Chinese automobile trading companies are undoubtedly the centre of attention for both public and private investors this year as they pour billions of dollars into the sector.
The investment frenzy is proven once again on Wednesday with another fundraising from Huasheng Haoche, an auto trading and financing startup.
The three-year-old company said it raised $210 million in its series B round of financing led by private equity firm Crescent Point Group. Goldman Sachs also invested alongside existing investors JD Finance and Frees Fund.
Wednesday’s fundraising extended the long list of deals already completed over the last 12 months as investors made big bets into the growing automobile sales and financing market in the world’s most populous country.
Chehaoduo, the company behind China’s third-biggest auto trading portal Guazi, was the latest to tap private capital after raising $162 million from the likes of Digital Sky Technologies and Tiantu Capital in mid-October.
It was its second fundraising round in less than a year after raising $818 million from a group of prominent investors including Tencent, Singapore’s GIC Private, IDG Capital, and Yunfeng Capital in March.
Souche, a Hangzhou-headquartered second-hand car trading app, raised $578 million in a deal led by Primavera Capital and Morningside Venture Capital in September. That was just 10 months after its previous round of funding in November that raised $335 million from Alibaba, Warburg Pincus, and Primavera, among others.
Chinese auto-trading apps also shined in the public market over the past 12 months, with Bitauto’s unit Yixin raising $867 million from a Hong Kong initial public offering in November last year and Uxin bagging $225 million after completing its US listing in June.
BOOSTING PHYSICAL PRESENCE
Wednesday’s fundraising was a major achievement for Huasheng Haoche as it secured a large sum of capital in order to catch up with the other players. That said, its business model is slightly different from its peer group as it focuses largely on proving financing for car buyers.
While having the most parts of its financing business online, Huasheng Haoche said it will use the proceeds to expand its network of physical stores, mostly in third and fourth tier cities. The startup has over 400 physical stores across 300 Chinese cities and aims to push the store count to 500 by the end of this year.
All these physical stores allow buyers to pick up their cars after placing their purchasing orders online. This allows better logistics management and aligns with to so-called “new retail” concept of using technology to facilitate sales and logistics in the real world.
Huasheng Haoche raised Rmb30 million ($4.3 million) in its angel round financing from Frees Fund in 2015, and JD Finance became its Series A investor with over Rmb10 million investment in November 2016.
JD Finance, the fintech affiliate of JD.com, was already one of the investors in Yixin. The Hong Kong-listed company runs the Yixin Chedai app, which is one of Huasheng Haoche’s major competitor in the auto financing market.
However, the e-commerce giant could potentially tap into customers in smaller cities since Huasheng Haoche’s physical stores are mostly in third- and fourth-tier cities. With the new partnership, these stores can also serve car buyers with JD Finance.
Interestingly, JD’s car financing platform stopped directing users to Yixin, which has a weaker physical presence. That could suggest the tech giant is shifting its focus in the hopes that it could better channel its online sales through Huasheng Haoche’s physical stores.