Alibaba Said To Invest 4.6 Billion USD In Shenzhou Zhuanche
摘要： Rumor had it that Alibaba had entered into strategic investment with Shenzhou Zhuanche and would invest 3 billion RMB in its mother company Shenzhou Youche Technology, so that Alibaba would account for 10% of its share, while the estimated market value of Shenzhou Zhuanche would also reach around 30 billion RMB.
In the Chinese Internet industry, it’s quite common to see Internet giants contradict with themselves, as can be seen in the merger of Didi and Kuaidi, MeiTuan and Dianping, as well as the investment of Alibaba into Shenzhou Zhuanche recently. Rumor had it that Alibaba had entered into strategic investment with Shenzhou Zhuanche and would invest 3 billion RMB in its mother company Shenzhou Youche Technology, so that Alibaba would account for 10% of its share, while the estimated market value of Shenzhou Zhuanche would also reach around 30 billion RMB.
However, an insider confirmed to TMTpost that the rumor proved to be true, and the deal had almost been completed.
Why did Alibaba invest in both Didi Chuxing and Shenzhou Zhuanche at the same time? As a matter of fact, such contradiction is quite common in Alibaba: while Alibaba invested in MeiTuan, it also established its own online group-on platform; while Alibaba’s finance arm Ant Financial invested in 36Kr, it also established a similar platform called ANTSDAQ by itself.
Shenzhou Zhuanche's market value is to reach 30 billion RMB
As a matter of fact, BlueWhale TMT revealed such information long ago, but Alibaba and Shenzhou Zhuanche both denied the news. For example, Alibaba responded that Alibaba had no plan to further invest in online car-hailing market, that it was working closely with Tencent over Didi Chuxing and that it would continue to support Didi Chuxing.
Although Didi “denied” such news, it was more like a gesture to “soothe” Didi Chuxing. Shenzhou Zhuanche also responded to such rumor, saying that the time was not ripe to reveal the specifics to the public.
According to BlueWhale TMT, Alibaba acquired through its overseas branch Alibaba Network China and domestic branch Alibaba China Network Technology 33,597,312 and 33,597,312 shares respectively. In total, Alibaba would hold 67,194,624 shares and accounted for 9.8% shares of Shenzhou Zhuanche.
Statistics suggest that Shenzhou Youche Technology completed it’s A-round financing in July, 2015 and raised 250 million USD in total; following, it concluded B-round financing in October and raised 550 million USD. After the B-round financing, its market value hit 355 million USD (around 23 billion RMB). However, after the latest round of financing, its market value would skyrocket to 30 billion RMB. Lu Zhengyao, CEO of Shenzhou Zhuanche, once told media that it planned to list on the stock market in 2016, and preferred to list on the new three board.
After some research, we found that the deal had already been completed, with Alibaba being the single investor, and that this round of investment would be the last round before Shenzhou Zhuanche listed on the stock market.
After Didi and Kuaidi merged in Valentine’s Day, 2014, Alibaba began to has less and less say in the merged company Didi Chuxing. That’s why Alibaba’s strategic investment in to Shenzhou Zhuanche was for some insiders signal that Alibaba wanted to strengthen its role in the Chinese online car-hailing market. Undoubtedly, Alibaba’s move would certainly further complicate the competition in this market.
The complicated Chinese chauffeur market
According to Roland Berger’s “2016 China Chauffeur Market Study”, Didi Chuxing ranked the first and accounted for 46.6% share of the market, and is followed by Shenzhou Zhuanche (39.9%), Uber (7.2%) and Yidao (6.3%).
Although might not be 100% accurate, we can tell for Mr. Lu’s interview on various occasions that its performance is rapidly improving. Different from its competitors, Shenzhou Zhuanche adopted the B2C business model, and targeted mainly mid and high-end users.
However, this doesn’t mean that Shenzhou Zhuanche can develop without subsidies and money-burning. Last February, Mr. Lu announced that it would spend 2.5 billion RMB to march in the mid and high-end market. However, according to its annual financial report, Shenzhou Zhuanche’s net loss was 38.2 million RMB in 2014. “For sure, we shall lose more money this year, but I didn’t set any limit to my team,” Mr. Lu also admitted.
At the same time, it’s worth mentioning that after LeTV invested 700 million USD in Yidao and became its dominant shareholder, Yidao began to expand its business significantly. According to Zhou Hang, CEO of Yidao, the total order on Yidao surged to 500,000 per day via its promotional activities such as “You Charge, I Give Subsidy” and “Jan. 7th Chauffeur Festival”, and lots of Yidao’s old users (both riders and partners) began to user Yidao again.
To be more specific, during the “Jan. 7th Chauffeur Festival”, the daily charge volume reached 1 billion RMB on Yidao, Yidao’s partners increased by 300,000, while the number of trips on Yidao also quadrupled compared to that before LeTV’s investment. In addition, after Peng Gang, CMO of LeTV was appointed president of Yidao on Feb.25th, it is expected that LeTV and Yidao will go even closer in the future. Actually, Yidao has also been planning to list on the Chinese stock market.
Speaking of Uber, Travis Kalanick, CEO of Uber Global, announced that China Uber had already completed its B-round financing this January, and that investors such as Hainan Airlines, CITIC Securities, China Taiping, China Life, Baidu have all participated. It is reported that China Uber launched its B-round financing last June, and planned to raise 1 billion USD in total, but later on expanded the figure to 2.5 billion USD.
In September, 2015, an insider told Bloomberg that Uber Global spent 3 to 5 billion USD in total in the Chinese market. Mr. Travis also admitted that China Uber spent 1 billion USD through its money-burning subsidy strategy. After all, the strategy proved effective and that Uber’s market share expand steadily along with its large sum of subsidies. Recently, Uber announced that its market share in China had grown to around 40%.
However, according to Alibaba’s 2015 Yearly Data Risk Report, 200,000 partners on Uber once committed to illegitimate behaviors and place fake orders, and that 40% of orders on Uber are fake ones. In other words, half of trips on Uber could be fake.
What about Didi Chuxing, then? At present, Didi Chuxing has expanded its service to Shunfengche, Carpooling, Designated Service, etc., which might divert too much attention from Didi. “Didi didn’t have any specific timetable to go public recently, and is still putting much attention on raising money. Didi will continue to adopt subsidy strategy, since it dares to do whatever it could to win over users, ”Chen Wei, CEO of Didi Chuxing, told the media when commenting the competition between Didi and Uber.
[The article is published and edited with authorization from the author @TMTpost-Chinese, please note source and hyperlink when reproduce.]
Translated by Levin Feng (Senior Translator at PAGE TO PAGE), working for TMTpost.