares to obtain an adjusted net loss."
At the same time, however, Tuhu's car maintenance sales and marketing expenses account for about 14% or more. According to the prospectus, from 2019 to the first three quarters of 2021, the sales and marketing expenses of Tuhu's car maintenance were 1.04 billion yuan, 1.26 billion yuan and 1.23 billion yuan, respectively. From this perspective, Tuhu spends an average of nearly 100 million yuan per month on car maintenance.
It is worth noting that in recent years, the automotive market has also rushed out of the "dark horse" of new energy vehicles. The emerging new energy vehicle market represents a change in the demand for automotive services, which is both an opportunity and a challenge for Tuhu car maintenance. The reason is that new energy vehicles do not have internal combustion engines and exhaust systems, and will no longer need to replace maintenance services such as oil, filters, ignition parts, etc., and how to further enhance their value in follow-up services are all needed to maintain vehicles.
In addition, in the already fishy auto aftermarket, Tuhu car breeding is not lacking in chaotic problems.
Like Tuhu in the car friends group, community, Tieba and car forums to publish their own business of small advertisements; there are stores suspected of using fake oil; in the consumer complaint website of the black cat complaints, Tuhu car about consumer fraud accessories maintenance level, service attitude, quality complaints are not uncommon.
At this point, the drawbacks of the car maintenance franchise model have been completely exposed.
Can Tuhu tell a new story?
Tapping into the value-added space of existing users has become the key to increasing Tuhu's auto maintenance revenue. In order to achieve greater geographical coverage and contact with customers, Tuhu has indeed put a lot of effort into car maintenance and "thrown" a lot of money for this.
Tuhu's prospectus clearly states that the flywheel effect is used for the company's rise and subsequent development. On the one hand, improving the customer experience can bring more user traffic, improve repurchase rates, vendor bargaining power, and so on. On the other hand, enough data and product upgrade ideas can also be fed back to the platform.
In terms of data value, car owners and suppliers have two major roles on the Tuhu car platform, either to increase the consumption scenarios of car owners and make them pay more, or to reduce the price of suppliers and improve their gross profit margins.
This still contains great development opportunities for independent car service platforms such as Tuhu Car. With strong in-house R&D capabilities and industry insights, Tuhu has been able to develop a set of tailor-made know-how for China Automotive Services, covering a big data platform for parts matching, and by introducing automation and other technology-driven tools to stores on the platform, including self-designed automatic car washers and digital diagnostic databases, Tuhu Has achieved excellent store operation efficiency and high store and technician utilization through this comprehensive solution.
In addition, Tuhu wants to leverage its experience in the supply chain to form SaaS solutions that are available to brands. At present, Tuhu Yangche mainly provides management tools for brand owners, such as enterprise resource planning, warehouse management system, dealer management system, mobile sales assistant, order management system, e-commerce platform, store management system, etc.
To prepare for the automotive aftermarket, Tuhu transformed from a "middleman" to a technology service. In terms of business development, in addition to the existing fuel vehicle business, Tuhu is exploring products and services tailored for new energy vehicles, such as battery repair.
Luo Rentong, a senior researcher at the Guangdong Innovation Strategy Research Association, believes that there are two key elements to whether Tuhu can continue to increase its penetration rate. First, the ability to import traffic, which will determine whether offline stores are willing to accept cooperation with Tuhu, and also determine Tuhoo's right to speak on the upstream supply side. The second is SaaS capabilities, how Tuhu standardizes and standardizes the services of more than 30,000 offline stores through a series of technical systems, which determines consumers' perception of the Tuhu brand and will affect the speed of scale expansion.
In the automotive service market, Tuhu has emerged as a challenger, and in fact, players in the traditional automotive service market are also trying to change. Traditional auto distributors and regional leaders are still strong competitors of Tuhu, and if Tuhoo cannot present unique product and service values, it will face greater competitive pressure after losing capital support.
The story of exchanging time for space is not uncommon in the Internet field, but tuhu has now entered a new historical cycle. Whether Tuhu's struggle can succeed depends on whose side time will be on.