Tuhu has become a new leader in the automotive service market. By the end of September 2021, the number of tuhumen stores ranked first among all auto service suppliers in China. In terms of automobile service revenue, tuhu ranks fifth among all automobile service suppliers in China, and the top four are independent authorized dealers (4S stores); Among Iam stores in China, tuhu ranks first in the number of stores and annual automobile service revenue.
The automobile service market has a large scale and stable growth, but the core pain point is the scarcity of high-quality services.
(1) according to the consulting report of ZhuoZhi, according to Gmv, the scale of China’s automobile service market will be 1026.8 billion yuan in 2020. Driven by the huge and growing car ownership and growing car age, it is expected to reach 1650.8 billion yuan by 2025, with a compound annual growth rate of 10.0%;
(2) 4S stores charge high fees and have remote addresses. Comparing 4S stores with traditional independent after-sales service providers (IAM stores), for car owners, the service quality of 4S stores is higher, but the charging price is higher; On the other hand, the density of 4S stores is low, usually located in the suburbs, which is inconvenient for car owners;
(3) independent stores are intermingled, lacking large-scale and standardized service capabilities. The price of independent stores is relatively reasonable and convenient, but it is impossible to ensure that high-quality service stores can be found. Most stores lack the capacity of large-scale and standardized services. Many stores have diversified business problems, such as lack of customers, overspending of operating costs, lack of supply channels, cash flow occupied by inventory, etc. some independent stores even provide counterfeit products and low-quality services.
In order to solve the pain points of the industry, tuhu has laid out the offline store network, created the store brand of tuhu car farm, and provided high-quality and standardized in store services for car owners. There are three different types of store operation modes under tuhu, namely tuhu workshop store (self operated store), tuhu workshop store (franchise store) and tuhu car raising cooperation store. Tuhu workshop store (franchise store) is the focus of tuhu offline store expansion. In order to set high-quality and standardized service standards, tuhu has the following requirements for franchisees and tuhu workshop stores: self operated and franchised tuhu workshop stores have unified store design, logo display and standardized service stations; Franchisees operate according to the same standards based on tuhu proprietary technology system; Control the supply chain of tuhu workshop to ensure consistent service quality and genuine product guarantee.
Tuhu car keeping app has both service and community attributes and distributes traffic to offline stores. As an online community, tuhu car keeping app allows car owners to share their service experience in the “community / car circle” function. The platform also invites key opinion leaders (KOL) to share and interact with their fans. Compared with traditional 4S stores and independent stores, tuhu car keeping app lacks diversion channels, realizes user aggregation by building a community, and provides online ordering and booking store products and services for car owners. For example, car owners can place orders through tuhu car keeping app and wechat applet, and obtain store information, such as whether the products are in the warehouse, store location, driving route and store business hours. According to the prospectus of tuhu car raising, in the 12 months ended September 30, 2021, the platform generated 13.9 million transaction users, an increase of 35.6% compared with 10.3 million in the same period last year.
Centralized procurement and improvement of performance facilities to solve the cash problem of inventory occupation in traditional stores. In terms of inventory management, each tuhu workshop store and regional distribution center mainly distribute goods and purchase SKUs at high frequency, and the front-end distribution center also displays a large number of SKUs to supplement the goods in the store. After receiving the order from the end customer, tuhu workshop can place the purchase order at the auto parts dragon. Auto parts dragon then distributes relevant products from the front-end distribution center to tuhu workshop store. In order to meet the needs of some long tail and low-frequency maintenance parts that RDC and FDC cannot meet, tuhu also provides external procurement services to tuhu workshops and stores. Through the establishment of self operated storage network and auto dragon business, tuhu has standardized the inventory turnover process, reducing the average commodity circulation days to 60 days, which is significantly lower than the industry average level; The revenue scale of auto parts dragon increased rapidly, from 628 million yuan in the first nine months of 2020 to 1.081 billion yuan in the first nine months of 2021, indicating a significant increase in its value in the performance infrastructure.
Investment suggestions:
Compared with authorized dealers (4S stores) and traditional independent after-sales service providers (IAM stores), tuhu’s customer-centered Wuxi Online Offline Communication Information Technology Co.Ltd(300959) integrated platform model has many advantages: it can distribute increasing user traffic to stores and ensure consistent and standardized service quality, It can strengthen bargaining power and improve inventory turnover efficiency in the process of commodity procurement, then realize economies of scale and accelerated business growth, and finally enable car owners to enjoy a good automobile service experience. We believe that as a new leader in the automotive service industry, tuhu has good development prospects. We have covered the company for the first time. Considering that the company is in the process of listing, we will not rate it temporarily.
Risk tips: (1) the popularity of new energy vehicles has an adverse impact on the demand for automobile services; (2) Unable to attract franchisees to join tuhu workshop, resulting in failure of expansion; (3) The low efficiency of supply chain operation makes it impossible to provide good service experience for car owners.
