On July 6, 2017, the full vehicle parts auto parts e-commerce Baturu announced that it has completed a Series C financing round totaling USD 100 million, led by Warburg Pincus, with follow-on investment from existing investor Zhongding Venture Capital.

In 2015, Baturu received RMB 50 million in Series A financing from Qifu Capital and others. In 2016, Baturu received RMB 100 million in Series B financing from Huachuang, Zhongding, and other capitals.

Baturu founder and CEO Zeng Wan Gui stated: "The completion of this round of financing, especially Warburg Pincus's investment and support in Baturu, will further strengthen our refined operations, improve the offline warehousing and logistics system, and further expand market coverage nationwide. Next, we will focus on promoting the construction and operation of the South China Central Warehouse."

At the end of 2014, Baturu's full vehicle parts trading B2B platform "Auto Parts Shop" officially launched, forming a closed loop of auto parts trading services from search, quote comparison, payment to delivery. Currently, the platform covers products from over 60 car brands, 100,000 mainstream models (95% of domestic market models), 200 million parts matching relationships, and 4 million parts types. Through the "virtual inventory + transit warehouse + offline service stores" supply chain system, it has cumulatively served over 50,000 auto repair shops, continuously bringing users a new auto parts procurement experience that is complete, accurate, fast, and cost-effective.

Starting from August 2016, Baturu began cooperating with insurance companies such as DaDi, Sunshine, Pacific, Zhonghua, Anxin, Dinghe, and others on direct parts supply.

Zeng Wan Gui said in an interview that next, Baturu will continue to deeply cultivate the three major areas of database, system, and supply chain. At the same time, adhering to the concept of openness and inclusiveness, it will connect with other areas of the automotive aftermarket, such as insurance claims assessment, supply chain finance, auto repair technology, brand and product marketing channels, automotive culture, etc., to fully unleash the value potential of big data and provide more services to the industry.

Why is informatization capability so important for supply chain companies?

After finishing the news section, the author shares insights on Baturu's development over the past three-plus years. Having known Baturu founder Zeng Wan Gui for over three years, the author has had multiple exchanges with him and continuously followed Baturu's development. AC Auto believes that Baturu's development from September 2013 to now can be roughly divided into three stages:

The first stage mainly involves building the basic parts information database and laying the foundation for the e-commerce trading platform.

The second stage involves connecting the online trading system, including data standardization (including standardization and sorting of upstream supplier data, etc.), product standardization (unified packaging, labeling, etc., to facilitate recognition by repair shops), and management process standardization. Baturu spent over two years on these three standardizations, all integrated into a complete informatization system, which is not easily visible to outsiders.

The third stage is the stage of perfecting the supply chain. The commissioning of Baturu's 80,000-square-meter full vehicle parts full-category central warehouse in Guangzhou, which achieves informatized and intelligent operation management, is a concentrated manifestation of the achievements in this stage.

From the previous "transit warehouses" to the current "warehouse-distribution integration," suppliers including warehousing and logistics have measurable costs reduced, and unmeasurable costs greatly reduced (warehouse management, sales, and other labor and management costs). According to Zeng Wan Gui, the system can calculate the specific warehouse-distribution cost figures for every single part in the central warehouse. The previous dealer operation mode relying on experience and intuition will transform into scientific operation management supported by data.

To build a good supply chain service platform, three major capabilities are essential:

First, the platform's informatization capability to connect upstream and downstream, helping partners improve transaction efficiency and reduce transaction costs;

Second, the platform's intrinsic competitiveness to gather support and cooperation from excellent upstream suppliers, having goods and good goods;

Third, the capability to efficiently and quickly serve repair shops, insurance companies, 4S stores, and other customers.

Based on the author's current understanding, the main gap between China's and the US automotive aftermarket supply chains lies in "informatization":

First, the informatization capability of the platform and dealers themselves;

Second, the capability of the platform to interconnect and access information with upstream and downstream;

Third, the capability of the supply chain platform to connect with information systems in other fields such as insurance.

Among the three major capabilities that the aforementioned supply chain service platform needs to possess, "informatization capability" is the cause, and the latter two are the results.

Differences in capabilities lead to vastly different final outcomes. Roland Berger's "China Automotive Aftermarket Supply Chain White Paper" released at this event also points out: Compared to the Chinese market, the US aftermarket supply chain has more transparent parts information, a flatter supply chain system, and many chain parts dealers.

Solely from the perspective of aggregating upstream full vehicle parts supplier resources, Baturu has also gone through three stages:

First stage: Purchasing goods from dealers of various model parts, then sorting and distributing from the platform's transit warehouse to repair shop customers;

Second stage: When platform transactions began to show results, dealers proactively established satellite warehouses near Baturu's transit warehouse, accessed the platform's informatization system, applied barcodes to parts, and began attempting to connect upstream and downstream information;

Third stage: Starting with the completion of the 80,000-square-meter central warehouse, dealers truly centralized warehousing on the platform and achieved warehouse-distribution integration.

As more auto parts categories on the Baturu platform achieve standardized and intelligent transactions, the proportion of orders and transactions from repair shops, 4S stores, and other customers through the platform is increasing, which can help them reduce parts procurement costs (labor costs, parts cost reductions from value chain cost reduction and efficiency improvement, etc.) and improve procurement transparency. If this trend develops smoothly, the platform's value and rigid demand will become increasingly prominent, and it will also increase stickiness with downstream repair shops.

After transaction standardization and informatization bring improvements in transaction efficiency and cost reductions, a virtuous positive feedback mechanism will form in the transaction closed loop from upstream suppliers to city partners and then to repair shops—repair shops' dependence on reliable and high-quality full vehicle parts suppliers will be higher than on other parts dealers. And the platform, under a light-heavy combination model, can rapidly expand transaction scale at very low marginal costs within the service radius covered by the central warehouse.

Therefore, for Baturu, the current focus is still on promoting the construction and operation of the Guangzhou South China Central Warehouse, laying the foundation for replication in other regional markets in the future. This may be the main reason why Warburg Pincus finalized the USD 100 million investment in a short time.

AC Summary

Supply chain companies are essentially high-tech enterprises with large investments, requiring strong data information support, efficient and collaborative warehouse-distribution logistics management, refined inventory management, and high-level financial management, rather than low-level price competition. We look forward to the early emergence of efficient aftermarket supply chains in China with transparent information and intensive transactions. (AC Auto · Chen Haisheng)

(Original link: Focus | Why did Baturu get USD 100 million investment? Also discussing aftermarket supply chain informatization)