Aging cars, slowing sales – time to focus on aftermarkets.
Chinese auto parts aftermarket company Casstime announced that it had raised USD 80 million in a Series C1 round of funding from Sequoia Capital, Source Code Capital and Hua Partners, despite the country’s gloomy car sales.
China experienced tremendous growth in car sales over the past decade, with a 10-year CAGR of 8.35% between 2009 and 2018. The world's largest auto market has been hurting since last June, and it saw a sales drop of 6.6% year-on-year in September.
When the selling of new cars loses momentum, investors are turning the focus on the aftermarket and tracking those startups improving overall efficiency and slashing costs for the industry.
There are currently 250 million vehicles in operation in China. Figures from the World Bank Group indicate the number of car ownership per 1,000 people in China was 173 in 2018, compared to 837 in the US. The average vehicle age in China is 4-5 years as compared to 11.8 years in the US. Both the number of vehicles in operation and the average vehicle age in China are expected to increase, which will further drive demand for aftermarket products and services.
China’s auto aftermarket is large and fragmented and, it remains to be developed to full digitalization. Several startups emerged in the landscape: AutocloudPro, Baturu and New Carzone.
Despite the US having years before adopted industry standards for spare parts – like PIES (Product Information Exchange Standard) and ACES (Aftermarket Catalog Exchange Standard), China does not have an industry-wide EPC (Electronic Part Catalogue).
Workshops in China must use different EPCs to look up the parts for different vehicle makes, and human error rates are high in the industry. Moreover, workshop employees need to learn for years to have the technical skills necessary to recognize the different makes of a vehicle that they may encounter.
Casstime offers an ERP (Enterprise Resource Planning) SaaS (Software-as-a-Service) system called Workshop #1 to automize the recognition processes and manage the data for workshops.
With its business model of ‘search engine + procurement platform’, Casstime streamlines the process of workshops buying auto parts. Its search engine reduces the error rate associated with the looking up of part numbers from 5% (when performed manually) down to 0.03%, the company says. The procurement platform matches demand from workshops and supply from auto parts suppliers or third-party suppliers.
The company claims it operates in over 300 cities across China and features over 1,000 specially selected suppliers. More than 60,000 workshops are now its loyal customers, accounting for more than one million vehicle visits every month, during which owners inquire about and purchase spare parts through the platform.
Aiming at providing both crash-relevant parts and wear-and-tear parts both on its platform, the company has a database with 400 million VINs (Vehicle Identification Numbers) and provides 30 million SKUs to date.