China ride-hailing app Caocao raises $588m
Caocao Chuxing, the ride-hailing arm of Chinese automaker Geely, has raised a RMB3.8 billion ($588 million) Series B round from five state-backed investors.
This is the first PE investment in China's ride-hailing space in 2021. Caocao is one of several operators - such as Meituan, Gaode, Haro, Dida, and T3 - that are looking to capitalize on the misfortunes of market leader Didi.
Didi listed in the US at the end of July but was then investigated over data privacy violations. Regulators suspended new user registrations and halted app downloads within days of the company's trading debut. Its stock is currently trading at $8.98 versus an IPO price of $14. Didi's market capitalization of $43 billion is lower than its peak private market valuation.
Several of the participants in Caocao's funding round come from Suzhou, where the company is headquartered. They include investment arms of the Xiangcheng District government, Suzhou Gaotie New Town, and Suzhou City Construction. Other commitments came from the international unit of Agricultural Bank of China - via a Suzhou entity - and Soochow Securities.
Caocao previously secured RMB1 billion in Series A funding in 2018 from the likes of Zhejiang Paradise Silicon Valley Asset Management Group, Zhejiang Zheshang Investment Management, and Sanchuan Holding Group.
Established in 2015, the company currently operates in 62 cities and has 60 million registered users. In the first quarter, monthly active users (MAU) reached 5.677 million, up 140% year-on-year. In July alone, MAUs exceeded 10 million, with order demand rising 150% on the same period in 2020.
The new capital will go towards R&D, business expansion, service quality improvement, and driver protection, with a view to enhancing competitiveness and increasing market share.
Cacao has also unveiled a "3N" strategy, which stands for new cars (customized vehicles), new power (new energy vehicles), and new ecosystem. This will form the basis for an integrated travel platform in Suzhou. Geely recently raised $500 million in funding for its Zeekr electric vehicle business.
According to the China Internet Network Information Center, there were 365 million users of online ride-hailing platforms at the end of 2020. Competition is shifting from user growth to user retention -as the industry becomes saturated - with a focus on faster pick-up times and higher quality transportation.
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