China auto retail player Huasheng Haoche raises $210m
Chinese auto retailer Huasheng Haoche has raised $210 million in a Series B round of funding led by Crescent Point Group, with participation from Goldman Sachs. JD Finance and Frees Fund, which backed the company’s seed and Series A rounds, also re-upped.
The fresh capital will be used to expand the company’s network of offline stores, improve operational efficiency, and develop new business opportunities, according to a statement.
“The company has combined online and offline operations perfectly. In addition, it insists on using a direct operating model for the offline stores and it has quickly established a presence in China’s third, fourth and fifth-tier cities, enabling it to stand out among its competitors,” said Lin Lin, a managing partner at Crescent Point.
While many of its peers have focused on building an online presence, Huasheng has prioritized brick-and-mortar operations since its inception three years ago. The company had over 400 directly operated stores across 350 cities as of the end of October, making it one of the largest auto retail players in China. It expects to surpass 500 stores by the end of this year. Transaction volume is said to have increased fourfold in the first half of 2018, compared to a year earlier.
Huasheng seeks to differentiate itself from most of the other PE-backed start-ups in the car trading space in two further ways. First, the company primarily sells used vehicles sourced directly from manufacturers rather than brokering used car sales. Second, it provides auto financing services, allowing customers to pay as little as 10% of the purchase price up front and commit to monthly payments starting from RMB1,000 ($144).
Through a partnership with JD Finance, a unit of JD.com, additional big data-based finance products, and risk management systems will be developed. The company also has access to JD.com’s more than 5,000 “village stations,” which act as an offline conduit for products and services that leverage online capabilities. This is expected to help drive growth of Huasheng’s offline operations.
Private equity interest in online car trading remains strong. In the past 12 months, Souche – which facilitates the sale of old and new cars – has raised $576 million, while second-hand specialists Guazi and Renrenche received $818 million and $300 million, respectively. In addition, Uxin Group has listed in the US.
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