SoftBank fund makes $1.5bn bet on Chinese second-hand car firm

Investment values Chehaoduo, the parent of online sites Guazi and Maoduo, at more than $9bn, a representative for the start-up said

In this Nov. 10, 2017, photo, a man walks past an advertisement of SoftBank, in Tokyo.  Japanese technology company Softbank said Monday, Aug 6, 2018, its profits grew to 313.7 billion yen ($2.8 billion) in the latest quarter as it realized gains from sales by its Softbank Vision investment fund. (AP Photo/Koji Sasahara)

SoftBank Vision Fund is investing $1.5 billion in Chinese car trading platform Chehaoduo Group, placing another major bet on the world’s largest automobile market.

The investment values Chehaoduo, the parent of online sites Guazi and Maoduo, at more than $9bn, a representative for the start-up said. It intends to use the money to develop technology in data and cloud computing, the company added.

SoftBank Group and its Vision Fund, the world’s single largest pool of tech investment capital, have poured billions of dollars into the world’s second-largest economy, according to Bloomberg. They’re a backer of Didi Chuxing, the ride-hailing service that ran Uber Technologies out of the country, as well as social media giant Bytedance and AI player SenseTime Group.

The Public Investment Fund, Saudi Arabia's sovereign wealth fund with around $300bn in assets under management, is an anchor investor in SoftBank's $100bn Vision Fund with a $45bn contribution. The PIF holds stakes in Uber and electric car makers Tesla and Lucid, among others.

Chehaoduo, backed by social media and gaming giant Tencent, competes with the likes of Uxin and Souche in a segment that’s remained largely resistant to disruption. Dozens of start-ups - including Chehaoduo and Didi - are now trying to employ artificial intelligence to help users compare pricing, secure auto-financing and gain access to after-market services. Chehaoduo said it will improve services in down payments, second-hand car trading and after-market services via more than 600 physical stores.

“The global automotive industry is experiencing unprecedented change,” said Mark Yang, Chehaoduo’s chief executive. “The application of big data and artificial intelligence is the key to fundamental reform of automotive retail in China.”

The investment adds to SoftBank’s growing portfolio. Its Vision Fund has taken stakes in more than 70 start-ups around the world including Uber and shared-office giant WeWork. In China, its investments include logistics operator Full Truck Alliance and online education start-up Zuoyebang.

“China’s used car market is growing rapidly but online penetration remains low and auto financing is underutilised compared to developed markets," said Eric Chen, a partner at SoftBank Investment Advisers.