Chehaoduo Group announced on Wednesday the completion of $200 million funding from Sequoia Capital China and Softbank Vision Fund. The company is backed by 58.com and is also parent company to online used car platform Guazi and new car seller Maodou.
Why it matters: The deal indicates renewed interest from venture capital funds in China’s online auto trading industry. The industry is among the worst-hit sectors since the Covid-19 crisis took hold in mid-January.
- China’s venture capital dealmaking is gradually bouncing back.
- Softbank’s Vision Fund has faced major setbacks in some of its flagship investments.
- Vision Fund flagship investment WeWork saw its valuation slashed by over 80% after failed IPO last year, while Oyo runs into similar trouble with massive layoff plan across the world.
Details: The funds, a follow-up tranche to the company’s Series D, will bring the total funding of the round to $1.7 billion. The Beijing-based firm received $1.5 billion in a Series D from Softbank at a $9 billion valuation in February 2019.
- The company says the the proceeds will be used to strengthen coordination of after-sales services between Guazi and Maodou and to boost car sales market recovery from the pandemic.
- Chehaoduo claims its new and used car businesses were both profitable in Q4 2019.
- It has recorded overall profits for the new car and used car businesses in the fourth quarter of 2019, fulfilling it’s pledge made in mid-December.
- For next stage of growth, Chehaoduo CEO Yang Haoyong expects to create greater synergies between various business unites of the company and to deepen cooperation with regulating institutions, OEMs, dealers, and other partners.
Context: Previously known as Guazi, Chehaoduo was created in 2017 after the merger with Maodou. Both brands are aggressively expanding to online and offline sales channels.
- Guazi rival Uxin has been struggling since 2019 amid blows from a short-selling report in April last year to the job suspension news in March.
- Covid-19 has negative impacts on China’s used car trading market, which saw sales volume dropped 24.06% year on year to 949,700 vehicles in March this year, according to figures from China Automobile Dealers Association.