China car group buying platform raises $20m in US IPO

The company – which counts K2 Ventures, Highland Capital Partners, and Bertelsmann Asia Investments (BAI) – among its investors, sold 2.6 million American Depository Shares (ADS) for $7.80 apiece, according to a prospectus. It originally planned to sell 3 million shares at $7.50-9.50. Two investors, K2 and an entity known as Honour Depot, together subscribed to approximately $6 million worth of shares in the IPO.

Tuanche claims to be a leading domestic omni-channel automotive marketplace, ranking third by sales volume and gross merchandise value (GMV) in 2017. It organizes offline events in the form of auto shows and group-purchasing activities, as well as operating an online network of virtual dealerships that connect automakers and franchised dealerships with secondary dealers.

Tuanche collaborates with a range of aftermarket service providers, financial institutions and insurance companies, with a view to offering an end-to-end purchasing experience. The rationale behind its business model is like that of most companies participating in the online-to-offline (O2O) automotive services space: to consolidate a fragmented industry by removing unnecessary links in the supply chain, and to provide users with a wider choice of products and more favorable pricing terms.

The company started out in 2010 as a group-buying platform that gathered consumers interested in purchasing the same brands and models of car through its online channels and then organized visits to offline stores. Tuanche leveraged the relationships it established with franchised dealerships to launch its own auto shows. A total of 304 auto shows were organized last year, up from 26 in 2016. Meanwhile, the company facilitated the sale of 207,506 vehicles – through the online marketplace as well as at offline events – a year-on-year increase of 85.8%.

Tuanche generated RMB280.7 million ($42.4 million) in 2017, up from RMB117.4 million a year earlier. Over the same period, its net loss increased from RMB84.6 million to RMB90.7 million.

Most of Tuanche’s revenue is generated from automakers and franchised dealerships through fees for booth space at events and commissions on automobiles sold through group-purchasing activities. Payments are also collected from secondary dealers when they acquire vehicles from automakers and franchised dealerships through the online platform.

K2 committed $700,000 in Series A funding in March 2013 and then re-upped in a $5.5 million Series B round six months later that also featured BAI. Highland and BAI took part in a $23.6 million Series C in 2014. This was followed by an extension of $8.7 million in 2017 that included commitments from K2, BAI, Highland, and AlphaX Partners. Chuan Thor, who previously led Highland’s activities in China, established AlphaX in 2016.

K2 is the largest external investor with a 13.1% stake in Tuanche. Highland has 9.7%, BAI has 9.1%, and Beijing Z-Park Fund Investment Center has 9.1%. Wei Wen, the company’s co-founder, chairman and CEO, has an equity interest of 18.3% but holds 76.1% of the voting power.

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• Topics
• Greater China
• IPO
• Technology
• China
• TMT
• automobiles
• Highland Capital Management
• Bertelsmann Asia Investments