Tihu Car IPO in Hong Kong: there are worries under high growth, 9 years of 16 rounds of financing strong support 10 billion losses
The hot words of iPO capital market in 2021, “car” must be one of them.Although the domestic automobile industry has gradually shifted from incremental market to stock market, different from the noisy car manufacturing market, automotive aftermarket service has received little attention.However, TUHU Car Inc. ‘s recent listing in Hong Kong has stirred up controversy over whether TUHU is a pioneer in the automotive maintenance industry or a “capital tool waiting to sell its holdings after listing.”For Tuhu Automobile, the low gross margin of revenue pillar, the accumulated loss of nearly 12 billion yuan in the past three years, and uneven service quality may be the development problem that needs to be solved urgently.For most car owners, even if they have not used the service of Tuhu car, they must have seen its red stores full of visual impact on the roadside.Up to now, Tuhu has more than 3,300 Tuhu factory stores and more than 33,000 cooperative stores across the country, covering most prefecture-level cities.The large number comes from Tihu’s definition of a partner store as “one that has completed at least one transaction with us during the three-month period prior to a specific date”.However, Tuhu car may not be intended for these stores on the operation.Perhaps Internet companies have a better story to tell. In its prospectus, Tuhu Describes itself as an online and offline integrated automobile service platform that provides one-stop, all-digital, on-demand service experience and creates an automobile service ecosystem composed of car owners, suppliers, auto service stores and other participants.But only from the income structure, Tihu car more like an auto supplies dealers, or car maintenance and beauty chain.After all, during the reporting period, Tihu’s platform service revenues accounted for only 3.1%, 4.7% and 5.5% respectively.Tihu car maintenance income detailsThe “big part” of Tihu’s revenue comes from sales of automotive supplies and services, especially tires and chassis parts, which are RMB 3.839 billion in 2019, RMB 4.202 billion in 2020 and RMB 3.678 billion in the first nine months of 2021, accounting for 54.6%, 48% and 43.6% of the total revenue respectively.However, due to the nature of the tire distribution industry itself, and tihu’s reliance on low-priced tires to attract traffic, its gross margins in this segment were only 3.9%, 7.8% and 8.6% in the reporting period respectively.The gross profit (absolute amount) divided by business lines and the percentage of revenue accounted for by business lines Photo Source: Prospectus of Tihu Automobile Company This also caused Tihu Automobile Company to be stuck in the mire of loss in spite of the rapid growth of revenue.In 2019 and 2020, The operating revenue of Tihu Car Farming was 7.04 billion yuan and 8.753 billion yuan respectively, with year-on-year growth of 24.33%.From January to September of 2021, the revenue reached 8.442 billion yuan, with a year-on-year growth of 41.76%.However, during the same reporting period, its losses respectively reached 3.428 billion yuan, 3.928 billion yuan, 4.435 billion yuan, accumulated more than 10 billion yuan.The adjusted net loss reached 1.036 billion yuan, 971 million yuan and 902 million yuan respectively, even excluding the impact of changes in the fair value of convertible redeemable preferred shares caused by financing.Higher sales and marketing expenses also contributed to the loss.During the reporting period, Tihu Yangche’s sales and marketing expenses were RMB1.041 billion, RMB1.263 billion and RMB1.231 billion respectively, accounting for 14.7%, 14.4% and 14.5% of its revenue, respectively.In sales and marketing expenses, the expenses related to advertising and promotion were RMB 485 million, RMB 532 million and RMB 548 million respectively, mainly including the expenses related to obtaining network traffic and media advertising expenses.In addition to the traffic purchased to promote the business, the promotional money may be “used for other purposes”.On the Black Cat complaint platform, a franchisee complained about a dispute with Tuhu Car Raising, saying that under the operation of The PUBLIC relations department of Tuhu Car Raising, the videos exposed by the franchisee could not be put into Douyin (douyin’s paid promotion program).A franchisees and road tiger car ownership dispute process image: black cat complaints platform rapid expansion is the absence of management, 9 years 16 round of financing way tiger subsidy for their own development choice is a typical Internet game: through early high investment to attract traffic, expand market share and consolidate the industry status, improve voice, forming scale effect and improve profitability.It’s not hard to understand why Tihu would rather buy traffic at a loss, offer low prices and keep expanding its stores.By the end of 2019, the number of Tuhu factory stores was 1,423, and by the end of September 2021, it had increased to 3,369, while the number of cooperative stores also increased from 18,743 to 33,223.Such a large number of stores is a prerequisite for large-scale operation, but management problems also follow.Tuhu’s selling point, and one of the biggest differences with traditional auto repair shops, is the standardization of service.But the premise of standardization is enough management ability, Tihu car obviously does not have at present.As of February 9, a total of 670 complaints had been filed against Tihu cars on the black Cat complaint platform.From the most famous “Warta battery incident” “fake oil incident” and so on it is not difficult to see, even if has been emphasizing standardization, emphasizing genuine, Tihu car internal management still has a lot of confusion unknown place.In the discussion area about Tuhu, the general feedback of consumers is that the service level of tuhu’s self-owned stores is significantly better than that of ordinary cooperative stores.Investigate its essence, is tuhu car and cooperative store is not close enough, can not bring each other enough income, cooperation is difficult to maintain.If you want to achieve standardization of service and management, you have to take the store into your own hands.However, despite the high cost, if it develops in this direction, Tuhu will not be able to become a meituan in the automotive afterservice market, but will have to be transformed into a chain store.Even if it can remain a “platform company,” it will be hard to make money and investors won’t like it.Low-cost tires and “58 yuan synthetic maintenance” can not always sell, without the price advantage, it is hard to say whether consumers will buy it.Continuous loss of tihu car can support today, inseparable from the continuous blood transfusion of capital.From 2013 to 2021, Tihu Auto raised a total of 16 rounds of financing, with a total investment of 3.768 billion yuan and 827 million DOLLARS, including Tencent, Pleasure Capital, Sequoia Capital, etc.It is worth mentioning that Tencent Investment currently holds 19.41% of the company’s shares, surpassing founder Chen Min, who holds 11.76%, and is the largest shareholder of Tuhu.Beijing Tokyo Car hui and Tmall car raising intensified competition, the future of fuel vehicle maintenance industry is uncertain the domestic automotive aftermarket service category is highly dispersed.In 2020, there were about 30,000 authorized dealer stores and 684,000 IAM (independent aftermarket) stores in China.Both have their own advantages. Authorized dealer stores (including 4S stores) have higher trust, while IAM stores, namely independent auto repair and beauty shops, have lower prices.Although Tihu has formed a third form between the two, it still faces competition from jd.com and Tmall.The latter two user base and volume is bound to cause a lot of pressure to Tuhu car.In addition to competition, the uncertain market outlook for the industry also brings a hint of concern.According to the China Association of Automobile Manufacturers, a total of 26.2483 million cars were sold in China in 2021, of which 3.5072 million new energy vehicles accounted for 13.36 percent.In 2019 and 2020, the proportion was only 4.68 percent and 5.24 percent, respectively.Data source: China Automobile Association;In 2021, the trend is even more obvious. New energy vehicles accounted for 7.16% of new cars sold in January, and increased to 19.06% in December.It is conceivable that new energy vehicles will gradually replace traditional fuel vehicles in the future.At present, new energy vehicles are mainly electric vehicles, and electric vehicles do not have internal combustion engines and exhaust systems, it does not need to carry out traditional maintenance services (such as oil and filter replacement) and ignition related parts and components maintenance.At the same time, the repair and maintenance of new energy vehicles need more professional services, especially the maintenance of the battery system, which is not a big challenge for the current Tuhu car.This, coupled with the increasing use of assisted driving and intelligent sensing systems, may reduce the occurrence of vehicle accidents, resulting in reduced repair and maintenance needs.However, Tihu is not sitting still. It is reported that Tihu has reached cooperation with zero-run, Extremely Fox and other new energy vehicle companies to arrange supporting services for new energy vehicles.But in any case, for Tihu car and all automotive aftermarket practitioners, the quality of service and the trust of owners is the fundamental foothold.The reason for the fierce debate on Tuhu’s car maintenance services and products on the Internet is that the management level is deficient, which leads to uneven service quality and flaws in product circulation. If this situation cannot be reversed, the future development will inevitably have hidden worries.