BDA-腾跃基金途虎汽车后市场项目商业尽调报告EN-2015 02 10

DueDiligenceonTuhuFebruary10,2015BasicInformationURL:http:///Established:2011Co-founderandCEO:Mr.ChenMin(陈敏)Headquarter:ShanghaiFinancingHistory:SeriesA:FinancingfromLegendcapitalofUSD5MNSeriesB:FinancingfromQimingventurecapitalandLegendcapitalofUSD19MNCurrentValuation:USD250MNpreBusinessModelGeographicCoverageAlltier1citiesOthers:Jiangsu,Zhejiang,Shandong,Anhui,Fujian,Tianjin,Hebei,Shanxi,InnerMongolia,Guangdong,Guangxi,Hainan,Hubei,Hunan,Henan,Jiangxi,Sichuan,Yunnan,Guizhou,Tibet,Chongqing,Liaoning,Jilin,Heilongjiang,Ningxia,Xinjiang,Qinghai,Shaanxi,GansuCustomerandStoreUsersAcquisitionCustomer:0.96MNUVfrombothPCandmobileendsinDecember2014Store:1,897storesbyDecember2014MonetizationModelmarkup,involvingoff-linestorestoprovideinstallationservicebypayinginstallationfeeFinancialStructureTuhuIsAFastGrowingO2OPlayerInCarAftermarketInChina,PenetratingIntoTheMarketFromTireCategorySource:CompanyInfoAtomVenturesLegendCapital5%22%QimingVentures9%Company(BVI)53%ESOP10%100%TuhuMainlySourcesProductsfromPrimaryDistributorsofTireBrandsandSellDirectlytoCustomers,LeveragingStorestoProvideInstallationServicesSource:BDAresearchandmanagementinterviewBrandOwnerTuhu

ChannelBDA

AnalysisTraditionalAutoAftersalesisHighlyDiverseandinefficientNumerousbrandsofsuppliers.E.g.inTirecategory,50-100brandsexistDistributionnetworkoutofdate.Multi-tiersnetworkisnormallyappliedwithlowefficiencyandseveretransshipmentsproblemChaosofmaintenancestore.Thereareatleast300thousandstoresinChina,mostofthemaremon-and-pops,withuncertainservicequalityandunsatisfyingconsumerexperienceTuhu’sValuePropositionisClearTransferprofittocustomersbycompressingsupplychainSetupservicenetworkandprovidestandardservicebyfranchisingBringcustomerstoofflinestoresandpaytheinstallationfeeTuhuWebsiteTuhuAPPTmallTaobaoJDNowFutureInstallation

ServicePrimaryDistributorSecondary

DistributorStoresCustomerTuhu’sBusinessModelTheMarketSizeofChina’sAutoAftermarketisEstimatedtoRMB400BNin2014CategoryFrequencyASP(RMB)MarketSize1

(RMBMN)Deep

Maintenance0.5time/year1,50091,560Tire1.5pc/year45082,404CarWash30times/year2073,248Repair1time/year50061,040RegularMaintenance0.5time/year85051,884CarBeauty0.3time/year1,00036,624Total396,760Source:CompanyInfo,PrimaryandSecondaryResearchX＝Note:1.Calculatedwith122.08MNpassengervehicleinoperationsinChinain2014TireandRegularMaintenanceAreBelievetheTwoCategoriesMoreSuitabletoBeSoldthroughO2OModelCategoryO2OFeasibilityBDACommentsTireStandardizedproductwithhighASPCustomershavingcertainbrandawarenessOfflineinstallationandserviceneededRegularMaintenance1StandardizedproductCustomershavingcertainbrandawarenessOfflineservicesrequiredDeepMaintenanceLowfrequencyUnstandardizedproductsCarWashLowASPCarRepairingUnstandardizedproductsCarBeautyLowFrequencyNote:1.Mainlyincludelubricantrefill,wiperandfilterreplacementSource:BDAAnalysisMostfeasibleLeastfeasiblePassengerVehicleTireReplacementMarketIsEstimatedToGrowWithThePassengerVehicleOwnershipInChinaAtA13%COGR,ReachingRMB169BNIn2020PassengervehiclesinoperationinChina,2010-2020FPassengervehicletirereplacementmarketsizeinChina,2010-2020F20172014201520162013201820192020+13%201120102012Unit:MNvehicles94201482201371201260201149201040+13%202016920191522018136201712120161072015Unit:RMBBNSource:CompanyInfo,PrimaryandSecondaryResearchO2OPlatformsMaintainPriceAdvantageoverTraditionalChannels;TuhuistheLeadingOneYetFacingLotsofCompetitionPlatform2014T-mall/TaobaoSalesValueT-mall/TaobaoSalesValueon11·11StorenumberRMB158MNRMB16.6MN~1,800RMB20MNRMB5.2MN~600RMB8MNRMB1.4MN~200BrandOwnerO2OPlatformsNowFutureInstallation

ServicePrimaryDistributorSecondary

DistributorStoresCustomer+30%+5-15%+10-20%+10-30%+10-20%+5-15%XXThepriceadvantageofO2OplatformsmainlycomefromthepricemarkupofsecondarydistributorsTuhuiscurrentlyNo.1ofO2OtirereplacementmarketinChina,whilestillfacingchallengesfromcompetitorsSource:CompanyInfo,PrimaryandSecondaryResearchManysmallerO2OplayersalsoexistonTaobao/Tmall.OperationalDataAnalysisMoreThan60%RevenueArefromOtherEcommercePlatforms,withTaobao/TmallContributingMoreThan55%+760%+187%201425761%29%10%20133055%44%20121033%45%22%Unit:RMNMN+531%+173%201426956%33%11%20134352%48%20121624%53%23%Unit:thousandordersSalesValuebyChannelSalesVolumebyChannelSource:CompanyInfoOtherOther-92%130x180%465%382%846%-93%115x145%337%491%583%OtherOtherTaobao/Tmall’sProportionIsEvenGrowing;TheTop10SKUsContribute25%ofTotalSalesChannelsTmall

-

-

-

-

-

-

2.31

6.85

6.88

12.66

33.79

70.81Taobao

0.01

0.01

1.44

1.88

3.17

3.20

3.75

2.68

2.42

1.32

4.82

17.34T

0.01

0.01

3.64

3.53

4.12

4.60

5.90

5.73

9.37

13.48

25.81

40.22Wechat/app

-

-

-

-

-

-

-

-

-

1.07

2.89

7.27JD

-

-

-

-

-

-

-

-

2.21

4.00

4.95

3.99Yihaodian

-

-

0.03

0.02

-

-

-

-

0.11

0.62

0.63

0.43Others

1.80

2.47

0.02

-

-

0.01

0.14

0.10

0.05

0.14

0.40

0.94Total

1.82

2.49

5.14

5.42

7.29

7.81

12.09

15.36

21.04

33.29

73.29

141.011Q

20122Q

20123Q

20124Q

20121Q

20132Q

20133Q

20134Q

20131Q

20142Q

20143Q

20144Q

2014SalesbyChannel%ofTotal

Tmall+Taobao0%0%28%35%44%41%50%62%44%42%53%63%

T1%35%71%65%56%59%49%37%45%44%39%34%%ofTotal

Top10SKUs46%49%37%39%47%45%44%47%36%35%30%25%Source:CompanyInfoInTermsofOrders,Tmall/TaobaoContributed66%In4Q2014ChannelsTmall

-

-

-

-

-

-

1,626

5,098

5,339

11,164

33,933

75,675Taobao

3

3

1,094

2,046

2,272

2,343

2,964

2,206

2,125

1,368

6,009

20,555T

5

8

2,143

1,959

2,420

2,723

3,950

4,095

7,094

10,569

20,467

36,355Wechat/app

-

-

-

-

-

-

-

-

-

857

2,401

7,555JD

-

-

-

-

-

-

-

-

1,756

3,160

4,557

3,957Yihaodian

-

-

28

13

-

-

-

-

87

508

595

397Others

1,127

1,577

21

-

-

17

109

76

54

101

138

398Total

1,135

1,588

3,286

4,018

4,692

5,083

8,649

11,475

16,455

27,727

68,100

144,8921Q

20122Q

20123Q

20124Q

20121Q

20132Q

20133Q

20134Q

20131Q

20142Q

20143Q

20144Q

2014OrdersbyChannel

%ofTotal

Tmall+Taobao0%0%33%51%48%46%53%64%45%45%59%66%

T0%1%65%49%52%54%46%36%43%41%34%30%Source:CompanyInfoTuhu’sFastGrowthIsLargelyAttributabletoLowPricesByCuttingDownItsGrossMarginQ22013Q12013Q42012Q32012Q32013Q42013Q12014Q42014Q32014Q22014Q12012Q220125.8%7.0%11.1%Unit:RMNGrossMargin,2012-2015TicketSize1,2012-2014Note:1.TicketsizeisanindicatorofASPduetorelativelyfixednumberoftiresperorderSource:CompanyInfoMeanwhile,TuhuHasBeenExpandingItsStoreNetworkSince2012,Especiallyin2014WhentheNumberofActiveStoresIncreasedMoreThan20TimesYoY170%147%269%284%219%438%1003%2303%2Q20141Q20144Q20133Q20132Q20131Q20134Q20123Q20122Q20121Q20123Q20144Q2014Activestorenumber,1Q2012-4Q2014Source:CompanyInfoHowever,TiresSoldPerStorePerQuarterIsDecreasingSince1Q2014,AlongWithTheFastExpansionOfStoreNetwork1Q20122Q20123Q20142Q20141Q20144Q20144Q20132Q20133Q20133Q20121Q20134Q2012-46%TiresSoldPerStore,1Q2012-4Q2014Source:CompanyInfoFastExpansionIntoNewRegionsIsAlsoA

DriverOfTuhu’sHighGrowthRegionsEntered,2012-2014Totalregionsentered2220201320122014603619SichuanOthersHebeiLiaoningGuangdongZhejiangBeijing1893802061962426815351JiangsuShanghai1,75418Source:CompanyInfoTUHUHasScaledUpItsNetworkByCooperatingWithMoreStoresinDifferentRegions,ReachingOver1,700In4Q2014RegionsShanghai

10

13

15

18

22

29

38

36

46

61

79

380Eastern

-

2

1

1

5

8

21

37

40

85

230

565North

-

-

-

-

-

-

-

-

-

36

76

281South

-

-

-

-

-

-

-

-

-

17

68

189Central

-

-

-

-

-

-

-

-

-

-

66

109Southwest

-

-

-

-

-

-

-

-

-

-

43

70Northeast

-

-

-

-

-

-

-

-

-

-

89

160Total

10

15

16

19

27

37

59

73

86

199

651

1,75420121Q20122Q20123Q20124Q20131Q20132Q20133Q20134Q20141Q20142Q20143Q20144QQuarterlyActive1

CooperatingStoresbyRegionQoQ%Growth50%7%19%42%37%59%24%18%131%227%169%Note:1.AnActiveFranchiseStoremeansastorereceivesatleastthreeordersfromTUHUincurrentquarter.QuarterEndPerformanceCustomersperStore

115

137

211

236

181

163

152

180

190

173

158

121TiresperStore

288

360

549

510

494

442

397

462

480

432

394

249TiresperCustomer2.5x2.6x2.6x2.2x2.7x2.7x2.6x2.6x2.5x2.5x2.5x2.1xSource:CompanyInfo~88%TuhuStoresAreActiveTheQuarterAfterTheyCooperatedWithTuhu,ButOnlyAbout60%StillRemainActiveAfterSixQuartersQuarterNewActiveStoresonQuarter

0Q1Q2Q3Q4Q5Q6Q720131Q888%88%88%88%88%88%88%20132Q1392%85%69%69%69%62%20133Q2295%95%91%86%82%20134Q1889%83%83%83%20141Q20100%90%85%20142Q11989%82%20143Q47692%20144Q1,157NumberofActiveFranchiseStoresSource:CompanyInfoTuhuExpectedToCooperateWith10,000StoresByTheEndOf2015,WhichSeemsVeryAggressiveRegionsShanghai84364170464Eastern35758910432774North152249618814South1031575551431Central1492583342Southwest70427175Northeast1974020Northwest02040Total1112136140006000Repair2014Carbeauty2014Repair2015Carbeauty2015StoreNumberByRegionByTheEndOf2015YoY%Growth260%341%Source:CompanyInfoTuhuIsImprovingItsLogisticSystemAlongWithTheExpansionOfRegionTuhuWarehouseLocation,Feb2014LocationAreaInusefromShanghai14,000m22012Beijing4,000m2Apr.2014Chengdu1,000m2Aug.2014Shenyang650m2Aug.2014Wuhan2,700m2Nov.2014Guangzhou1,750m2Jan.2015Jinan400m2Jan.2015Xiamen400m2Jan.2015Total114,900m2Note:1.TuhumovedShanghaiwarehousetocurrentlocationinApr.2014;2.Tuhuplanstoexpandthetotalwarehouseareato33,000m2bytheendof2015Inusebefore2014Inusein2014Inusein2015Source:CompanyInfoTuhuOffersCustomersA

RichSelectionOfTires,AndItManagesInventoryVeryWell11%13%13%9%9%Other>120D90D-120D2%60D-90D9%30D-60D9%15D-30D14%<15D62%InStockSKUsOther8%10%11%8%8%6%ListedSKUsInventoryAgingStructureSource:CompanyInfoTuhu’sSuppliersAreMainlyRegionalDistributorsOfTireOEMs;DueToTheHighInventoryPressuresOfSuppliers,Tuhu’sChoiceIsAmpleAtThisMoment7%BeijingZhengQiangXinShiJi5%5%BeijingHengYunXiangDongguangHaiLian5%QuYangTianjingYuQiang26%5%Source:BDAinterviewandanalysis,CompanyInfo“Tuhu’spurchasescaleislargetoanydistributor.IfTuhucontinuestogrow,itisevenpossiblethatOEMsdirectlycooperatewithTuhu.”—Industryexpert“O2OinChina’sautomotiveaftermarketisatrend,whichcouldpossiblereshapeinwholemarketin3to5years.AlmostalltheOEMsarestartingtotrythisnewmode.ItisabsolutelypossiblethatOEMswilldirectlysupplytoO2Oplatforms,suchasTuhu.”—Industryexpert“O2Oplatforms,suchasTuhu,currentlypurchasetiresfromregionaldistributors.OvercapacityinChina’stireindustryhasbecomenormalstate,whichleadstohighinventorypressureindistributors.Distributorshavetoselltheirstockinlowerpricemaintainoperation.Inmyopinion,thesupplywillbestable.”—IndustryexpertProcurementcontributiondetailoftop5suppliersProcurementcontributiondetailoftop5suppliersTuhu’sTeamSizeIsAlsoGrowingRapidlySource:CompanyInfoTuhu’sTeamSize,4Q2013-4Q2014Department4Q20131Q20142Q20143Q20144Q2014R&D1417223973Pre-sales112546109119After-sales4561616Drivers613141611Logistics49131933Orderprocessing353713Storemanagement4572241Marketing46101634Purchasing3481626Operation12358HumanResource11267Finance2481717CompanyRepresentative

11Administration

1223BeijingBrand

152729GuangzhouBrand

41012ShenyangBrand

86WuhanBranch

9ChengduBrand

78Total5797163343466SupplierInterviewMostBrandOwnersCurrentlyDon’tWanttoCooperatewithTuhuDirectly,WhileDistributorsAreMoreWillinglyGiventheHighInventoryPressureBrandsDistributorsWillingnessofCooperationWhatweheardSource:CompanyInfoBrandownersareshorteningtraditionaldistributionprocessbyintroducinghorizontaldistributionmodelandreducingsecondarydistributors;BrandownerswoulddirectlysupplyO2Oplatformswhentheirpurchasescaleisbigenough.Atcurrentstage,brandowners’prefertocooperatewithbigE-commerceplatformssuchasT-mallandJD,ratherthanverticalplayerslikeTuhuTraditionalautomotiveaftermarketisveryfragmented,withlargenumbersofdistributorscompetingwitheachother;DistributorswouldliketosupplyO2Oplatformswithlargeamountofproducts,astheyfacegreatinventorypressureduetoovercapacityinChina’stireindustryrecentyears.Howevertheyusuallydon’twanttogiveuptoomuchmarginVerywillinglyVeryunwillinglyStoreOwnerInterviewAccordingtotheInterviewswith13OfflineStoresofTuhu,BDAfoundthatMostStoresWouldKeepCooperatingwithTuhuThoughtheExtraBenefitisStillLimitedNowSource:BDAresearchandanalysisTuhubringsaverage6-7%extrabenefitstoitscooperativestoresThebenefitmainlycomesfromtheinstallationfee,andthecrossselling92%ofthestoresarewillingtomaintainordeepencooperationwithTuhu85%ofthestoresarewillingtoexpandthecooperativescopetootherautomobileparts46%ofthestoresarewillingaddalogoofTuhutotheirstoreswhileonly15%ofthemarewillingtoreplacetheoriginallogowithTuhu’sExtraBenefitsFutureCooperationIntentionPurpose:ToaccesstheextrabenefitsthatTuhucouldbringaswellasthefuturecooperationintentionoftheofflinestoresMethodology:BDAselected13offlinestoresofTuhuforthefieldtripandinterviewedtheownersResearchPurposeandMethodologyBDAInterviewedOwnersofOfflineStorestoAssesstheExtraBenefitsfromTuhuandtheCooperationIntentionoftheStores

ResearchPurposeAssesswhethertheofflinestoresarecooperativewithTuhuMethodology13offlinestorescooperativewithTuhuinBeijingandShanghaiwereselected.AsktheownersoftheofflinestoresaboutextrabenefitbroughtbyTuhuAverageordersofTirespermonth,installationfeeperTireAverageordersofotherservicepermonth,andtheAspperserviceThecrosssellingrevenuemadebyconvertingTuhu’scustomerInterviewthestoresaboutextrabenefitsAnalysisofExtrabenefitTuhuCouldBringAsktheownersoftheofflinestoresaboutthewillingnesstocooperatewithTuhu.AsktheownersoftheofflinestoresaboutthescopetheyliketocooperatewithTuhu.InterviewaboutthecooperationintentionSource:BDAresearchandanalysisAnalysisofFutureCooperationIntentionInterviewaboutthewillingnessofaddingalogoofTuhuAsktheownersoftheofflinestoresaboutthewillingnesstoaddalogoofTuhuontheirstores.AsktheownersoftheofflinestoresaboutthewillingnesstoreplacecurrentlogowithTuhu’slogo.TuhuBringsAverage6-7%ExtraBenefitstoItsCooperativeStoresKeyIndicatorsAveragePerformanceAvg.numberoftiressoldpermonthintotal355Installationfeeearned~7,500RMB/

monthCrosssellingbenefit~7,000RMB/monthExtrabenefitthatTuhucouldbringtostores6-7%“NowwehavetocooperatewithTuhu,otherwisewewilllosealotofcustomers…Tuhunowcontributes~20%ofourtotalrevenue.”--Mr.Chen,StoreOwner,Beijing“OrdersfromTuhuarenotstable,~400Tirespermonth,bringing~8thousandRMBpermonth.”--Mr.Wang,StoreOwner,Beijing“Tuhucouldbring~150customerspermonth,yetitisdifficulttodothecrossselling.”--Mr.Wang,StoreOwner,Beijing“Tuhucouldonlybringlessthan10orderspermonth,wereallydon’tcaretheextrabenefit”--Mr.Li,StoreOwner,BeijingHowmuchextrabenefitcouldTuhubring?“WecanprovidecustomersbroughtbyTuhuwithotherservice,thuswecanearnextra~45thousandRMBpermonthfromthecrossselling”--Mr.Zhou,StoreOwner,ShanghaiSource:BDAinterviewandanalysis54%ofTheStoreOwnersAreWillingtoDeepentheCooperationwithTuhuwhile38%ofThemWillKeeptheCooperationTowhatdegreeyouwillliketocooperatewithTuhuinthefuture?“WearecertainlywillingtodeepenthecooperationwithTuhuthatwecanconvertthecustomersofTuhutoourown.”--Mr.Zhou,StoreOwner,Shanghai“IwillkeepcooperationwithTuhuaslongasitcouldbringcustomerstomystore.”--Mr.Wang,StoreOwner,Beijing“IwillcontinuethecooperationwithTuhunextyear,afterallitcouldbringmeextra5to6thousandRMBpermonth.”--Mr.Li,StoreOwner,Beijing“Iamnotsureaboutthefuturecooperation,asTuhudidnotmakemuchcontribution.”--Mr.Ye,StoreOwner,Beijing“WewanttodeepenthecooperationwithTuhusothatwecandomorecrossselling.”--Mr.Chen,StoreOwner,Beijing38%Stop8%DeepenReduceDepends0%54%Keep0%Source:BDAinterviewandanalysisN=1385%ofTheStoresAreWillingtoExpandTheScopetoCooperatewithTuhu,SuchasLubricant,OtherAutoPartsandServiceWouldyoulikeexpandthescopetocooperatewithTuhuinthefuture?“Iamwilling

tocooperatewithTuhuonotherparts:Lubricant,AutopartsotherthanTireandservicessuchascarbeautyandcarwashing.”--Mr.Ye,StoreOwner,Beijing“I’vesoldsomeautopartsfromTuhutocustomers,butthesalesareveryminor.”--Mr.Huai,StoreOwner,Beijing“Iamwillingtoexpandthescopeexceptcarwashing,asitcostsalotoftimeandearnnotmuch.”--Mr.Zhou,StoreOwner,Shanghai“Iwon’texpandthecooperativescopeasTuhucouldnotbringmesomecustomers.”--Mr.Li,StoreOwner,Beijing“MystorehasalreadyexpandedthescopeofsellingTuhu’sotherproductsuchaslubricantandotherautoparts”--Mr.Wu,StoreOwner,ShanghaiWhatarethescopes?OtherAutoPartsServiceOilNoYes85%N=13Source:BDAinterviewandanalysis46%ofT heStoresAreWillingtoAddaLogoofTuhutoTheirStoresWhileOnly15%ofThemAreWillingtoReplacetheOriginalLogowithTuhu’s

“IamdefinitelyOKwithaddingalogoofTuhu,infact,IonceaskedTuhutoaddalogoonmystore.”--Mr.Zhang,StoreOwner,Shanghai“IamnotsureifwewilladdalogoofTuhu,butIamsurewewon’treplaceGoodyear’slogowithTuhu’s.”--Mr.Wu,StoreOwner,Shanghai“ItdependsonthenumberofcustomersbroughtbytheTuhu,wewillconsideraddingalogoofTuhuifitcanbringmorecustomers.”--Mr.Huai,StoreOwner,Beijing“IwillneitherreplacewithnoraddalogoofTuhu,Idon’twanttoadvertiseforit.”--Mr.Wang,StoreOwner,ShanghaiDoyoumindaddingalogoofTuhuonyourstore?“ConsideringthecustomersbroughtbyTuhu,IamfinewithaddingorevenreplacingwithalogoofTuhu.”--Zhou,StoreOwner,ShanghaiHowaboutreplacingthecurrentlogowithTuhu’s?DependsYes46%31%No23%15%Yes15%Depends69%NoN=13N=13Source:BDAinterviewandanalysisCustomerSurveyToAnalyzeCustomerPerceptionofTuhu,

PurchasingBehaviorandFutureTrends,BDAConductedanOnlineSurveywithASampleSizeof740DescriptionToanalyzecustomerperceptionofTuhu,theirpurchasingbe