Financials, Automotive, Healthcare Author:Feng An May 17, 2019 12:35 PM (GMT+8)

In terms of profitability, Used-car market is still in the state of large losses, and the self-established logistics will bring considerable costs to enterprises.

Guazi Offline Store. PHOTO Credit: Guazi

Chehaoduo logistics technology (Tianjin) co., LTD., wholly owned by Guazi used car parent company Chehaoduo, was established on May 9. The company has a registered capital of 50 million yuan, the scope of business involves logistics software development, road freight transport and domestic freight agents, etc.

Logistics Competition Still Depends on Capital

In terms of profitability, Used-car market is still in the state of large losses, and the self-established logistics will bring considerable costs to enterprises. Uxin went public in June 2018 with a net capital raised of 1.361 billion yuan. The company lost 1.696 billion yuan in 2017 and 1.671 billion yuan in2018, said Uxin's earnings report.

One of the top three in the industry called "Renrenche", also repeatedly spread due to lack of capital chain and large-scale layoffs. It is obvious that enterprises in used-car industry still have no good breakthrough in making profits.

Second-hand cars are not high-frequency consumer products, and self-established logistics is bound to face the test of scale effect. Besides, the capital market in the current stage is volatile, so whether self-established logistics is a wise choice still needs to be verified. In addition to regular shipping costs, weather and other fluctuations can also affect shipping costs, which will undoubtedly increase the buyer's purchase budget.

Blue whale finance reported on March 6th, the used-car industry has raised more than 50 billion yuan in financing as of October 2018. Uxin Group, raised US$ 400m from its inception to its IPO, taking in US$ 1.36 billion. Renrenche has raised a total of US$ 760 million. By this estimate, the Chehaoduo Group alone accounted for 45%.

Guazi has completed seven rounds of financing in just over four years, totalling more than US$ 3.3 billion. If average to every day, by the end of the last round of financing, it is equivalent to about 19 million yuan per day, and each round is above 100 million yuan. Investors include Softbank, Sequoia Capital, Capital Today (今日资本), H Capital, DST and other famous venture capital institutions, Tencent, as well as traditional investors such as China Merchants Bank, BOCGI, ICBC international, Shougang Fund, etc.

"National Purchase" is the Trend in Second-hand Vehicle Industry

Guazi launched the "National Purchase" service for the standard and barrier-free circulation of second-hand cars in March. "National Purchase" is Guazi focus layout of the new business, adhere to the direct sale model. The purpose is to realize the cross-regional sales of individual cars, break the regional price barriers of second-hand cars and promote the circulation of second-hand cars nationwide.

This service is the first new business focused on by Chehaoduo after it secured US$1.5 billion in series D financing. On February 28, 2019, the parent company of Guazi used-car and Maodou new car network officially announced that it has completed series D financing of US$ 1.5 billion, funded by SoftBank Vision Fund. Chehaoduo Group is valued at more than US$ 9 billion after the financing.

The "National Purchase" service has brought two new increments of new retail and logistics to Guazi -- with the help of hundreds of strictly selected direct sales stores nationwide, Guazi second-hand car platform has built an efficient and intelligent logistics network to guarantee the on-time delivery of purchased vehicles nationwide.

The sub-platform "Maodou" aims at the new car market, purchases new cars directly from OEMs, and realizes fast delivery through offline self-built warehousing and third-party logistics. Therefore, the establishment of a new logistics company and its "to build a better national logistics network" goal is consistent.

Logistics has Become an Important Choice

In fact, self-built logistics in the used car market has long been the "tacit agreement" between enterprises. As a non-standardized mass commodity, second-hand cars are often restricted by regional consumption differences, logistics and other problems, resulting in serious differences in supply and demand and price across the country.

Due to geographical limitation, the round trip transaction also causes massive logistics cost loss. If enterprises have their own logistics and transportation processes under control, the waste of inventory turnover will not exist, and the service experience will be improved.

Uxin, another leading company in the used-car market announced its entry into the logistics market in 2017, adopting the same self-established investment model, with the goal of direct purchase nationwide.

The company started to set up a special logistics business division and built its own warehouse as early as 2012. With the gradual development of the market, Uxin began to take "backbone line + central warehouse, liaison line + transit warehouse" and the logistics layout of the last kilometre as the core to expand the logistics system combining point and line and multi-dimensional distribution.

Uxin already has more than 3,000 logistics routes and more than 300 supply cities by early 2019. The company expects to further improve the logistics infrastructure and penetrate the logistics delivery network of county-level administrative regions in the future. Therefore, for Guazi, whether due to competition or business needs, logistics is an important choice at this stage.