Good News on Listing | Frost & Sullivan Assists Zhongchi Chefu Internet of Vehicles (Global) Co., Ltd. in Successfully Going Public in the US (AZI.US)

Zhongchi Chefu Internet Technology (Global) Co., Ltd. (Stock Code: AZI.US) successfully listed on the US NASDAQ on August 28, 2024. Zhongchi Chefu Internet Technology (Global) Co., Ltd. was established in 2010 and is one of the early high-tech enterprises in China to enter the industrial Internet field. The company is positioned in the digital service area of the automotive industry supply chain in China, building an industry-wide public digital supply chain SaaS for vehicle manufacturers/parallel importers, insurance companies, and parts manufacturers. Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') provides exclusive industry advisory services for the listing of Zhongchi Chefu Internet Technology (Global) Co., Ltd., and hereby warmly congratulates them on their successful listing.

Investment highlights

Overview of China's Rear-Service Market

In 2018, the overall scale of China's automotive service market was $8.5 trillion, which will reach $11.5 trillion by 2022, with an average annual compound growth rate of 8.3%. In 2022, it reached $11.5 trillion, with an average annual compound growth rate of 8.3%. It is expected that by 2027, the scale of China's automotive service market will reach $15.2 trillion, with an average annual compound growth rate of 5.7%. The automotive sales market grew from $4 trillion in 2018 to $4.7 trillion in 2022, with an average annual compound growth rate of 4.1%.

In the future, with the explosive growth in new energy vehicle production and sales, it is expected that by 2027, the market will grow rapidly at a compound annual growth rate of 3.8%, reaching an estimated $5.7 trillion. The annual compound growth rate of the automotive after-sales market is 11.1%, reaching $6.8 trillion by 2022. With the continuous increase in vehicle ownership and age, by 2027, the automotive after-sales market size will reach $5.7 trillion. It is estimated that by 2027, the automotive after-sales market size will reach $9.5 trillion, with an average annual compound growth rate of 6.9%. The following chart shows the market size of the Chinese automotive service market:

Driving factors for China's after-sales service market

Increase in To-B Participants

To-B enterprises play a key role in the value chain. These companies build online platforms to facilitate smooth transactions of auto parts, while also providing IT solutions to improve the enterprise's supply chain management level. With their in-depth insights into the supply chain and cost advantages brought about by economies of scale, these To-B enterprises will bring significant benefits to the entire market.

Growth in the use of new energy vehicles

The continuous rise in the popularity of new energy vehicles indicates that the entire automotive service market will undergo profound changes. Compared to traditional cars, new energy vehicles exhibit unique models in terms of sales and after-sales service. This transformation undoubtedly creates new market opportunities for the automotive service sector of new energy vehicles.

Average vehicle age increases

With the increase in the average age of Chinese vehicles, it is expected to directly drive up car owners' expenditures on automotive services to ensure the normal operation of vehicles. At the same time, as the number of non-warranty vehicles continues to rise, car owners who consider cost-effectiveness tend to choose independent aftermarket service providers over traditional 4S dealers. This change indicates that automotive service providers will face more market opportunities. In addition, China's continuous investment in infrastructure and the continuous expansion of road networks have laid a solid foundation for the expansion of the automotive consumer market and the potential growth of the service market.

Overview of China's Full Life Cycle Automotive Service Market

In the automotive industry, automotive lifecycle services refer to management services that cover the entire lifecycle of a vehicle, including car sales, repairs and maintenance, car washing and car detailing, installation of required parts, automotive insurance and finance, car leasing, refueling/charging, and other services. When a vehicle is scrapped, automotive lifecycle services also provide vehicle recycling services.

According to a Frost & Sullivan report, with the growth of China's per capita GDP, investment in automobiles has also been increasing accordingly. The market scale of new car sales by China's full life cycle service providers will increase from 7.9 billion yuan in 2018 to 9.2 billion yuan in 2022, with an average annual compound growth rate of 3.8%. It is expected that with the increase in new energy vehicles, by 2027, the market scale of new car sales by China's full life cycle service providers will reach 10.9 billion yuan, with an average annual compound growth rate of 3.4%.

Source: Frost & Sullivan report

Analysis of Players in China's Full Lifecycle Automotive Service Market

According to the classification of service scope, automotive service participants in China are mainly divided into single-service providers and comprehensive service providers.

In the automotive service industry, single-service providers are divided into two main categories: traditional single-service providers and digital single-service providers. Traditional single-service providers mainly engage in automotive service chains (B2C) and regional parts distributors (B2B). These B2C automotive service providers include independent automotive service chains and car repair shops run by couples, whose core function is to provide direct automotive maintenance and other after-market services to end-users. Regional parts distributors, on the other hand, act as intermediaries, supplying automotive parts from parts manufacturers to B2C service providers.

On the other hand, digital single-service providers are B2B automotive service enterprises integrated with internet technology. They leverage their technical and platform strengths to create real-time, comprehensive online one-stop service platforms. These providers, with their strong digital capabilities, offer IT services such as SaaS, supporting auto repair shops in store management, customer acquisition and maintenance, as well as procurement and management of the supply chain.

In the automotive service industry, comprehensive participants are divided into two main categories: traditional comprehensive participants and full-life-cycle automotive service participants. Traditional comprehensive participants, such as 4S dealerships, provide one-stop services that cover vehicle sales, parts supply, after-sales service, and information feedback. Full-life-cycle automotive service participants, on the other hand, integrate B2B and B2C models to connect diverse automotive services.

Taking Zhongchi Chefu as an example, the company has integrated automobile sales, maintenance, automobile insurance, and B2B supply chain services to build a service network that comprehensively covers the entire life cycle of automobiles.

Frost & Sullivan has extensive research experience in the automotive and transportation industry and has assisted well-known companies in successfully listing on capital markets. Successful listings include: Xirui Aircraft (2507.HK), Didi Chuxing (2559.HK), Extreme Intelligence (ZK.NYSE), Zhihang Automobile (1274.HK), Luyuan Group (2451.HK), Noco-noco (NASDAQ: NCNC), VinFast (NASDAQ:VFS), Shengshi Dalian (NASDAQ:SDA), Youpin Auto (NASDAQ:UCAR), HSAI Technology (HSAI.NASDAQ), ECX Technology (ECX.NASDAQ), Boyang International (2457.HK), Newton Group (NWTN.NASDAQ), Zhongxin Hangkong (3931.HK), Leapmotor (9863.HK), DBS World (2418.HK), KuaiDog Taxi (2246.HK), NIO (NIO.SGX), NIO (9866.HK), Canggang Railway (2169.HK), Yanguang Mingzhu (YGMZ.NASDAQ), Asia Express (8620.HK), InfinityL&T (1442.HK), TOMOHOLDINGS (6928.HK), EH Technology (EH.NASDAQ), Aodi Ma (8418.HK), Xiangxing International (8157.HK), CIMC Vehicles (1839.HK), Xunlong (1930.HK), CSSC Leasing (3877.HK), Chengdu Expressway (1785.HK), Tianrui Automotive Interior (6162.HK), Baren Holdings (2885.HK), Huazi International (2258.HK), Pulin Chengshan (1809.HK), NIO (NIO.NYSE), Wanlida (8482.HK), Qilu Expressway (1576.HK), Yingheng Technology (1760.HK), Asia Industry (1737.HK), Ruifeng Power (2025.HK), Gaomeng Technology (8065.HK), Hebei Yichen (1596.HK), Zhengli Holdings (8283.HK), Junao Holdings (8035.HK), Yadi Group (1585.HK), Yihai Car Rental (EHIC.NYSE), Xincheng Power (1148.HK), Zhengxing Wheels (ZX.NYSE), Shuanghua Holdings (1241.HK), Changfeng Axle (1039.HK), Black Sesame Intelligence (2533.HK).