58 City 150 Million Acquisition Of Excellent Credit Shoot Behind: Second-Hand Car Business "Savage Growth" Countdown

On the night of March 24th, 58 cities announced that they signed an agreement with the excellent car group of the second hand car business platform to acquire 105 million of the business assets of the company. From prosecution infringement to investment to acquisition, the mutual love between the 58 city and the excellent group ended temporarily.

In recent years, the economic downturn and the overall automobile consumption have been sluggish. Data show that in 2019, the total number of second-hand passenger cars of the general passenger cars in China was about 12 million 960 thousand, down 13% from 2018, and the volume of transactions was reduced by about 1 million 860 thousand vehicles. The sudden attack of the new crown pneumonia epidemic is no more than an increase in the used car business.

The acquisition, in the 58 cities, bought its long used car business at the right price. In terms of the market downturn, the industry shuffled and sold part of the business. According to the industry analysis, the sales of gifted credit to excellent credit is largely in order to return the funds.

Excellent letter "broken arm to save oneself"

Excellent letter was founded in 2011, its business mainly includes the three major sections: excellent credit, good credit, second hand car and excellent credit. As the first stock of China's second hand car business, it landed on the New York stock exchange in June 2018. When it went public, it had no wind of two, and the issuing price of excellent letter was US $9, and its market value reached US $2 billion 761 million.

But in recent years, the economic downturn and other factors, the performance of excellent letter is not ideal. In 2019, the company started a painful adjustment, selling new cars, finance and accident car auctions. Dai Kun, the founder of excellent credit, has said that the sale of some businesses is aimed at concentrating limited resources in the most important direction, that is, second-hand cars "nationwide purchase".

Since 2017, Yupin, a 2B business, has announced its transformation to the C terminal. The nationwide purchase business was also launched on the same year, and its business focus shifted gradually. The proportion of the whole country in its business scope has been increasing. The second-hand car "national purchase" means that users can browse the source of the car online, choose their favorite cars to buy online, subvert the traditional trading mode, and break the barrier of second-hand car transaction.

After focusing on "nationwide purchase", 2C business expanded, while 2B business was shrinking. In 2019, the third quarter earnings report showed that the revenue of the company in the third quarter increased by 33.4% over the same period, of which 2C (GMV) (2 billion 828 million yuan) increased by 110%, while the 2B business GMV was 1 billion 537 million yuan, a decrease of 64.1% over the same period.

It is worth mentioning that before this, the financial business of excellent letter was also taken over by 58 cities. In July last year, he transferred the loan business derived from second-hand car trading to Golden Pacer (58 Finance) in exchange for a certain number of shares and 100 million dollars in cash. As the most profitable business, auto finance has always been an important support to beautify the credit and earnings figures, which is regarded as "good faith and self rescue".

It is sad to note that the advertising in 2017 was over 1 billion yuan, but the price of the 105 million dollars (745 million yuan) was not as good as the advertising cost. So far, the main business of the company has only been purchased nationwide.

For this transaction, Dai Kun said that the B2B business was the starting point for yvin to explore the electric business of China's used cars. With the expansion of yup's personal consumption market, the group's strategic focus shifted. After divestiture of this business, it will focus on B2C's "nationwide purchase" business, and the cash flow will also help its long-term development.

But in an interview with the economic news reporters in twenty-first Century, people in the industry said, "the concept of" national purchase "has effectively utilized the price difference between regions and enlarged the profit space through its information superiority. This is the essence of the so-called national purchase that I personally understand. I personally believe that if the purchase continues, there will be no market at all because it does not help consumers better. Instead, it takes advantage of the unique information superiority in this field to get the benefits of asymmetric information.

58 what is the purpose?

58 the city has been in the field of used cars for a long time.

In 2015, the 58 merged into the new track to monopolize the domestic classified information market. In March 2016, C2C used car platform, melon seed used car direct selling network announced the completion of a new round of financing of $204 million 500 thousand, of which 58 city is one of its non controlling shareholders. In 2019, the 58 city changed a "new playmate" in the second-hand car field, and sold 700 million of its majority stake in the second-hand car of its melon seeds. Less than three months later, 58 cities turned to excellent trust second-hand vehicle and reached strategic cooperation. Hua Ping investment and TPG and other investment institutions continued to invest and raise about 230 million US dollars.

58 what is the purpose of the acquisition of the city's excellent credit? As the largest classified information service platform in China, traffic superiority is the magic weapon of the 58 cities. Up to now, the 58 cities have tens of thousands of used vehicle resources annually, covering 400+ cities nationwide, serving over 2000 people and serving 80% of the second-hand car dealers in China.

The second-hand car auction as a key link in the circulation and value discovery of used cars is of great significance to improving the efficiency of selling cars, shortening the selling cycle and the inflow of vehicles in the second-hand car market. Although the volume of traffic can not be underestimated, the development of 58 cities in the circulation and auction business of the second hand car is lagging behind. The acquisition of 9 years of excellent credit to a certain extent has made up for the closed loop of the automobile business in 58 cities.

58 Yao Jinbo CEO of the same city said that in 2020, 58 cities offered second-hand car auction services to car dealers as part of its core strategy. "The next 58 will continue to enhance the service capability of the excellent credit shoot in the B terminal market, not only to help car dealers sell cars, but also to help them collect cars through online auctions, so as to really promote the efficient circulation of second-hand car industry."

The emergence of second-hand vehicle online platform is a direction, but the operation and development of online platform depends on offline scenes. Second hand vehicle consumption must be wired under the scene of the experience process, whether in buying a car, trading or after sale, maintenance, maintenance process, there is no offline scene relying on the line is not enough. The industry insiders told reporters.

Second hand car industry hard to survive

According to the data of China Automobile Circulation Association, in February 2020, the volume of second-hand car market in the country was 71 thousand and 100, and the volume of transactions decreased by 92.78%, down 91.19% from the same month last month, and the transaction volume was 4 billion 358 million yuan.

The competition of second-hand car industry is becoming more and more fierce. In order to highlight the tight encirclement, the second hand car suppliers such as gifted believe that they spend a lot of money on marketing. Data show that in the 2016-2018 years, the marketing cost of excellent letter was 793 million yuan, 2 billion 201 million yuan and 2 billion 680 million yuan respectively, accounting for 96.24%, 112.80% and 81.04% of the total operating income respectively. Marketing expenses amounted to 1 billion 358 million in the first three quarters of 2019.

The outbreak of the new crown pneumonia has made the situation of the second hand vehicle industry more difficult. Demand side consumers' purchase intention has declined. The supply side business has basically stagnated, and the fragile capital chain has been hit hard. In February this year, it launched two kinds of personnel programs, namely "flexible employment" and "short-term wage reduction", which saved cash flow by allowing some employees to stop working and some employees to reduce wages. It is understood that ordinary employees reduce wages 20%-30%, management salary reduction is not less than 40%.

In addition, from last year, there were five senior executives leaving the company. Chief marketing officer Wang Xin, chief operating officer Peng Weilian, chief strategy officer, Wen Wen Bing and general manager of the finance department Yu Jingyuan left one after another. Qiu Hui, chief technology officer, announced his departure after the letter was released later this year. The resignation of 6 executives in 9 months seems to imply that the credit crisis is at stake.

More than just a letter from the company, after the resumption of work, a number of new cars and second-hand cars exposed the news of layoffs.

"In recent years, second-hand car business platform has encountered problems, some merger and contraction business, some have basically entered the stage of survival, in the past, most of them would choose to use online platform to lead the offline business, and then turn to offline business. But can it be transformed into offline business to boost the development of online platform? This is a process of change. It is precisely this process that may rekindle hope in the second-hand car industry in the future. The industry insiders said.

Layoffs, pay cuts, downtime, can only postpone the current predicament, second-hand car business savage growth is entering countdown, after the outbreak, second-hand car business will go? Traditional burning money marketing, one-sided pursuit of horse race enclosure, neglect of product quality and service level of operation mode is difficult to maintain, and how will the second-hand car industry achieve sustained, stable and healthy development?

"Standardization and scale" are the future direction of China's used cars. Up to now, China's second hand vehicle industry is mainly operated by 4.5 million car dealers, and is relatively short of brand, lack of scale operation and standardization support services. The industry should form a large-scale operation on the basis of standardization through empowerment to form a post-sale service guarantee mechanism of integrity system on the basis of standardization, and survival of the fittest, so that the concentration degree of second-hand car business services can be improved.

The industry finally said that the industry should pay more attention and respect to consumers' expectations and concerns, that is, to ensure the transparency of vehicle information, and strengthen quality assurance and technical support through the existing Internet application technology, 4G, 5G and so on.