Deal focus: Legend backs Mancando’s offline network

China became the world’s largest automotive market in 2009, overtaking the US, and the gap between the two has grown ever since then. Approximately 28 million vehicles were sold in China in 2018, but this represented a year-on-year decline of 3%, the first time in two decades that growth has slipped into negative territory. Amid fears that the market has peaked, investors are looking for opportunities in the sector that are about more than new car retail.

After-sale services is a popular target. It leverages the large number of vehicles on the roads – not just those that are added to the stock each year – and it is highly fragmented. With sufficient financial backing, a B2B or B2C-focused company can potentially achieve scale through consolidation. 

Most PE and VC investors address the B2B opportunity through online platforms, asset-light businesses that deliver supply chain efficiency by connecting buyers and sellers. They may also broker transactions and offer financing solutions. Qipeipu, a platform operated by Baturu Technology, and Haoqipei fit this profile. Both have received Series C rounds in the past 24 months, with participation from the likes of Warburg Pincus and Jeneration Capital.

By contrast, auto parts supplier Mancando’s online capabilities stretch no further than a rudimentary app that allows customers to place and track orders. The four-year-old company’s strength is its offline resources: partnerships with over 1,000 franchisees across 13 provinces and cities; and 50,000 square meters of manufacturing and storage capacity. This was enough to convince Legend Capital to participate in a RMB170 million ($25 million) Series A round led by Eastern Bell Venture Capital. 

“What makes Mancando stand out is its ability to control and monitor the manufacturing process, as well as to sell products through its sprawling networks. Unlike most other players in this segment, which are small and largely rely on getting products from third-party suppliers, Mancando has established a direct relationship between manufacturer and end-customer. This has reduced the number of layers in the supply chain and thereby reduced costs,” says Long Xue, a partner at Legend Capital. 

Mancando primarily distributes own-brand products, but it also carries products manufactured under contract for other market participants as well as imported brands. It serves over 95,000 car repair factories and claims to have achieved compound annual sales growth of more than 300% in the past three years. Xue expects the company to maintain this rapid growth trajectory and further expand its manufacturing capacity and sales networks. 

“Previously, goods made in China were mainly sold to developed overseas markets without the manufacturers creating much brand value. Now, with the maturation of the Chinese market in every aspect, companies like Mancando have established themselves by serving domestic customers,” he says.   

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Early-stage
• Support services
• Industrials
• China
• Legend Capital
• Venture
• automobiles
• manufacturing