Tuhu is one step closer to going public.
On August 23, documents from the Hong Kong Stock Exchange showed that Tuhu Vehicle Raising passed the listing hearing, which means that Tuhu Car Maintenance is about to become the first Hong Kong listed company in the independent after-sales service market of automobiles.
This is the third time Tuhu has hit the IPO. Previously, on January 24, 2022, Tuhu submitted its listing application to the Hong Kong Stock Exchange for the first time, but six months later, the listing bell has not been ringing. On August 29, 2022, Tuhu renewed its prospectus again, which expired again at the end of February this year. On March 30 this year, Tuhu once again submitted a prospectus on the Hong Kong Stock Exchange.
The reporter checked the prospectus and found that the scale expansion of Tuhu car maintenance mainly depends on joining - among the nearly 5,000 Tuhu factory stores in the country, franchised stores account for 96.9%, and self-operated stores account for less than 4%.
"Tuhu's franchise model can achieve rapid growth in revenue scale and rapid improvement of performance at low cost, but the stable and controllable development of this franchise model requires a strong supply chain, management system and supervision system as support, rather than just brand authorization and product supply, otherwise the rapidly developing franchise model is prone to quality and service loss problems and eat away at its own brand, which is very detrimental to sustainable development." Bai Wenxi, chief economist of IPG China, said in an interview with China City Daily.
Bai Wenxi said that this is also the most urgent problem that needs to be solved after Tuhu Vehicle Maintenance achieves listing with scale and performance.
The cumulative loss in four years was 15.3 billion yuan
According to data disclosed by the Ministry of Public Security, the number of motor vehicles in mainland China reached 417 million by the end of 2022, compared with only 240 million in 2012, an increase of 73% in ten years.
Compared with foreign mature automobile markets, the mainland automobile industry developed late, and in the past decade, as China has become the number one country in global automobile sales, the aftermarket has gradually become an important profit growth point for the automotive industry.
According to public information, Tuhu was established in 2011, and its main business is tires, maintenance, beauty, car products, batteries, etc. In 2014, the Tuhu Car App was launched; In 2016, Tuhu opened its first workshop store.
According to reports, based on the O2O model, Tuhu is the earliest online and offline integrated car service platform in China, providing customers with a "online appointment + offline installation" car maintenance method. As of March 31, 2023, Tuhu has more than 4,700 Tuhu factory stores and more than 19,000 partner stores nationwide, ranking first among all auto service providers in China.
There are many star capitals behind Tuhu car maintenance. According to the prospectus, the main business entity of Tuhu is Shanghai Wantu Information Technology Co., Ltd., which has obtained 16 rounds of financing since its establishment, with a total financing amount of more than 9 billion yuan. Investors include Tencent, Joy Capital, Sequoia China, etc., of which Tencent holds about 19.61% of the shares, making it the largest shareholder.
After November 2021, Tuhu did not raise any more financing. According to the latest data in the prospectus, Tuhu achieved profitability in the first half of this year, achieving a positive net profit of RMB59.5 million and a positive operating cash flow of RMB715 million for the six months ended June 30, 2023.
"Make car maintenance simpler" is Tuhu's slogan, but for the company itself, it is difficult to make a profit.
Screenshot of Tuhu's official website
For the past four years, Tuhu has been losing money. The reporter checked the prospectus and found that from 2019 to 2022, Tuhu Vehicle Maintenance lost 3.428 billion yuan, 3.928 billion yuan, 5.845 billion yuan and 2.138 billion yuan respectively, with a cumulative loss of more than 15.3 billion yuan.
In 2023, in the three months to March 31, Tuhu still lost 279 million yuan, but the loss has shrunk compared with the loss of 610 million yuan in the same period last year.
Continuous losses are the main reasons for Tuhu's previous IPO failures?
In this regard, Bai Wenxi, chief economist of IPG China, believes that the main reason why Tuhu did not pass the hearing before should have nothing to do with profit, because Hong Kong stocks are issued under the registration system and market-oriented, and the exchange does not pay attention to the profitability of the issuer, which should be caused by Tuhu's own "hard damage" in the equity structure and financial structure, or the registration materials submitted have parts that need to be supplemented and have never been supplemented in time.
The proportion of franchised stores is as high as 96.9%
After "80", Chen Min is the founder and CEO of Tuhu Car Maintenance, and he mentioned in an interview with the media: "We will do cars between 80,000 and 400,000, and more high-end car 4S shops do it, and the owner is not poor in money."
At the same time, he said that Tuhu is more concerned about third- and fourth-tier cities, and even some small towns, where car updates are not so fast, and car owners are more concerned about the cost performance of maintenance.
According to reports, Tuhu has three different types of stores, including self-operated Tuhu factory stores, franchised Tuhu factory stores and third-party cooperative stores.
As of June 30, 2023, Tuhu Factory has a total of 161 self-operated stores and 4,968 franchised Tuhu Factory stores, and has 20,013 cooperative stores nationwide. However, according to the prospectus, these workshops are mainly located in first-tier cities, new first-tier cities and second-tier cities.
Tuhu said in its prospectus that joining Tuhu Factory is a strategic focus for the company, enabling it to expand efficiently through an asset-light model. The reporter noted that in the past four years, the proportion of franchised stores in Tuhu factory stores has continued to exceed 90%, and the proportion has continued to expand.
At the end of 2019, Tuhu had 1,423 Tuhu factory stores, of which 1,296 were franchised stores, accounting for 91.1%; Subsequently, from 2020 to the end of 2022, the proportion of franchised stores in Tuhu factory stores was 93.4%, 94.9% and 96.5%, respectively.
By the end of June 2023, Tuhu Factory expanded to 5,129 stores, of which 4,968 were franchised stores, accounting for a further increase to 96.9%.
It is undeniable that franchised stores and cooperative stores also contributed higher revenue and gross margin.
According to the data, revenue from franchised Tuhu Factory stores was RMB4.0 billion, RMB5.5 billion, RMB8.1 billion, RMB8.8 billion and RMB2.6 billion respectively for the end of 2019, 2020, 2021 and 2022 and the three months ended 31 March 2023, accounting for 55.9%, 62.7%, 69.3%, 75.8% and 80.7% of the total revenue for the same period, respectively.
At the same time, compared with self-operated Tuhu factory stores and cooperative stores, the gross profit margin of joining Tuhu factory stores is also the highest.
According to the prospectus, the gross profit margin of joining Tuhu Factory stores in 2019, 2020, 2021 and 2022 and the three months ended March 31, 2023 was 11%, 15.9%, 18.6%, 22.4% and 26%, respectively. During the same period, the gross profit margins of self-operated Tuhu factory stores were -9%, 0.9%, -3.8%, -3.3% and 5.5%, respectively.
However, similar to many brands that vigorously promote the "franchise" model, although franchise stores can allow companies to expand rapidly in a short period of time, the lack of relevant supervision often brings a "crisis of trust" to brands. For example, in 2018, Tuhu fell into the "fake engine oil" storm, and a large number of car owners took to the streets to pull banners to defend their rights.
Yan Jinghui, an expert from the China Automobile Dealers Association, told China City Daily that not only Tuhu Cars, but other third-party after-sales service platforms that adopt similar operating models have different degrees of lack of supervision. This is also a pain point and difficulty in inhibiting the development of enterprises, and it is necessary to establish a regulatory system and operation mechanism. In addition, service platforms also need to consider how to expand sales to make franchisees profitable.
"Now in the automotive industry, car sales and after-sales service are reversed, selling cars to make a profit or lose money, but relying on after-sales service to make money." This is prone to over-maintenance. Yan Jinghui said, "Because consumers are not clear about the specific problems of vehicles, maintenance masters and franchised stores are likely to over-repair in order to pursue profits, driven by interests, and replace those that should not be replaced for replacement." ”
For third-party platforms such as Tuhu Cars, he suggested strengthening supervision, on the one hand, in the supply of raw materials such as spare parts, channels must be regulated; On the other hand, it is necessary to increase manpower and institutional measures such as rewards and punishments to avoid excessive maintenance.
The car market set off a "three-country killing"
According to a report by China Insights Consulting, China has ranked first in global new car sales for more than 10 consecutive years. China's passenger car ownership is expected to continue its growth momentum and reach a further 373.8 million units by 2027.
China's automotive services market is huge and has the potential for further growth. In 2022, the size of China's auto service market has reached 1.2 trillion yuan, and it is expected to grow at a compound annual growth rate of 9.0% from 2023 to 2027, reaching 1.9 trillion yuan in 2027.
"With the rapid increase in car ownership and the formation of automobile culture, the automotive after-sales maintenance and repair service market is an expanding sustainable growth market, which is also an important reason why Tmall, JD.com and new forces in car manufacturing have entered the car maintenance market." Bai Wenxi analyzed that if Tuhu can take advantage of the scale advantage that has been formed, and take the listing as an opportunity to continuously strengthen and increase this first-mover advantage, it is still worth looking forward to in the future competition of the car maintenance track.
Nowadays, with the blessing of Internet leading enterprises, the automotive aftermarket has formed a "three countries killing" pattern.
In 2017, JD.com announced its entry into the automotive after-sales service market; In October 2018, Tmall Car Raising announced its entry into car maintenance; Tencent is the largest shareholder of Tuhu.
The reporter noted that during this year's "618", Tuhu Car Maintenance, Tmall Car Maintenance and Jingdong Car Maintenance have started price wars.
On May 31, Tuhu Car Raising published a number of articles on its WeChat public account to promote the "618 National Car Maintenance Season" activity, launching preferential activities such as "5% off brand tires", "hot sale article 2 half price" and "tire buy three get one free".
Tmall car maintenance and Jingdong car maintenance are not far behind. The former takes "one yuan to grab carbon deposition detection" as the attraction point, and launches the 618 clear maintenance activity, the main thing is to check the carbon deposits first, check whether the carbon deposits need to be treated, and then maintain them after treatment; The latter shouted slogans such as "save more than 30% on car maintenance" and "double compensation for expensive purchases", and also launched a tire buy one get one free campaign for Beijing.
"Compared with Tuhu car maintenance, Tmall car maintenance and JD car maintenance are currently small. Tuhu is better in terms of brand and operation. Yan Jinghui further said that in terms of disadvantages, there is still a shortage of senior technicians in Tuhu Cars, because each brand's products have their own technical requirements and information requirements, which may not be repaired.
In addition, from the perspective of after-sales service channels and models, new forces tend to self-operated and authorized network models, and many new energy vehicle OEMs have self-built after-sales service systems. For third-party service platforms that mainly provide fuel vehicles, how to cut into the new energy vehicle market will be another challenge.
In this regard, Tuhu mentioned that it has established business cooperation with Leapmotor and Beiqi Extreme Fox to explore the establishment of a new energy vehicle service network.
"Overall, it's a profitable prospect." Yan Jinghui believes that the new energy vehicle service platform belongs to the growth stage in terms of products and supply chain, and is in a period of change in marketing services, the key lies in how to adapt to consumer needs and market changes.
■ China City Daily reporter Zhu Lina Zhang A-chan