Softbank Invests $1.5 Billion in Chinese Car Trading Platform

SoftBank Vision Fund will invest $1.5 billion in Chinese car trading platform Chehaoduo, a strong bet on the world’s largest automobile market as sales of both new and used cars decline.

The investment values Chehaoduo Group, the parent of complementary online trading sites Guazi and Maodou, at more than $9 billion, the Chinese startup said in a statement on Thursday. Guazi sells second-hand cars while Maodou sells new ones.

Chehaoduo, which literally means “so many cars,” said it would use the funding to improve its technology, upscale its marketing and expand its physical store footprint.

Chehaoduo CEO Mark Yang said big data and artificial intelligence will be at the core of the ongoing transformation in Chinese car retail.

Launched as Guazi by Yang in 2015, the company won $3.3 billion in funding rounds led by Chinese internet giant Tencent and venture firm Sequoia Capital China. Guazi rebranded as Chehaoduo in 2017 when it launched new-car spinoff Maodou.

The company has opened more than 600 brick-and-mortar stores since September, providing offline services covering used cars, new cars and after-sales maintenance.

Japanese investment group SoftBank and its Vision Fund have been betting heavily on the industry with investments in related startups around the globe, including Chinese ride-hailing giant Didi Chuxing and its Silicon Valley rival Uber. The latest deal comes after it invested 460 million euros ($523 billion) in German used car platform Auto1.

China’s used car market had been growing rapidly but online penetration remains low, said Eric Chen, a partner at the Vision Fund, in a statement. Auto-financing is a further source of great potential compared to mature markets, he added.

The Vision Fund is the world’s largest private equity fund after raising more than $93 billion in 2017.

In December, 1.11% fewer used cars were sold in China than for the same month in 2017, according to statistics from the China Automobile Dealers Association. Average pricing also declined that month.

Total auto sales around the country contracted last year for the first time in more than two decades, according to the China Association of Automobile Manufacturers.

Contact Reporter Isabelle Li (liyi@caixin.com)