Luckin Coffee mastermind Lu Zhengyao – how the Chinese billionaire known for ‘burning money’ went from cars to caffeine
Chinese coffee chain Luckin Coffee may be a cautionary tale after stocks fell nearly 85 per cent – but Hong Kong-based stakeholder Lu Zhengyao has always had a flair for high-risk investment tactics
The name Lu Zhengyao is on people’s lips across Wall Street after one of his companies, Luckin Coffee, saw its stock price plummet 85 per cent.
Luckin Coffee, the once-rising star of the Nasdaq, announced after an internal investigation that its chief operating officer Jian Liu and his subordinates inflated the company’s turnover by 2.2 billion yuan (US$309 million) for its second and fourth quarter 2019 sales figures.
So who’s this Chinese investor who is known for burning cash as part of his business strategy?
His background
A Hong Kong resident, Zhengyao was born in Pingnan County, Fujian province in 1969. After graduating from University of Science and Technology Beijing he worked for the government for three years. After resigning, he started his own business. He worked closely not only with his blood relatives, but some very loyal employees as well – one of whom later founded Luckin Coffee.
The first decade of business adventure
Zhangyao wasn’t an immediately successful entrepreneur. His very first business was trading telecoms parts and systems. Later, in 2005, he founded UAA (Joint Automobile Club) which dealt with car service, car repairs and insurance. The club even received initial investment from Lenovo.
His success started in 2007 with a car rental business called Car Inc. Modelling his business after international car rental services, he opened 11 branches across China in the first year. In less than three years, it caught the attention of Lenovo which then invested 1.2 billion yuan. Lu quickly spent half of it buying new cars, making Car Inc. the biggest car rental company in China. One year later, the company was listed on the Hong Kong stock exchange.
Three years later, Lu decided to open his own ride-hailing app, UCar. This app differed from other ride-hailing apps as it bought its own cars and hired professional drivers. UCar was deemed Zhengyao’s way to repay his investors, a show of loyalty and gratitude.