On July 6, Baturu, an auto parts e-commerce company, announced the completion of a $100 million Series C financing round, led by Warburg Pincus with follow-on investment from Zhongding Venture Capital, setting a record for the largest single financing deal in China's automotive aftermarket supply chain sector.

In fact, Baturu, established just 4 years ago, has always been highly favored by investors. Baturu was founded in September 2013 and secured 50 million yuan in Series A financing from Qifu Capital in December 2014, followed by a 100 million yuan Series B round in July 2016 led by Zhongding Venture Capital and Huachuang Capital, with follow-on investment from Yuexiu Capital.

Xu Bo, Chief Financial Officer of Warburg Pincus Group’s China division, explained the reasons behind capital's enthusiasm for the automotive aftermarket: In 2016, China's passenger car sales reached 24 million units, ranking first globally; the number of passenger vehicles in stock also approached 150 million, second only to the United States. It is expected that this figure will reach 220 million vehicles in five years, surpassing the United States to become the world's largest. At the same time, China's auto parts market scale will benefit from the increase in vehicle ownership and rising average vehicle age, growing at a rate exceeding 10% annually, and is projected to exceed 800 billion yuan by 2022.

Despite the huge market, the entire automotive supply chain industry is highly fragmented. The Chinese market is extremely dispersed and fragmented, lacking unified standards, and featuring multi-layered irregular sales systems, leading to severe resource waste and inefficiency. No single company in China's parts supply chain holds more than 1% market share, whereas in the United States, the top five auto parts retailers account for 30% of market sales, with a market value exceeding $76 billion. Therefore, the Chinese market has tremendous consolidation potential, providing huge growth opportunities for companies like Baturu.

Data Value-Added Monetization

Baturu's founder and CEO Zeng Wan Gui is from Jiangshan, Zhejiang. Before starting his business, he had been in the auto parts industry for over 20 years. "Baturu" means hero or warrior in Mongolian, and this auto parts e-commerce company is indeed thriving, leading the domestic auto parts supply chain sector in just 4 years.

Due to inefficiencies and information opacity in the entire market, Baturu's B2B e-commerce platform "Auto Parts Shop" aims to become a "full vehicle parts" trading service platform, providing one-stop services for auto repair shops including parts search, quote comparison, payment, delivery, and after-sales, forming a closed loop of auto parts trading services.

Zeng Wan Gui told 21CBR reporters that after the Series C financing, Baturu will continue to deepen its efforts in three major areas: database, system, and supply chain, which are also the core strengths valued by investors.

Leveraging its self-developed dynamic parts database and intelligent trading system, since its official launch at the end of 2014, Baturu's platform now covers over 60 car brands, 100,000 mainstream models (95% of the domestic market), 200 million parts matching relationships, and 4 million parts types. Through its "virtual inventory + transit warehouse + offline service stores" supply chain system, it has cumulatively served over 50,000 auto repair shops.

At the same time, Baturu has simplified the layered auto parts supply chain structure, establishing a new supply chain service system centered on "upstream virtual inventory + Baturu transit warehouse + offline service stores (including the city partner system being promoted nationwide)".

Headquartered in Guangzhou, Baturu benefits from this largest auto parts distribution hub in China, facilitating access to high-quality sources and laying a solid foundation for national expansion. Guangzhou is also one of the three major passenger car production bases in the country, with the automotive industry becoming its largest pillar industry. Meanwhile, Guangzhou plans to heavily invest in building an auto parts industry, forming a complete automotive industry chain, and Baturu, as an innovative auto parts e-commerce platform, will help drive downstream demand for parts, improve upstream industry efficiency, and promote industry chain development.

Currently, Baturu has over 200 employees, nearly half of whom are IT technicians. Zeng Wan Gui candidly told 21CBR reporters: "I've been in the auto parts field, doing traditional business for over 20 years. This industry only started using ERP after 2000, and I was one of the earliest auto parts people to use ERP; before that, it was manual lookup entered into computers, which was a profound experience. Our current system is based on matching data; the database trading system means greater volume. I focus on what the system can do for me. Parts standardization is hard because there are so many links; Baturu needs to solve this by using internet methods and machines to replace manual labor."

Global strategic management consulting firm Roland Berger pointed out in its latest "China Automotive Aftermarket Supply Chain White Paper" that influenced by the rapid development of e-commerce, the Chinese market will form a distribution model centered on platforms in the future. Currently, numerous auto parts e-commerce platforms have emerged in the market. To stand out, aftermarket distribution platforms must be based on trading platforms with parts databases, deepen integration with upstream and downstream, and explore data value-added monetization business models.

Zeng Wan Gui said that next, they will connect with other areas of the automotive aftermarket, such as insurance claims assessment, supply chain finance, auto repair technology, etc., to fully leverage the value potential of big data. "We can tailor a simple and efficient claims assessment system for insurance companies, embedding our data information and price information to help insurers reduce claims costs and increase premium income." Starting from August 2016, Baturu has successively cooperated with insurers such as Dadi, Sunshine, Pacific, China, Anxin, and Dinghe on direct parts supply.

Warburg Pincus Boost

Hu Zhengwei, Executive Director of Warburg Pincus, and his team led Baturu's Series C financing. He told 21CBR reporters that in this industry, he has seen no fewer than 20 auto parts companies, but the overall decision-making time for this financing was only a short two to three weeks. "The speed was very fast; everyone has bigger goals and no need to argue over minor terms." Hu Zhengwei positions Baturu as the "Amazon of automotive aftermarket supply chains."

Warburg Pincus has continuously increased its investments in China's big mobility sector, having invested in companies across the mobility chain such as Shenzhou Car Rental, Shenzhou Shuttle, Uxin Auction, Mobike, NIO, eDaijia, and Guazi, totaling nearly $1 billion. Baturu is Warburg Pincus's first investment in the auto parts sector.

In Hu Zhengwei's view, Baturu is a company with a relatively mature business model, already at the 3.0 stage. "Stage 1.0 is taking an order each day and purchasing on demand, which is too inefficient. Stage 2.0 is home delivery; you place a demand, and suppliers deliver to the point. Stage 3.0 seems simple but is a big deal for the industry; it solves efficiency and delivery issues. On the surface, it's building warehouses, but actually, it's databases, systems, and integration with upstream and downstream."

Zeng Wan Gui said that the company's current development focus is still around the South China region, planning to enter East China early next year.

"Our central warehouse has just started; it will be put into use starting in July. The central warehouse is a node; we leverage South China suppliers to gather the best resources nationwide here, mainly to prepare for replication in other regions across the country," Zeng Wan Gui said. They plan to replicate Baturu's Guangzhou business model elsewhere, including warehouse, finance, and team upgrades, aiming to cover the entire country within three years. (21st Century Business Herald · Tan Lu)

(Original link: Baturu's "Amazon" Dream: With $100 Million Series C Financing in Hand, How to Seize the 800 Billion Automotive Aftermarket?)