Venture

Chinese Car Sales Startup Chehaoduo Raises $1.5B From The SoftBank Vision Fund

Chinese startup Chehaoduo raised $1.5 billion from the Saudi Arabia-aligned SoftBank Vision Fund this week, bringing its total fundraising tally to some $3.4 billion.

There’s no shortage of car-selling websites and online services in the world. In America, CarGurus is a well-known entrant and member of the 2017 IPO class. But while there’s plenty of competition and even some zany ideas, there’s still a huge market to tackle, and thus lots of capital flowing into companies out to do just that.

China

The Chinese car market is massive. Despite hitting recent headwinds along with the broader Chinese economy, the figures concerning automobiles in China are nearly bonkers. The country had annual car sales of 28.1 million in 2018, for example, compared to 17.27 million in the United States during the same period.

Strong national car sales mean lots of new cars on the market of course, but also lots of used cars. It appears that Chehaoduo targets both sides of the car market. The firm, now with ten-figures worth of cash on its balance sheet, operates two services including Maodou which targets new car sales, and Guazi, which seems to operate in selling used car.

In a release, SoftBank waxed excitedly about the Chinese used car market and thus the chances for its latest investment:

China’s used car market is growing rapidly but online penetration remains low and auto financing is underutilized compared to developed markets. In just three years, Chehaoduo Group, through the Guazi brand, has leveraged the latest innovations in data-driven technology to establish China’s leading car trading platform. The company has a bold vision with technology at its center to underpin an industry network that will support transformative growth of the market.

Even for tech that’s a bit air-filled, but I think the point is that Chehaoduo’s implied quick growth in a big market attracted Vision Fund dollars. In that sense, the deal matches what we’ve seen recently from the ever-active SoftBank-managed capital pool.

The Vision Fund doesn’t have infinite money (perhaps a few dozen billion dollars left), but until its monetary pool dries we’ll see this sort of capital injection continue. And given the revenue scale that Chehaoduo can likely find given its total addressable market (TAM, in venture parlance) and per-deal value (cars are expensive), perhaps this is one of SoftBank’s more reasonable disbursements.

Top Image Credit: Li-Anne Dias.