Deal focus: Huochebang brings order to trucking chaos

The most common truck driver profile in China is a farmer who drives his small, simple vehicle from one city to another. He spends 3-5 days finding a load and shares half of the fees with intermediaries who make connections with shippers. Once on the road, he must pay for fuel, truck maintenance, tolls, fines, food and lodging. If the farmer is unable to find another job at the destination, he returns home with an empty truck. With these overheads in mind, the fees charged to shippers are inflated.

China’s logistics sector was worth RMB7.9 trillion ($1.14 trillion) last year, but the trucking industry remains highly fragmented and inefficient. Individuals own more than 90% of trucks on the road and these vehicles stand empty 40% of the time. Logistics accounts were equivalent to 15% of the country’s GDP in 2016 compared to 8% in the US.

Truck Alliance, known as Huochebang in Chinese, wants to fully utilize these trucking resources by connecting long-haul drivers and shippers through an online platform. The company recently raised $156 million in the second tranche of a Series B round led by Baidu Capital. It came five months after the first tranche worth $115 million, led by last-stage investor All-Stars Investments and the International Finance Corporation. A third tranche is expected to close imminently.

“The long-haul truck delivery market is about 5-10 times larger than the passenger car-sharing market,” says Richard Ji, managing partner at All-Stars, a $1 billion PE fund that backs other sharing economy businesses including ride-hailing app Didi Chuxing and homestay sharing platform Tujia. “Truck Alliance clearly is the category leader and the company is currently expanding its revenue streams.”

Truck Alliance has already signed up 3.7 million truck drivers and 630,000 shippers, and is hosting five million transactions each day through its mobile app and website. The online marketplace enables truck drivers to increase their loads and income, while shippers can reduce their costs.

In addition to providing matching services, Truck Alliance issues electronic toll collection (ETC) cards and helps drivers install wireless ETC devices in their trucks, so they can pay tolls without stopping their vehicles. The ETC system then deducts the appropriate amount from drivers’ bank accounts. It is through fees for these services that Truck Alliance makes most of its money. Last year, the company sold about one million ETC cards and devices, which recorded RMB20 billion in transaction value.

Truck Alliance is currently rolling out after-market services, such as vehicle and driver insurance products, discount fuel cards, and financing for new trucks. “The company can provide any service around truck logistics. The key is that there should be a large enough customer base – including truck drivers and shippers – on the platform so that Truck Alliance can monetize its services, such as a commission from each transaction,” says Ji.

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• Topics
• Greater China
• Technology
• Expansion
• China
• Logistics
• TMT
• Baidu
• All-Star Investments
• IFC