Hangzhou-based used car transaction platform, Souche.com, on Friday announced that it has received $180 million in a series D round led by Warburg Pincus, marking the private equity firm’s second investment in the space this year.
Other investors such as ClearVue Partners, Morningside Venture Capital, CreditEase New Financial Industrial Fund, VMS Investment Group, Zuoyu Capital, and Haitong International also participated in the transaction, with Cygnus Equity as the financial advisor.
Michael Chen, managing director of Warburg Pincus, commented: “Souche equips the auto dealers with much-needed marketing, transactional and financial management capabilities. Souche is quickly building an innovative auto financing service platform combining online and offline resources.” Souche is Warburg’s first significant investment in the space.
Souche said, it plans to use the money to enhance tech capabilities and financial services ecosystem, as well as reach 10 million unit sales target by the end of 2017.
In November 2016, Souche introduced a new financial services product called “Tangeche” in partnership with Ant Financial. The product, claimed to be the first of such “lease-to-buy” car purchase model in China, enables people to own a car with down payment as low as 10 percent.
Part of the Warbug-led investment will be channeled to this product, founder and CEO of Souche Yao Junhong said,
“We plan to increase investment on Tangeche, targeting to achieve 100,000 auto transactions by the end of this year,” Junhong said in a statement.
Late last year, Souche obtained $100 million in investment from a number of major investors, including Ant Financial, the financial service arm of Chinese major Alibaba, and chauffeured car service provider UCar Inc. It previously raised $10 million in a series B round led by Sequoia Capital in 2013, after reportedly securing $1 million in the same year from Ferry Venture Capital.
Souche was founded in 2012 as a platform to provide transaction, marketing, and business management services to used car dealers via a software as a service (SaaS) system. In 2016, the platform reached a trading volume of 51.3 mln units and a transaction volume of RMB 69.68 bln.
It now connects about 80 per cent of Chinese used car dealers, the company claims.
Car dealership has become an interesting market for China’s private equity investment. For Warburg, Souche is its yet another strategic move after investments in CAR Inc., UCAR, Uxin, eDaijia, and Mobike in recent years.
The company said that with the increase of car ownership in China, diversifying demands of people’s transportation means an evolution of young consumers’ spending behavior. With this in mind, Warburg will continue to explore new opportunities in the travel and transportation industry in the region, the firm stated.
Last month, private equity firm PAG led a $100 million series C round in Chezhibao, which operates Chinese used-car online auction platform Mychebao.com. In January, Nanjing city-based used car appraisal and transaction platform Che300 raised RMB200 million ($29 million) from Sequoia Capital China, not long after online used car dealership Uxin Group completed a $500 million new funding round from China Vision Capital, Warburg Pincus, Tiger Global Management, Hillhouse Capital and KKR & Co. L.P.
China’s car ownership increased from 63 million in 2009 to 183 million in 2016 with CAGR of 16 percent. By 2020, it is estimated the number will reach over 200 million, taking over the US to become the country with the most cars.