China’s Bitauto unit receives US$550 million in funding from internet giants

PUBLISHED : Wednesday, 03 August, 2016, 8:10pm
UPDATED : Wednesday, 03 August, 2016, 10:34pm

Chinese internet giants Tencent, Baidu and e-commerce company JD.com have agreed to invest US$550 million in the automotive finance unit of Bitauto, forging a closer tie-up with the car website operator amid growing auto sales.

Yixin Capital, the automotive finance unit, will be 47 per cent owned by Bitauto, which will continue to consolidate the financial conditions of the unit after the cash investment by the three companies, Bitauto said in a statement on Tuesday.

Nasdaq-listed Bitauto, which operates the mainland’s leading auto information website bitauto.com, also runs a car e-commerce platform for trading of new and used cars.

“With the strong support of our partners, Yixin Capital is well positioned for long-term success in China’s online automotive financing industry,” William Li, Bitauto’s chief executive and chairman, said in the statement.

In June this year, the three companies each invested US$50 million in Bitauto. Prior to that, JD.com agreed in January last year to invest US$400 million in cash and US$750 million of resources in Bitauto, while Tencent invested US$150 million in the company. Yixin Capital received a total of US$250 million of cash investment from the two companies in this round of financing.

JD.com holds a 23.5 per cent stake in Bitauto, Tencent has a 7.1 per cent shareholding and Baidu owns a 3.2 per cent stake.

China’s automotive finance industry has drawn interest from tech giants. Alibaba is providing car loans on its e-commerce platform Tmall, while JD.com also runs its own automotive finance unit.

Alibaba is the owner of the South China Morning Post.

Analysts have expected China’s automotive finance industry to see strong growth in the next few years amid a rise in auto sales and more diversified auto loan products.

The penetration rate of automotive financing in China is lower than that in developed countries as Chinese consumers are not used to borrowing to buy a car. According to research by consulting firm Deloitte, the penetration rate last year was estimated at 27 per cent. Yet the firm forecast that the number will reach 50 per cent in 2020 as the younger generation is more receptive to auto credit loans and the involvement of tech companies will bring more energy to the industry.

Despite a slowing economy in China, car sales in the first half of this year remained stable. Data from the China Association of Automobile Manufacturers showed that car sales in the first half rose 8.1 per cent to 12.8 million vehicles.