One of those is Shanghai Lantu Information Technology Holding, or Tuhu, and it's got some notable backers in Goldman Sachs, Carlyle Group, Sequoia Capital, as well as internet giant Tencent Holdings. Valued at $4 billion, the company is already a major distributor of auto parts and China's biggest internet-based car maintenance service provider, according to founder Chen Min.
Chen says Tuhu is bringing a new approach to car repair in China through its 2,400 franchises and 13,000 partner shops. Unlike many of the individual or family-run auto-repair stores in the country, Tuhu centers share similar designs and layouts, bear the company's red and white logo, and employees wear a uniform. This universal standard is important to Chen, 39, who likens it to what customers have come to expect from somewhere like Starbucks Corp.
"When customers maintain their cars, we hope it's as simple as going to Starbucks for a cup of coffee: no matter what type -- big cup, medium cup, small cup -- they get what they ask for and don't need to worry about the cost," he said in a Jan. 20 interview. "We must offer very affordable prices."
For routine maintenance of a Dodge 2.7-liter sport utility vehicle, Tuhu charges 426 yuan ($66), according to its website, more than 20% cheaper than the same service offered at a Dodge dealership.
Vehicle ownership in China more than tripled over the past decade to 281 million units at the end of 2020, according to government data, putting it on track to overtake the U.S. as the world's biggest auto market this year in terms of car ownership. That also means the average age of vehicles in use is increasing. Deloitte & Touche forecasts that China's auto-maintenance market revenue, which includes spare parts sales, will rise to 1.7 trillion yuan a year by 2025, almost double the figure in 2015.
Competition is heating up as companies with deep-pocketed backers enter the fragmented market and overpower the smaller, inefficient independent players. With that, China is becoming more like Western countries where well-known after-market operators such as Autozone, O'Reilly Automotive or Halfords Group in the U.K. have large networks and recognizable brands.
As vehicles get older, there is "rising demand for the type of standardized maintenance services offered by companies like Tuhu both online and offline," China Passenger Car Association Secretary General Cui Dongshu said in a phone interview. "Other companies such as JD.com that want to grasp this business opportunity are also getting into the game."
Another is New Carzone, whose backers include Alibaba Group Holding Ltd., Goldman Sachs and Warburg Pincus, which says it is "well-positioned to expand its nationwide network and empower independent auto after-market service providers in China."
Tuhu has an online platform and database that can be used to find spare parts, make orders and book appointments for repairs. A real-time inventory tracker of some 100,000 components at about 500 warehouses helps control the management of stock and lets customers figure out whether, where and when they can get new components, according to Chen.
"There is a huge market for car services in China and that is why I founded this company," said Chen, who worked for Microsoft Corp.'s China software venture and HP Inc. before creating Tuhu in 2011. "A lot of my colleagues started their career as programmers. We believe digitalization and the internet can bring changes to various industries and society."
Tuhu's revenue this year should increase at least 50% from the 10 billion yuan recorded last year, according to Chen, and the company plans to add as many as 1,400 franchise stores. Discussions are also being held about a possible initial public offering, he said, without providing details.
Published : February 07, 2021
By : Syndication Washington Post, Bloomberg