The Main Business Is Highly Dependent On 4S Stores. How About Huaao Auto'S Three-Time Rush To The Market?

"The first round of audit inquiry shall be raised within 20 working days from the date of acceptance, and the audit opinion or decision on termination of IPO shall be made within 3 months." according to the examination process of Shenzhen Stock Exchange's gem registration, Beijing Huaao Automobile Co., Ltd., which is going through three times of listing, is facing the test of deadline.

In June 2018, Hua'ao automobile submitted the prospectus to the Securities Commission for the first time, in order to "break through" the gem, only four months later, it suspended the examination due to many problems. In May 2019, the company broke through the barrier for the second time and failed again.

On June 29, 2020, Huaao automobile passed through the gem for the third time. Due to the company's major issues, it was cancelled the review, becoming the first company under the gem registration system to be canceled.

On June 30 this year, after Huaao automobile completed the updating of its financial information, the Shenzhen Stock Exchange resumed the examination of its issuance and listing. However, no progress has been made so far. It has been three months since Shenzhen Stock Exchange resumed the listing audit calculation of Huaao automobile on June 30, and the latest inquiry and reply documents to the company are still missing.

Therefore, the audit period of Huaao automobile has set the audit record under the gem registration system. This automobile inspection institution which relies on automobile 4S shop for a living has a lot of difficulties in going public. What are the problems behind it and whether it can successfully apply for listing three times?

4S store cooperation mode to be tested

Huaao automobile pointed out in the prospectus that the company's main business is vehicle inspection and evaluation and extended warranty service. The company initiated the marketing mode of cooperative marketing with 4S stores, and built the largest nationwide sales network of 1000 4S stores in the industry. In the current A-share market, there is no comparable listed company similar to Huaao automobile business.

During the reporting period from 2018 to 2020, the revenue of Huaao automobile is 510 million yuan, 533 million yuan and 504 million yuan respectively, and the net profit realized is 72.1349 million yuan, 81.5436 million yuan and 76.9658 million yuan respectively. Among them, the company's testing and evaluation business contributed about 80% of the revenue during the reporting period, and the proportion of revenue contributed by extended warranty will rise to about 20% in 2020.

Vehicle testing and evaluation and extended warranty service are the absolute revenue main business of Huaao automobile, but the independence of the company's dual main business is questioned by the regulatory authorities.

According to Hua'ao automobile, at present, the two main businesses of the company are realized in the scene of 4S stores. By the end of 2020, the company has cooperated with 984 automobile 4S stores.

The reporter of 21st century economic report noticed that Huaao automobile needs to send sales personnel to sell directly to customers in 4S stores to carry out inspection and extended warranty business.

Cooperate with 4S stores to provide professional testing sites, equipment and customer vehicle repair and maintenance information to Hua'ao Automobile Co., Ltd., and provide repair and construction for customer vehicles requiring warranty, and provide necessary publicity and advertising support for Hua'ao automobile to carry out business. Huaao automobile pays technical service fee, maintenance fee and channel promotion fee to cooperative 4S stores.

During the reporting period, most of the customers of Hua'ao Automobile Co., Ltd. introduced the customer manager of the cooperative 4S store to the customer manager of Huaao automobile. In 2020, the top 20 customers of Huaao Auto's order amount are all cooperative 4S stores to help introduce.

The deep binding with 4S stores makes the acquisition channel of Hua'ao automobile lack of independence, at the same time, it greatly increases the company's customer acquisition cost. Not only that, according to the 21st century economic report reporter's multi-party investigation, at present, the service scope of most automobile 4S shops covers automobile inspection, maintenance, extended warranty and other services, providing similar business in the form of self-employed or outsourcing, which means that Huaao automobile may also face the same level competition from 4S stores.

In 2018, when the company first submitted the prospectus, the above-mentioned operation mode of the company was questioned by the regulatory authorities. Three years later, the company rushed to be listed again, and the cooperation mode between the company and 4S stores was still focused on.

In this regard, Hua'ao automobile said that there was no competition or substitution between Huaao automobile inspection service and the service provided by 4S stores.

As a matter of fact, according to the staff of Beijing Xibeiwang Honda, Volkswagen and other 4S stores visited by the 21st century economic report, they can provide vehicle inspection and evaluation services, and the in store insurance companies can also provide automobile insurance extension services.

In the prospectus, Hua'ao automobile also pointed out that cooperative 4S stores may be suspended from cooperating with Huaao automobile due to various uncertain factors and choose other cooperative organizations.

Comparing the two Prospectuses of Huaao automobile, the reporter of 21st century economic report found that the above-mentioned matters are indeed taking place in a large number during the reporting period of the company.

In 2017, Huaao automobile cooperated with 998 automobile 4S stores in China, while by the end of 2020, the company cooperated with 984 automobile 4S stores. In this regard, Hua'ao automobile said that it was due to the company's initiative to eliminate inefficient 4S stores, and the total number of cooperative 4S stores remained basically stable.

It is understood that affected by factors such as the double decline of automobile production and sales and the tightening of supervision, the current automobile 4S shops are generally difficult to operate, and are vigorously expanding new business. The cooperation with inspection institutions such as Huaao Automobile Co., Ltd. has actually diluted the performance of 4S stores. Whether the company's cooperation mode can be sustained has become the biggest doubt of sustainable operation.

High profit faces challenge

"From the point of view of the unit price of inspection service, the inspection service of Huaao automobile is not competitive in the market." an automobile industry analyst told the reporter of the 21st century economic report that the current independent vehicle inspection market is actually a red sea market with low price competition. From the perspective of the service unit price of Huaao automobile, Huaao automobile lacks market competitiveness after leaving the scene of 4S shop.

From 2018 to 2020, the number of customers in the company's testing business was weak. In 2017, the company's testing business services were 92468, 102916 in 2018, 102850 in 2019 and 75369 in 2020. The number of extended warranty services of the company also declined significantly, with 86725 in 2018 and 69536 in 2020.

The number of services has dropped sharply, but the company's revenue and profits have remained high. The business secret is to raise the price substantially. During the reporting period, the unit price of the company's automobile inspection service increased from 4219.54 yuan in 2018 to 5266.67 yuan in 2020, and the unit price of extended warranty service increased from 1392.07 yuan to 1987.10 yuan.

According to the 21st century economic report, the reporter inquired from the car inspection gang and other channels that the comprehensive inspection of ordinary cars is generally calculated according to the ex factory price. Taking the car inspection group as an example, the inspection fee for vehicles within 100000 yuan is 399 yuan, the cost for vehicle inspection between 100000 yuan and 200000 yuan is 499 yuan, and that for vehicles over 200000 yuan is more than 599 yuan, The vehicle owner only needs to bear the travel expenses of the inspection personnel.

"The market price of automobile sales and inspection services ranges from 300 yuan to 1000 yuan. If the car is put in the 4S shop for testing, the price may more than double," a staff member of a third-party inspection agency told the 21st century economic report.

Compared with the price, it is not difficult to find that the inspection service price of Huaao automobile is even twice as high as that of 4S shop, but the company's high price marketing strategy is obviously difficult to sustain.

In the latest report period, Huaao automobile inspection and evaluation service is the main source of gross profit of the company, accounting for more than 90% of the gross profit of all business, and the gross profit margin of inspection and evaluation reached 77.75%, 76.31% and 73.87% respectively, far exceeding the gross profit rate level of automobile inspection industry.

According to its previous prospectus, from 2015 to 2017, the comprehensive gross profit margin of Huaao automobile was 79.16%, 77.93% and 70.18% respectively. In 2015, the gross profit margin of the company's testing and evaluation was even as high as 83.74%, which was reduced to 78.61% in 2017, while the gross margin of extended warranty decreased from 28.36% in 2015 to 13.42% in 2017.

In the past five years, the gross profit margin of Huaao Automobile Co., Ltd. has shown a sharp downward trend. The company admits that if the company can not increase and enrich suppliers and optimize the cooperation conditions of suppliers, it will face the adverse situation of continuous decline in gross profit rate.

Questions about staff turnover

According to the prospectus of Hua'ao automobile, from 2018 to 2020, the average daily sales volume of inspection business of customer managers of Huaao automobile is only about 0.3-0.4, and the daily inspection service quantity per capita of the company's inspectors is only 1.29, 1.27 and 0.93 respectively. The low frequency of customer acquisition and service results in a large number of employee turnover.

By the end of 2017, there were 1405 employees. By the end of 2018, the number of employees of Huaao automobile (including its subsidiaries) will be 1388, 1315 by the end of 2019 and 1197 by the end of 2020.

In 2020, there are 800 sales personnel, 164 management personnel and 233 technical personnel, of which the turnover rate of management personnel is 2.03%. Among the sales staff, there are 541 account managers with a turnover rate of 18.41%, and 55 channel managers with a turnover rate of 6.36%.

According to the prospectus, in the next three years, Hua'ao automobile plans to add no less than 20 branches and cooperate with no less than 500 4S stores in the next three years, aiming to achieve the goal of increasing the number of new customers' vehicles to 500000. How to achieve the company's business objectives under the continuous turnover of employees?

In the inquiry of the company, the regulatory authorities even questioned whether Huaao automobile and 4S stores shared sales staff to carry out mixed operation. Huaao said that the company's employees did not hold shares in cooperative 4S stores, nor did they hold important positions in cooperative 4S stores.

For a large number of employees continue to leave, and even some media questioned, Huaao automobile relies on a high proportion of employees to leave, so as to avoid paying social security and provident fund, and increase the company's profits.

The 21st century economic reporter noticed that when it first rushed to the market, Huaao automobile failed to pay all the employees' social security and provident fund, which accounted for more than 7% of the regulatory red line, so its listing was blocked.

In 2015, nearly 20% of the company's employees did not pay social security. In 2017, the proportion of unpaid social security and provident fund was 11.73% and 12.05%, respectively, which failed to meet the requirements of IPO audit that the unpaid proportion of social security and provident fund in the latest year should not be higher than 7%.

According to the latest prospectus, in 2018 and 2019, Hua'ao automobile can not meet the requirements of social security and provident fund payment proportion, and it will only meet the conditions in 2020.

It is worth noting that in the five years since its launch, what Huaao automobile has not changed is its plan to invest RMB 505 million in fund-raising projects. According to the company's plan, it plans to use RMB 227 million to raise funds to expand the inspection and extension business volume project, 122 million yuan to build the R & D center, 4450 yuan to invest in information system upgrading, and 111 million yuan to build customer service system and brand promotion.