On April 29, after Cao Cao officially submitted the prospectus, three online car-hailing platforms were crowded on the road to the IPO of Hong Kong stocks. Previously, Dida Travel and Ruqi Travel submitted their statements to the Hong Kong Stock Exchange in March.
As the third largest online car-hailing platform in China, Cao Cao has the largest fleet in China. As a representative of the asset-heavy online car-hailing model, from 2021 to 2023, Cao Cao Travel will lose 3.007 billion yuan, 2.007 billion yuan, and 1.981 billion yuan respectively, with gross profit margins of -24.4%, -4.4%, and 5.8% respectively. Although the gross profit margin will turn positive in 2023, the cumulative loss in three years will be close to 7 billion yuan.
Cao Cao's impact on the IPO this time, and put the line battle of the online car-hailing industry in front of him, is the asset-heavy B to C model can have the last laugh, or is the C to C platform more suitable for the domestic market?
Can Cao Cao, who is moving forward with a "weight", successfully drive to the capital market?
The larger the convoy, the greater the burden
Gong Xin, CEO of Cao Cao Travel, raised a question of "whether the online car-hailing platform should be bigger and then stronger, or stronger and then bigger" in an interview with "One Traveler".
To put it simply, the online car-hailing platform uses subsidies to seize the market, and then makes profits through scale, which belongs to becoming bigger and stronger first; Seeking growth by improving user experience is a matter of becoming stronger first and then bigger.
According to Cao Cao's B to C model of "new energy vehicles + public buses + certified drivers", it should take the route of "becoming stronger first and then bigger".
As of the end of last year, Cao Cao operated a fleet of about 31,000 custom-built vehicles in 24 cities across China.
Only from the perspective of the ability to control the team, the asset-heavy model is indeed more controllable. In the ranking of the compliance rate of online car-hailing platforms released by the Ministry of Transport, the compliance rate of heavy asset platforms such as Ruqi Travel and Cao Cao Travel with their own fleets generally remains around 90%.
For example, in the three years from 2021 to 2023, Cao Cao's travel sales costs will be 8.899 billion yuan, 7.970 billion yuan, and 10.052 billion yuan respectively.
Cao Cao's cost of sales includes driver income and subsidies, depreciation expenses, service costs, and commissions paid to capacity partners. Looking at the driver's salary alone, Cao Cao has paid more than 30 billion yuan in service remuneration to more than 3 million drivers since its establishment.
Even after the adjusted reduction in 2023, Cao Cao's driver income and subsidies still account for 80% of the travel service revenue, and the travel service revenue accounts for 96% of the overall income.
In fact, compared with other B-to-C online car-hailing platforms, Cao Caoxing, which is backed by Geely, has established a certain cost advantage. The two customized cars operated by Cao Cao, the Maple Leaf 80V and the Cao Cao 60, are both manufactured by Geely Group, and Geely Group's battery swap stations and Geely-authorized auto repair shops will also provide support for Cao Cao.
The gross profit margin in 2023 will turn from negative to positive, which Cao Cao said is due to the increase in orders and the successful optimization of TCO, which is the cost of owning and using vehicles, which includes the purchase or lease cost of vehicles, energy supply costs, etc., which can clearly see the role of Geely's technical strength and supply chain capabilities.
According to the prospectus, the estimated TCO of Maple Leaf 80V and Cao Cao 60 is 0.53 yuan and 0.47 yuan per kilometer respectively, which is 32% to 40% lower than that of other models in the industry.
In addition, Cao Cao's AOV (customer unit value) in 2023 increased by 17.67% year-on-year, thus achieving a positive gross profit margin.
However, in the long run, the asset-heavy model still brings Cao Cao a lot of cash flow pressure.
From 2021 to 2023, Cao Cao's year-end cash and cash equivalents were 417 million yuan, 379 million yuan, and 582 million yuan, respectively, and most of the net cash was generated through financing activities, and Cao Cao Travel raised a total of about 5 billion yuan in the past three years.
In terms of liabilities, Cao Cao's travel prospectus shows that from 2021 to 2023, the short-term part of the company's short-term debt and long-term debt will be 2.4 billion yuan, 3.5 billion yuan, and 5.2 billion yuan, respectively, and the long-term part of long-term debt will be 1.4 billion yuan, 2.1 billion yuan, and 2.4 billion yuan respectively.
Tight cash flow and high debt are almost common problems with the B-to-C model.
From 2017 to 2019, the total assets of Shouqi Ride-hailing, which is also a heavy asset, were 444 million yuan, 463 million yuan, and 346 million yuan, respectively, but the total liabilities reached 3.083 billion yuan, 6.231 billion yuan, and 9.098 billion yuan.
According to its prospectus, from 2020 to the end of June 2023, the asset-liability ratios of Ruqi Travel were 18.08%, 180.51%, 197.67%, and 242.87% respectively.
Shouyue Automobile and Shenzhou Limousine have subsequently adopted the combination of "C to C" and "B to C" modes.
For asset-heavy ride-hailing platforms, the profit path is to dilute the average cost per unit through scale.
Not only to be stronger, but also bigger, Cao Cao's gross profit margin will turn positive in 2023, largely from the year-on-year increase of 448 million orders.
This involves another problem, the industry has entered the stock competition, and the capacity is close to saturation.
Stock competition is accelerating
In the past two years, relevant departments in many places have issued early warnings for online car-hailing capacity.
As early as April 6, 2023, the relevant departments of Jinan City issued an early warning on the saturation of online car-hailing capacity, reminding practitioners to be cautious when entering the industry.
In early May 2023, the Suining Municipal Transportation Bureau issued a similar warning. On June 19, 2023, within one day, Changsha City and Shenzhen issued early warnings. Subsequently, Sanya, Chongqing, Wenzhou, Shanghai and other cities also joined the ranks of early warnings.
According to data from the Ministry of Transport, as of December 2023, the number of registered online ride-hailing drivers in China reached 6.572 million, exceeding 6.5 million for the first time, and 1.482 million new drivers for the whole of 2023.
For consumers, there is a more intuitive embodiment, and the probability of online car-hailing hitting "stinky cars" is getting higher and higher.
This is because under the saturation of transportation capacity, online car-hailing platforms have launched special forms such as fixed prices to reduce unit price competition, coupled with the decrease in the per capita order volume of online car-hailing drivers, and the income of online car-hailing drivers has plummeted.
According to data from the Guangzhou Municipal Transportation Bureau, from January to April 2023, the average daily revenue of online car-hailing bicycles in Guangzhou fell from 438.8 yuan to 323.24 yuan for consecutive months.
Drivers can only work longer hours to cover costs such as renting a car and charging and refueling, so the longer the driver spends in the car, the smellier the car becomes.
However, according to the city division, the saturation of online car-hailing capacity is mainly concentrated in second-tier cities and above, and first- and second-tier cities are already the base camps of online car-hailing platforms, and the competition is more intense.
According to data from the Ministry of Transport, by the end of 2022, the penetration rate of ride-hailing in first-tier cities reached 50.3%, but the penetration rate in second-tier cities and below was less than 10%.
Therefore, many online car-hailing platforms focus on the development of third- and fourth-tier cities and the development of sinking markets.
For Cao Cao, if he wants to enter lower-tier cities, he needs to recruit a fleet. The soldiers and horses have not moved, and the grain and grass go first, which may further increase the pressure on cash flow.
For a long time, due to the high unit price, Cao Cao's base camp is in the second-tier cities and above.
According to the prospectus, as of December 31, 2023, among the 51 cities in Cao Cao's travel layout, they are mainly concentrated in first-tier and second-tier cities, and the GTV in the top ten cities will account for 63.4%, 62.3% and 68.5% of the total GTV in 2021, 2022 and 2023, respectively.
Cao Cao himself also mentioned that if he wants to enter the sinking market, he may reduce the unit price of customers. From this point of view, the gains may outweigh the losses.
However, the saturation of stock competition capacity may be further exacerbated, especially with the rise of aggregation platforms in recent years.
According to Sullivan, in recent years, the total domestic online ride-hailing orders have increased from 3.5% in 2018 to 30% in 2023.
Cao Cao's order volume will increase in 2023, partly because of the rise of aggregation platforms, which has increased traffic entrances.
According to the prospectus, the proportion of transactions from aggregator platforms increased from 43.8% in 2021 to 49.9% in 2022, and further surged to 73.2% in 2023.
Cao Cao's sharp increase in orders in 2023 is due to increased cooperation with aggregation platforms.
Compared to customer acquisition through marketing and subsidies, aggregators are more cost-effective. In 2023, Cao Cao's customer acquisition cost will account for 18.1% of GTV, up from 22.2% in 2022.
Of course, the rise of aggregation platforms is not only beneficial to Cao Cao's travel, but also opens a window for many small and medium-sized online car-hailing platforms, such as Chongqing's Zhaozhao Travel.
In October 2019, he obtained the first Chongqing online taxi business license to recruit travel, and in 2022, he successfully entered the online car-hailing operation in 69 cities across the country.
The success story of Huaxiaozhu also proves that the aggregation platform can quickly achieve scale in third- and fourth-tier cities through cooperation with local small and medium-sized online car-hailing platforms.
The rise of local ride-hailing platforms in third- and fourth-tier cities has made it difficult to move from the first and second tiers to the third and fourth tiers.
In fact, the competitive situation of domestic online car-hailing platforms has remained unchanged for many years, and it is difficult for any platform to expand its scale.
In this way, the best way to alleviate the financial pressure is to increase the financing channel - listing.
Is going public the way out?
Among the online ride-hailing platforms that have recently submitted their forms, Ruqi Mobility, which is backed by GAC and Tencent, submitted a prospectus for the first time on August 18, 2023, but failed to be listed, and submitted a prospectus on the Hong Kong Stock Exchange again in March this year.
Tick Travel, which is mainly engaged in hitchhiking business, is a "five-break" Hong Kong Stock Exchange, and has finally passed the filing of the Securities Regulatory Commission recently.
The reason for this is related to the questionable profitability of ride-hailing platforms.
The total loss of Ruqi Travel from 2020 to 2022 exceeded 1.6 billion yuan, and the total net profit attributable to the parent company from 2020 to 2022 was -650 million yuan.
Behind the perennial losses is the normalization of subsidies for online ride-hailing platforms.
The ride-hailing industry has maintained a pattern of one super and many strong for many years, and subsidies are still one of the main means to compete for the market. For example, T3 Travel recently announced that it will issue more than 250 million yuan of driver subsidies from April 29, and will also launch "commission-free awards" and "single awards" to reward drivers who complete online orders
Whoever has a high subsidy will use whomever has no loyalty. In fact, the main way for aggregators to seize the market is also through subsidies.
When AutoNavi Map launched the taxi function, it launched a 50 yuan package coupon with a price of 4.99 yuan and a 150 yuan package coupon that can be received for free with the help of friends.
Therefore, the profit story after scale does not make sense.
Online car-hailing platforms have not been without their efforts, and giants have launched models such as ride-sharing to broaden the market, or carpooling, to increase the unit price of a single trip, but it is difficult to expand the market due to difficult supervision and other problems.
Among the funds used in Cao Cao's IPO, such as customizing models, upgrading the company's technology, and investing in autonomous driving, it may be more practical to repay certain bank loans and interest and maintain the company's operations.
After maintaining the pattern of one super and many strong for many years, there are indeed not many stories to be told by online car-hailing.