On April 29, CaoCao Inc. (hereinafter referred to as "Cao Cao Travel") submitted a prospectus to the Hong Kong Stock Exchange. Huatai International, ABCI and GF Capital (Hong Kong) are the joint sponsors.
According to the prospectus, the travel service with online car-hailing as the core is the main source of income for Cao Cao Travel, accounting for more than 96% of the revenue in the past three years. In conjunction with ride-hailing services, Cao Cao also provides vehicle leasing services to capacity partners, as well as selling vehicles to capacity partners, independent fleet operators and individual drivers.
In 2015, Cao Cao was incubated from Geely Holding Group. At that time, the online car-hailing market was flourishing, and industry players used the method of "horse racing" to promote the rapid growth of the market scale, and online car-hailing travel was also successfully integrated into the daily life of the public. According to CNNIC data, the number of online ride-hailing users in China has grown from 10 million to 528 million in the past decade.
In recent years, the ride-hailing industry has gradually entered a mature period from the explosive period. On the one hand, the growth of the scale of online car-hailing users has returned to a stable period, and on the other hand, the policies of the online car-hailing industry continue to drive the standardized development of enterprises and improve service levels. At this point, how to escape from homogeneous competition and run a business model that satisfies both investors and consumers has become a new problem for online car-hailing giants.
In this context, Cao Cao handed over a beautiful report card. In the past three years, the steady growth of performance has become the biggest business highlight of Cao Cao Travel. From 2021 to 2023, Cao Cao's travel revenue increased from 7.2 billion yuan to 10.7 billion yuan, and the gross profit margin improved significantly to 5.8%. According to Frost & Sullivan, Cao Cao ranked among the top three ride-hailing platforms in China from 2021 to 2023 in terms of total platform transaction value (GTV).
In the prospectus, Cao Cao Mobility elaborated on the differentiated competition model behind the steady growth of data: in 2021, Cao Cao Mobility began to focus on customized car and car service solutions, and the following year began to deploy customized cars to provide private car services. This business model not only provides users with a consistent high-quality and differentiated ride experience, but also enables the company to achieve remarkable results in optimizing vehicle operation efficiency and assisting drivers to improve efficiency.
Looking ahead, the prospectus mentions that Cao Cao will achieve sustainable and efficient GTV (total transaction value) growth by increasing the number of completed orders and maintaining a stable AOV (average order price). At the same time, the efficiency of customer acquisition will be improved, and the percentage of total user acquisition cost in GTV will continue to decrease.
Leading the industry breakthrough with customized car services
Since 2020, in order to solve the dilemma of market share growth, the travel boundaries of online car-hailing platforms have been expanding. After many explorations, customized online hailing stations have become a key strategy for platform companies to widen the gap with competitors.
Compared with traditional online car-hailing services, the biggest change brought by customized online car-hailing is that it can get rid of the dilemma of low-price competition and provide users with high-quality and individualized travel services, which often determine users' satisfaction and loyalty to travel brands.
It is in this process that Cao Cao has seized the market opportunity due to a series of unique advantages and has become the leader of customized car services. According to Frost & Sullivan, as of 2023, Cao Cao has a fleet of about 31,000 custom-built vehicles in 24 cities, the largest fleet of its kind.
On the one hand, with the help of Geely, Cao Cao has achieved a breakthrough in car manufacturing capabilities, and thanks to Geely's car-making heritage, Cao Cao's customized cars have obvious advantages in terms of cost, procurement and supply chain;
Previously, Gong Xin, CEO of Cao Cao Travel, mentioned in an interview with the media that Cao Cao Travel is not necessarily the fastest taxi and the most subsidized, but it must be the best service experience, and we want to become the travel brand with the best service reputation.
According to an independent third-party survey conducted in March 2024 that included thousands of rideshare users across the country, Cao Cao was named "the best service reputation" among China's leading ride-sharing platforms, ranking far ahead in terms of user recognition.
When exploring the service advantages of customized cars, customized cars also brought a number of positive feedback to Cao Cao Travel in terms of operating data.
Compared to other vehicles, Cao Cao's customized vehicle TCO (vehicle ownership and use cost) is significantly lower, which can ensure high cost-effectiveness. Cao Cao's first-generation custom car, the Maple Leaf 80V, and the second-generation custom car, the Cao Cao 60, are considered to be the most cost-effective models among shared mobility services. According to Frost & Sullivan, the estimated TCO of the Maple Leaf 80V and Cao Cao 60 are RMB0.53 and RMB0.47 per km, respectively, which is 32% to 40% lower than that of other BEVs with battery swapping function (typically comparable).
In addition, Cao Cao is actively embracing artificial intelligence technology to improve operational efficiency, and the AI-powered Cao Cao brain plays a pivotal role. Put simply, Cao Cao's trading engine predicts future travel demand, optimizes dispatch, and balances travel capacity. This strategic management reduces idle mileage and reduces the average waiting time for both users and drivers. Group A/B comparative testing estimated that in the first year of Cao Cao's brain's operation, the implemented algorithm improvements increased Cao Cao's total GTV by 14.9%.
The growth curve moves towards the profit channel
In 2023, Cao Cao's performance curve will begin to extend to the path of sustainable profitability.
In terms of customer acquisition efficiency, due to factors such as the strong brand awareness of customized cars among users and the further improvement of marketing efficiency by Cao Cao's brain, the total customer acquisition cost of Cao Cao Travel as a percentage of GTV has been declining year by year, from 23.6% in 2021 to 18.1% in 2023. According to the prospectus, total user acquisition costs as a percentage of GTV are expected to continue to decline for the foreseeable future.
In terms of improving unit economics, vehicle TCO is the largest cost component that affects driver revenue and mobility service provider profitability in the shared mobility value chain. Compared with a typical pure electric vehicle with a battery swap function, the TCO of Cao Cao's customized car is reduced by 32% to 40%. Since the second half of 2023, Cao Cao has also started selling the latest customized cars to third parties.
In addition, the huge growth space of China's shared mobility market is also expected to drive further growth in the revenue of Cao Cao and even the ride-hailing industry. The prospectus predicts that from 2024 to 2028, considering the rapid growth of the consumer service industry and the trend of continuous consumption upgrading, the penetration rate of shared travel in the travel industry will increase significantly from 3.8% in 2023 to 7.3% in 2028, and the scale of the shared travel market will also accelerate to 751.3 billion yuan in 2028, with a compound growth rate of 20.6% from 2024.
Driven by multiple factors, from 2021 to 2023, Cao Cao's revenue increased from 7.2 billion yuan to 10.7 billion yuan, and the gross profit margin improved to 5.8%. In the fourth quarter of 2023, Cao Cao achieved an adjusted EBITDA margin of 5.0%.
After experiencing the ups and downs of the industry, Cao Cao has formulated six strategic initiatives to continuously improve its position in the industry and achieve excellent business growth. Based on these strategies, Cao Cao's future plans include upgrading and launching a range of customized vehicles, improving service solutions and service quality, expanding geographic coverage, and upgrading technology and investing in autonomous driving.