China car trading platform Souche raises $576m
Primavera Capital Group and Morningside Venture Capital have led a $576 million round of funding for Souche, a Chinese online trading platform for new and used cars.
Other participants included Alibaba Group, Dreamfly Capital, Lingfeng Capital, Paladin Asset Management, ClearVue Partners, Russia-China Investment Fund, Sunshine Insurance Group, and CreditEase. Dreamfly and Lingfeng are private equity firms established within the last three years by former senior executives from Wanda Group and Goldman Sachs, respectively.
The investment comes 10 months after Souche closed a $335 million Series E led by Alibaba. Earlier this year, the company acquired industry peer Cheyipai, creating what it described as a group of four market leaders in the used car trading space. Of the others, Guazi has received substantial backing from Tencent Holdings, including a $818 million Series C in March; Renrenche closed a $300 million round in April, led by Goldman Sachs, Tencent and Didi Chuxing; and Uxin Group has listed in the US.
Founded in 2012, Souche operates a software-as-a-service (SaaS) system that is said to connect more than 60,000 new and used car dealers – it claims 90% market penetration of the country’s large and medium-sized players – and over 9,000 auto parts and maintenance service providers. The company expects its online trading volume to exceed RMB350 billion ($51.3 billion) in 2018, twice the previous year’s total. It received a commission on each transaction.
Souche says it is working with strategic investors like Alibaba to create an online-to-offline (O2O) ecosystem in the auto trading space. It has also branched into financial services – leasing, consumer loans, and supply chain finance – with automobile manufacturers, offline car dealers, and Ant Financial, Alibaba’s financial services affiliate. The business has nearly 4,000 outlets in 313 cities.
The company plans to use the new funding for investment in technology and the ongoing digitization of the industry, service upgrades, and strengthening its management team. It also announced the acquisitions of Iyunche, a logistics and supply chain specialist, and Breakthrough, a company that supplies enterprise resource planning software to the auto industry.
“The scale of China’s auto market is enormous and sales of new and used cars are growing rapidly. Through its SaaS-enabled digital distribution channels, Souche has empowered car dealers across multiple dimensions and helped establish a comprehensive automobile ecosystem. The competitive advantages are plain to see,” said Jing Zhang, a managing director at Primavera, in a statement.
Seven months prior to the Series E, Warburg Pincus led a $180 million Series D round for Souche in April 2017. This came less than five months after a $100 million Series C led by Ant Financial and car rental services provider Ucar. Previous investors in the company include Sequoia Capital China, Ferry Venture Capital, VMS Investment Group, Zuoyu Capital, and Haitong International.
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