After picking up $1.5b from SoftBank, Chinese car trading site Chehaoduo says it’ll spend $300m on advertising

After the fundraising, Chehaoduo will be valued above $9 billion.

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Beijing-based Chehaoduo Group, best known for its second-hand car platform Guazi.com just landed a US$1.5 billion investment from SoftBank’s Vision Fund.

After the fundraising, Chehaoduo will be valued above $9 billion, almost seven times the market cap of its main rival, Nasdaq-listed Uxin, which stood at about US$1.35 billion at closing on Thursday.

After the fundraising, Chehaoduo told KrAsia‘s parent company 36Kr that it has earmarked an advertising budget of RMB 2 billion (US$298.7 million) for 2019. It’s not looking like promotion campaigns among online second-hand car dealers will be waning anytime soon.

Data from market research firm iResearch shows that in 2015, Chinese online second-hand car dealers spent RMB 800 million (US$119.47 million) on ads to promote brand recognition and cultivate potential users as most Chinese were still used to buy or sell their cars via offline channels. Advertising-related expenditures in this industry grew to RMB 1.2 billion (US$179.2 million) in 2016 and more than RMB 5 billion (US$746.7 million) in 2017.

Guazi, Uxin and Renrenche are three major players in the second-hand car industry. Renrenche once filed a lawsuit against Guazi for misleading the marketing with an ad in 2017, claiming Guazi as “way ahead of its rivals in terms of trading volume”. Guazi lost the lawsuit and was ordered to remove such ads. The company was fined RMB 12.5 million (US$1.85 million) in November 2018 by Beijing’s commercial authorities for this misleading ad.

Heavy spending on advertising has been dragging some companies, including Renrenche, into operational difficulties. However, a Chenhaoduo spokesperson ruled out the possibility that the company would acquire any competitor in the second-hand car industry within three years, responding to a rumor that Chenhaoduo company would acquire Uxin.

Editor: Nadine Freischlad