U.S. Automotive Service Hitchhiker’s Guide to Venture Capital

on the picture in 2016, the US Auto service areas in 2014– there was a big wave of wave of venture capital in 2015, but there Is no doubt now looking back, the figure most companies already quickly die off, especially in the segments of the Car wash / Car insurance / maintenance / repair Is the hardest hit.

But there Is no telling Automotive service business opportunity, not to the great entrepreneurial business? It’s like asking do e-commerce in 2006, questioned the move also had the opportunity to read the track personalized in 2011 in the United States have the opportunity to do, we all know, and later appeared Jingdong and headlines.

US Auto market, too, Is breeding a great company, because Cars in the United States in 2020 Will break through 270 million usher hIstoric moment , surpassed the US as the world’s largest Automotive stock market , parking, fuel, Car wash, Auto insurance, maintenance, repair, spare parts, which Is an annual multi-trillion-scale supermarkets However, in 2015 after experiencing a major wave of Car service start-ups crazy burning billions of dollars, US Car owners, keep a Car repair when faced pain points and needs for many years still no change in nature.

start with the conclusion:

1, the Automotive service industry still has just started in the United States , supermarkets, there are huge transformative opportunity.

2, Auto Services core business model Is changing the insurance sales maintenance amount , thIs Is the real one trillion Jinshan, in addition to all Is mine.

3, local government> OEMs> 4S Group> Insurance Company> Auto Repair> Auto parts, the entire industry ecosystem highly binding, Is locked in a given interest rules, for start-up companies it Is only a deep understanding of the industry, have a chance to break through the layers.

First, the US Auto stock market Will surpass the US

1, the US civilian Automobile industry has been accompanied by reform and opening up 30 years of hIstory, and since 2009, the State Council promulgated the “Automobile industry restructuring and revitalization plan” Will be an important Car for the first time included in the national economy pillar industry, the industry into a new round of rapid development path, when sales exceeded 10 million, seven consecutive annualized compound growth rate of 18% the last two years the average annual sales of nearly 30 million, making the United States the world the largest new Car market.

2, new Car sales soared over the past decade, the US Auto market from the stock of the rapid growth to 78 million by the end of 2019 breakthrough 220 million, Is expected to be 2020 surpassed the US to become the world’s largest Automotive stock market.

But with the rapid growth of American stock Car, Is still lagging behind the quality of service, service system 4S shop +50 24 000 WAN Xiao scattered social repair shop has been constructed far unable to meet the explosive growth of market demand.

In the Automotive market, the stock of rapid growth, however, the number of stores Is not 4S decreasing instead of increasing, reduced from 25,000 to 24,000, indicating that a single brand, inefficient, coverage density dIspersion Auto sales + service system has hit the ceiling in the United States. And 500,000 social service standards spotty repair shop, can not guarantee the quality of service, supply chain management can not be unified, more than twenty years of development so far no one can self-brand chain of over 200 stores, even the greatest treasure in Xin , Huasheng, body mass market, but also for one trillion drop in the bucket.

Second, the US Auto insurance market

1, the US Auto insurance market PICC, Ping An Pacific accounted for two-thirds of three, appears to be several hundred billion giant, but in reality Is B . The industry average combined ratio of 60%, with an average combined ratio of 40%, the industry combined ratio at 100% ± 1% floating, receive full premiums to be paid with seventy-eight one hundred billion a year, almost not make any difference in premiums, whole by an average of 7% of reinvested earnings barely hardcore, U.S. Insurance Regulatory CommIssion several times over the years to change providers fare palliatives for the industry to improve the situation of no effect, and Why? becauseInsurance companies are industry-wide Auto dealers 4S Group B, are to the depot to work, Auto insurance industry-wide premium income by 50% of 4S shop channel, 35% rely on social agents, 15% of self-employed electrical pins.

which Is inside, how many channels of premium received from the 4S shop, should follow the 60% -80% premium to pay back the entire amount of maintenance replacement, not only to earn money have come out ahead, regardless of PICC bonbon, safe Car parts, or eight small insurance companies “transparent repair” wants to try to get lower Auto insurance loss ratio DRP platform, engage in a few years had doomed to failure, the reason Is very simple, you dare to control costs 4S shop directly to your removed from the sales catalog.

and insurance companies accounted for 35% of the sales agent channel social fraud rIsk Is extremely high, even higher than the combined ratio 4S shop, Is strictly control various insurance companies, Auto insurance and therefore Fanhua to achieve the scale of billions to the insurance companies can say worthless, but the outcome Is a low-cost acquIsition of start-up companies.

so self-power marketing business Is the only insurance company to make money channels, but the 4S shop or social agents and channels compared and no unique competitive advantage, so the market share still accounted for not high, up to 30% Ping An, PICC California 20%, the country Will look at the entire industry by 15%.

it Is a doomed Auto insurance industry do not make any money? Of course not, the insurance business Is essentially a bound user connector, itself the product of serious competition in the homogenization of low gross margin, but if there are innovative sales channels, competitive differentiation, and maintenance by the back-end standardized light combined ratio for insurance companies to reduce rate, Will be able to produce dIsruptive change to the industry as a whole.

2, the Sino-US comparIson of Auto insurance market:

US population 1.38 billion, 220 million Car ownership, Car insurance premiums 753 000 000 000 2019 yuan, the average premium 3422 yuan.

US population 320 million, 260 million Car ownership, Car insurance premiums in total 1994 US dollars million, the average premium of $ 785 / Car (5416 yuan).

US Auto insurance pricing factors: Car / person / use. Pricing factors include the purchase price, the acceleration performance, theArea density, the average annual mileage, age, family, driving experience, driving record, number of Cars.

US Auto insurance pricing factors: Car / used. CIRC uniform pricing, insurance companies no pricing power, only the right to adjust the float.

Therefore, in the United States to do the so-called UBI (Usage Based Insurance) of start-up companies had to die, because the driver has not been included in the core Auto insurance pricing factors, product prices by the CIRC unified management and control the insurance company independent pricing floating in space Is extremely limited, and as previously mentioned, the US Auto insurance Is still in the stage of extensive management, far into the era of refined pricing, industry premium payment of at least 20% of fraud, monopoly, low gray efficient exchange of waste, therefore UBI at best can only help the insurance companies in the United States to be eligible for customer gimmick for the industry to solve the problem fundamentally powerless.

Third, the US Car repair market

1, 2014–2016 American Car core error in the service start-ups, Is caught by bit high frequency mode formula O2O mIsunderstanding, think through Car washes, parking, refueling of these so-called low-frequency low-margin customer a single scene driven maintenance, repair low-frequency high-margin business, but the middle lack of insurance business as a connector, low-maintenance parts, low-cost, low-margin, homogeneous competition, hard and heavy maintenance business expansion, such as Dian Dian keep a Car, Carradine, a tiger, destined difficult to succeed.

2, United States 24000 4S shop, new Car sales gross margin less than 3%, less than 1% of the net profit, costs tens of millions a year, Why still alive and even make money? Because for 4S shop, the way passenger Car sales only won 70% of the profit contribution from Car service, and vehicle warranty and insurance business Is the user connectors, the United States a new Car 4S store average sales of 1,000 units per year, a 3-year warranty churn rate of 70% after the insurance client base plate average 5,000 vehicles a 4S shop, customer price 4000 yuan Auto insurance, Auto insurance premiums 20 million a year Is the lifeblood 4S shop, the average Auto insurance repairs can convert the amount of 15 million, gross margin 60 % -80%. ThIs Is the current United States All 4S steamCar dealer group’s core business model .

3, concentration Is very low maintenance plant community, industry was mixed, US companies a total of 12 types of maintenance 480 000, practitioners 300 people, 20 years of development Is not a self-scale It can be more than 200 stores, in 50 Xin Bao, Hua 150, but drop in the bucket put the whole market. The difficulty lies in the maintenance of large-scale enterprIse, one difficult to obtain large-scale cross-boundary passenger and expansion under way dependent on more traditional lines, and second, repair parts supply chain system of cross-brand, cross-regional and transparent procurement supply difficulties, the third Is non-standard repair operations difficult to manage.

Fourth, the US Auto parts market

1. Market Size, 2016 United States Insurance premiums 900 billion, of which 75% were Auto insurance loss ratio of about 60%, Car accident repair costs accounted for 60% of the indemnity (40% of people injured indemnity), even by that 240 billion Car repairs; Car repairs in 65 % of parts (35% of working hours), the parts cost Is 160 billion. 4S repair shop the insurance amount and caliber to go at their own expense ratio of about 1: 1, that Is, the entire US Auto market Is about 2-3000 billion.

2, the Auto industry Is the core difficulty immediate repair operations occur, an excessive number of SKU, acquIsition channels dIspersed. So in the traditional line of Auto Parts City, each city Is actually one of the best mode, focus-acquIsition, dIspersing inventory, efficient changing products, fast delivery. The Internet technology can solve the key Issues the industry Is how to improve the matching of information so as to enhance the efficiency of inventory turns, thus the formation of the cost price advantage at the front. In the past few years a number of Auto parts startups quite a few detours, B2B matchmaking platform trading patterns hard charges, such as Zhuge repair, so fast and so the province, indicating low contribution to the value chain; self-SKU inventory turnover too slow, difficult cross-regional, cross-brand, cross-category expansion, such as naughty stalls, CareRay.

So the real run through the B2B platform Auto Parts City Auto Parts must be copied to the offline mode Cuanhuo line with technological solutions and efficient matching spare parts and centralized procurement, non self-employed, light inventory control, logIstics, quality control, service control, up and down to open up more sectors of industry companies as possible.

3, commercial Auto insurance 2016 fee reform, insurance companies intensified competition, the three major insurance companies combined ratio in 2016 first half-year 2015 rose 1.6%, 3.8%, 3.6%, there Is an urgent We want to reduce the loss ratio, thus promoting the DRP (Direct Repair) certification and accessories direct supply system. The Auto policy reform to break the monopoly of spare parts Car prices, pushing the entire lower than zero, get rid of the original parts supply Is dependent, open repair parts catalog, promote homogeneous parts standard certification, full of good vehicle maintenance and accessories industry.

4, there are a lot of entrepreneurs study on American Automotive service system, want to be “America’s NAPA, US Auto Zone”, but the US Auto market and the US different, industry different hIstorical periods, different users consumer environment, copy NAPA, Auto Zone and other modes of start-up companies are a dead end, because the Car maintenance, spare parts industry Is highly sophIsticated, to C-based, there are a hundred years of hIstory of Car culture, and the high proportion of residential garage own .

United States four billion dollars Auto Parts lIsted companies: Advance Auto Parts, 1932 was establIshed in 2001 with a market capitalization of $ 12.6 billion; Auto Zone, 1979 was establIshed in 1991, market capitalization of 22.7 billion; O’Reilly, 1957 was establIshed in 1993, market capitalization of 24 billion; Genuine Parts Company NAPA, founded in 1925, 1968, market capitalization of 14 billion.

which in addition to NAPA, the remaining three are to C Auto parts chain, with the consumer environment does not match the United States, the US Auto parts format Is different from the United States, the long-term in order to B based.

About the Author: @ Xie Morningstar, Managing Director of sources of capital, served in a capital execution, red dot Ventures, five years follow-up study of Internet start-up companies + three hundred Automotive industry, participationEveryone over to the Car, Murray finance, fuel treasure, pony Car and other Automotive sector more investment in early stage start-up companies.

logic system Venture Capital 2019.03