(Yicai) Sept. 27 -- JD Auto, the automotive aftermarket services provider under Chinese e-commerce giant JD.Com, has started a price war against Tuhu Car on the rival’s first trading day on the Hong Kong Stock Exchange.
After congratulating Tuhu for the listing, Miao Qin, vice president of JD.Com and president of the Beijing-based firm’s automotive business division, said that JD Auto would offer ‘Zhenhu prices,’ including labeled products at 5 percent cheaper than those of Tuhu, half-price tires and engine oils, new customer maintenance from CNY99 (USD14), and coupons.
The Chinese word ‘zhenhu’ comes from an idiom that means deliberately doing something as a warning to an opponent. Moreover, the literal meaning of ‘zhenhu’ is ‘shock the tiger,’ as the Chinese character for tiger -- hu -- is the same as the one in the name Tuhu.
However, Miao’s move did not result in any negative consequence for Tuhu, as its shares [HKG: 9690] were trading up 6.7 percent at HKD31.50 (USD4.03) as of 2.35 p.m. in Hong Kong today.
Tuhu was China’s largest automotive aftermarket services provider last year, followed by Shell Helix Auto Care, Tyreplus, Tmall Auto Care, and JD Auto, according to Tuhu’s listing prospectus. However, as the market is very fragmented, the Shanghai-based firm only seized a 0.9 percent share.
China’s automotive service market reached a size of CNY1.2 trillion (USD164.3 billion) last year, and it is expected to expand at a compound annual growth rate of 9 percent for the next five years to reach CNY1.9 trillion in 2027, according to a report from China Insights Consultancy.
Founded in 2011, Tuhu provides tire and chassis parts, car maintenance, car repair, auto beauty, accessories, and related installation services online and offline. As of June 30, the firm had 161 self-operated outlets, 4,968 franchised stores, and 20,013 cooperative stores. By March 31, it had over 100 million registered users, with an average of 10.2 million monthly active users.
Tuhu’s revenue rose 19 percent to CNY6.5 billion (USD889.8 million) in the first half of the year from a year earlier, with an adjusted net profit of CNY214 million (USD29.3 million). Tencent Holdings is Tuhu’s largest shareholder, with a stake of nearly 20 percent.
Editor: Futura Costaglione