Zhongsheng Group Holdings Ltd. · HKEX:881
Zhongsheng — Investor Day (June 2023)
61 slides from Zhongsheng's investor day presentation, Jun 5, 2023
Slide 1: Zhongsheng Group Investor Day
Zhongsheng Group Investor Day Dalian June 05, 2023
Slide 2: Agenda
Agenda 1 Opening remarks 2 Market outlook and growth opportunities 3 Zhongsheng services as a brand: overview 4 Zhongsheng services as a brand: customer services 5 Zhongsheng services as a brand: collision centers 6 Zhongsheng services as a brand: used car services 2
Slide 3: Attendees of Zhongsheng Group
Attendees of Zhongsheng Group Yi Huang Guoqiang Li Zhicheng Zhang Qing Hao Chairman and President, Executive Executive Director and Vice President and Lexus Executive Director Director and CEO and Vice President Brand General Manager Xin Zhou Ning Yu Daniel Zhou Yunpeng Jiang Vice President and Vice
Slide 4: Zhongsheng Group is the largest auto service provider in China
Zhongsheng Group is the largest auto service provider in China with full coverage of auto service value chain Footprints in 32 core cities 417 318 7.65mn dealer stores1 dealer stores in customer higher-tier cities4 serviced Changchun Shenyang Beijing Tianjin Dalian 520k units 140k units 6.72mn units
Slide 5: Resilience in operations despite adverse 2022 environment
Despite the adverse external environment in 2022, Zhongsheng upheld “customer first” philosophy and showed great resilience in operations New car Value-added service Used car Aftersales & accessories Industry-leading performance Significant increase in auto services profit Profit mix, RMB million 21
Slide 6: Zhongsheng Group Strategic Transformation
Zhongsheng Group Strategic Transformation From single-store management to platform-based operations The most trusted auto From new car sales service brand among to providing full life- premium Chinese cycle auto services consumers From OEM brand- oriented dealership to Zhongsheng branded auto servic
Slide 7: Agenda
Agenda 1 Opening remarks 2 Market outlook and growth opportunities 3 Zhongsheng services as a brand: overview 4 Zhongsheng services as a brand: customer services 5 Zhongsheng services as a brand: collision centers 6 Zhongsheng services as a brand: used car services 7
Slide 8: China PV market sales growth slowing while car parc increases
Sales growth in China’s PV market has slowed down, but its car parc keeps increasing with China overtaking the US in 2022 US China New car sales growth in China’s PV market is expected to But its car parc kept increasing and exceeded that of US to be slow down the world’s largest in 2022 New PV sale
Slide 9: US market evolution: aftersales and used cars drive transformation
Based on long term market evolvement in the US, aftersales/used car markets will drive structural transformation in the auto industry once new car sales plateaued New car sales in US market plateaued ... followed by structural consolidation in aftersales around 2000 and used car markets New car sale
Slide 10: Change in auto service providers' business models
...which will drive the change of auto service providers’ business models Part & service Finance & insurance New car sales Used car sales Others 2000-22 gross profit mix of AutoNation (No.1 auto service provider in US), 2000-20 AutoNation strategic USD billion, % CAGR transformation 5.3 5.0 Shift to
Slide 11: Competition between global OEMs and local Chinese OEMs in EV
Competition between leading global OEMs and local Chinese OEMs in EV has intensified Global OEMs address the challenges posed by local Chinese OEMs through accelerated electrification and smartification development Mainly ICE electrification Brand new BEV platforms MRA/MFA MB.EA Shared ICE-EV Mid/la
Slide 12: Electrification brings new opportunities for auto service market
Electrification brings new opportunities for the auto service market EV penetration in China has been growing Car-aging trend and car parc increase rapidly1... drive the growth of auto service demand EV penetration in China ~2 years vs. ~7 years ~26x 26% Average EV age Average PV age ~13mn units vs.
Slide 13: Three major opportunities for auto service market in China
We believe there are 3 major opportunities for auto service market in China A Auto aftermarket with B Breakthrough in used C Branded auto services and RMB 1 tn potential1 car institutionalization industry consolidation 1. Expected 2020-30 market size growth 13
Slide 14: Aftermarket: rapid growth to RMB 2.6 tn in 2030
A. Aftermarket: increasing car-aging and car parc drive the rapid growth of China’s aftermarket, which is expected to reach a market size of RMB 2.6 tn in 2030 with around 6% of CAGR PV parc in China, million units China’s PV aftermarket size1, RMB trillion 4% p.a 320 360 6% 2.6 260 270 290 p.a 240
Slide 15: Aftermarket: accident car repair is the most imperative segment
A. Aftermarket: accident car repair is the most imperative segment, which is expected to be more relevant given the trend of electrification In the auto service industry, nearly 50% of profit comes from aftermarket, Increasing EV parc will further whose profit is 60-70% contributed by accident car r
Slide 16: Aftermarket: direct parts procurement improves profitability
A. Aftermarket: direct parts procurement can further improve profitability of aftersales services Traditional procurement model Centralized direct sourcing New auto insurance pricing policies were launched in Sep. Part supplier A Part supplier B Part supplier C Part supplier A Part supplier B Part s
Slide 17: Used car: structural problems being resolved
B. Used car: longstanding structural problems which handicapped the development of used car business are being resolved, market potential will be released from a long-term perspective Consumer adoption Policy and regulation support Transparent vehicle information 1 Chinese consumers are more and mor
Slide 18: Used car market expected to exceed RMB 1.1 tn in 2025
B. Used car: China’s used car market size is expected to exceed RMB 1.1 tn in 2025 with average growth rate of 10%, indicating great potential 2015-2025 new and used passenger car1 sales in China Used-to-new vehicle sales million units ratio 2021 used car sales/new car sales 2.8 +10% p.a. 24.0 24.5
Slide 19: Used car business key profit driver; CarMax case study
B: Used car: the development of mature markets indicates that used car business will be key profit driver for auto service providers in the future For auto service providers in mature markets, profit Case study: CarMax managed to address pain points of brand credibility for used car buyers, and of u
Slide 20: High-income households to triple by 2030
C: Branded services and industry consolidation: # of high-income urban households in China will triple in 2030, generating strong demand for premium auto services # of high-income urban households in High-income households prefer Offerings and quality are key China has been growing rapidly1 aftersal
Slide 21: Auto service providers highly fragmented, consolidation potential
C: Branded services and industry consolidation: auto service providers are highly fragmented and varied in service capabilities, with huge potential of industry consolidation Example - accident car repair 4S store Independent collision center Chain collision center Share of accident car payment amou
Slide 22: Key success factors in building service brand
C: Branded services and industry consolidation: key success factors in building service brand 1 Established market practices AutoNation built its own Descriptions (AutoNation) brand of AutoNation Collision Center and AutoNation USA High-quality • ~65%1 of consumers • Provide the same showroom with s
Slide 23: To become the most trusted auto service brand for premium consumers
Zhongsheng’s strategic vision: To become the most trusted auto service brand for premium consumers in China To build a household name for auto services for the upcoming 130 mn high-income families in China Next strategic milestones 100 +100% 1.0 No. of Collision Revenue of car Used-to-new Centers ac
Slide 24: Agenda
Agenda 1 Opening remarks 2 Market outlook and growth opportunities 3 Zhongsheng services as a brand: overview 4 Zhongsheng services as a brand: customer services 5 Zhongsheng services as a brand: collision centers 6 Zhongsheng services as a brand: used car services 24
Slide 25: Build Zhongsheng's auto service brand
Build Zhongsheng's auto service brand CRM center Full life-cycle user operation Collision center Used car platform Collaboration of 7 Effect of scale, cost and Cross-brand/region transfer and platforms productivity improvement precise pricing ▪ Improve service quality of stores ▪ Empower user Procur
Slide 26: Large customer base: Zhongsheng an industry leader
A: Large customer base: Zhongsheng has been an industry leader 7.65 mn cumulative customers serviced4 3.54 mn 2 mn customers Insurance policies serviced1 brokered2 15% 2019-22 CAGR 28% 2019-22 CAGR 5.04 mn 1.04 mn WeCom users3 Zhongsheng GO registered users4 Scale-up since 2021 Official launch on Ap
Slide 27: Coverage of main city clusters in China
A: Large customer base: Zhongsheng has covered main city clusters in China with the potential to further unlock growth within these clusters Main city clusters in China1 and Zhongsheng's store & customer distribution XX # of Zhongsheng stores XX # of Zhongsheng active customers in each city cluster5
Slide 28: Excellent brand mix: higher-end and luxury brands
B: Excellent brand mix: Zhongsheng has been focusing on the optimization of higher-end and luxury brands NON-EXHAUSTIVE xx # of stores Mid-to-Higher-end brands Luxury brands 64% Share of luxury brands stores Brand 97 29 mix 108 54 32 30 #1 Market share of Lexus #2 22 21 19 2 Market share of Mecedes-
Slide 29: High geographical concentration in higher-tier cities
C: High geographical concentration: Zhongsheng continues to tap the potential of higher-tier cities and regions Ave. age of Market share of luxury brands in 32 key cities in 2022,% stores3 (yr) 80 60 55 53 48 41 39 33 31 30 30 30 26 26 23 22 19 19 15 14 12 12 12 12 8 7 6 5 2 8.6 Foshan Chengdu Dong
Slide 30: Leader in CRM: digital user operation capabilities
D: Leader in CRM: Zhongsheng has created industry-leading digital user operation capabilities through continuous innovation on user experiences Continuous innovation on user experiences Zhongsheng GO Launched on April 1, 2023 1.35mn visits on Day 1, including new users of 0.14mn, achieving 0.11mn or
Slide 31: Strong M&A integration capabilities
E: Strong M&A integration capabilities: Zhongsheng has invested over RMB 10bn in acquisition of 100+ dealer stores since 2017, demonstrating solid post M&A integration capabilities XX # of dealer stores acquired Historical M&As,2017–2022 Superior capabilities in M&A integration Luxury brands 23% RMB
Slide 32: To become the most trusted auto service brand for premium
Zhongsheng’s strategic vision: To become the most trusted auto service brand for premium consumers in China To build a household name for auto services for the upcoming 130mn high-income families in China Next strategic milestones 100 +100% 1.0 No. of Collision Revenue of car Used-to-new Centers acc
Slide 33: Agenda
Agenda 1 Opening remarks 2 Market outlook and growth opportunities 3 Zhongsheng services as a brand: overview 4 Zhongsheng services as a brand: customer services 5 Zhongsheng services as a brand: collision centers 6 Zhongsheng services as a brand: used car services 33
Slide 34: Collaboration among key platforms under one brand image
Collaboration among 4 key platforms to serve Zhongsheng customers under one single brand image CRM center, connected with other business platforms, acts as one single customer touchpoint to build the "Zhongsheng Service" brand system Expanded online sales Status quo of CRM Settlement price (RMB 850m
Slide 35: CRM centers upgraded in three areas
CRM centers have been upgraded (vs. the traditional model) in 3 areas: integrated marketing resources, standardized service processes, and digital customer operations “Four obstacles” in traditional customer operation Enhanced customer experience A. Integrated marketing resources Operation ▪ Break b
Slide 36: Improved service quality and effectiveness of CRM centers
A|B: Service quality and effectiveness of CRM centers have been significantly improved with integrated marketing resources and standardized process management Activities covered by CRM centers The auto insurance renewal rate and service effectiveness have been significantly improved Renewal rate, %
Slide 37: Digital levers enable omni-channel customer operations
C: Digital levers enable Zhongsheng to achieve customer-centric, full lifecycle and omni-channel customer operations From dealer-led customer …to omnichannel, full lifecycle service relationship… platform Distribution of customers 7.65mn In total2 5.04mn Via WeCom2 ▪ Vehicle is the only connection b
Slide 38: Creating the most valuable membership platform
Creating the most valuable member- C: Zhongsheng takes customer experience to the next level from ship platform to offline to omni-channel through WeCom and Zhongsheng GO build a "car owner Acquiring customer data Increasing interaction User fission to capture ecosystem of people, via WeCom frequenc
Slide 39: Zhongsheng GO paid subscription membership platform
C: We aspire to make Zhongsheng GO the most valuable membership platform in auto services Implication of the paid subscription Exclusive benefits for paid subscription membership system membership A prerequisite to earn points 1 Any consumption is converted to points High stickiness: paid membership
Slide 40: Omni-channel customer operation case study: Labor Day campaign
Campaign initiation Execution Impact achieved Omni-channel Time: 4.26-5.7, 2023 Browsing, benefits application & 21k units customer Platform: offline stores + Zhongsheng usage, and write-off tracked to provide real-time feedback to Incremental orders received during GO operation case Content: ‘125 y
Slide 41: Omni-channel customer operation case study: 618
Omni-channel customer operation case study: May 31 Jun 12 Jun 18 Zhongsheng GO 618 New subscription customer Blind box lottery launched to 3 rounds of flash sale of hot selling customer benefits benefits launched repeatedly attract customers to the products at floor price for members campaign ▪ Prom
Slide 42: What can Zhongsheng GO achieve going forward?
Going forward, what can Zhongsheng GO achieve? 1 Targeting at over 10mn high income families to achieve transition from vehicle connection to people connection Long-term goal 2 Providing car owners with full lifecycle services Achieving low-cost lead generation and 3 Expanding Zhongsheng selected pr
Slide 43: Agenda
Agenda 1 Opening remarks 2 Market outlook and growth opportunities 3 Zhongsheng services as a brand: overview 4 Zhongsheng services as a brand: customer services 5 Zhongsheng services as a brand: collision centers 6 Zhongsheng services as a brand: used car services 43
Slide 44: Current auto repair services suffer from three pain points
Current auto repair services suffer from 3 pain points Poor service quality Low efficiency High cost ▪ Varying efficiency and quality of ▪ Underutilized equipment and ▪ Lack of vehicle supply given only technicians waste of resources due to low new car brands are served, making it ▪ Unstandardized s
Slide 45: Zhongsheng collision centers fully upgraded
Zhongsheng collision centers have been fully upgraded, thanks to its unique resource advantages Cozy lounge Fully upgraded area Service quality and levels are comprehensively Improved Star services improved with consistent CI1 standard, refined service quality software and hardware service facilitie
Slide 46: Collision centers build on Zhongsheng Group advantages
Zhongsheng collision centers build on the advantages of Zhongsheng Group, creating a natural moat Core elements to build Zhongsheng's endowments and collision service centers advantages Land & capital Leverage original store property to save land, A large area of land and huge investment are needed,
Slide 47: Unique value propositions to all stakeholders
Zhongsheng collision centers offer unique value propositions to all stakeholders, including customers, insurers, other third-party dealers and government Improved service Customers quality More affordable price Specialist technician team Better experience, e.g., consistent quality Cozy lounge area s
Slide 48: Case study: Dalian collision center
Case study: Dalian collision center has achieved significant impact from cost Dalian collision reduction and efficiency improvement, laying the foundation for center rolling out the model at scale Resources are integrated to achieve comprehensive Service efficiency improvement in digitalization and
Slide 49: Collision center footprint and planning toward 100
There are 6 Zhongsheng collision centers currently. Our next strategic milestone is to expand to 100 and correspondingly double the accident car repair output value In operation Under development Collision center footprint and Collision center 1.0 Strategic goals planning Modify based on current fac
Slide 50: Courtesy cars a source of used car supply
Courtesy cars will be a good source of vehicle supply to the used car business while enhancing customer experiences Zhongsheng courtesy car business is expected to generate 10-20k high-quality used cars annually # of courtesy cars ~10,000 10,000-20,000 ~4,300 high-quality used cars to Zhongsheng1 20
Slide 51: Collision center aspiration: most trusted service brand
Zhongsheng collision center is aspired to create the most trusted service brand for quality consumers, and to build Zhongsheng after-sales ecosystem Details to follow What can Zhongsheng collision center achieve going forward? Higher quality services to Zhongsheng customers, while satisfying 1 broad
Slide 52: Collision centers, CRM centers and Zhongsheng GO form a closed loop
Collision centers, CRM centers and Zhongsheng GO form a closed business loop Membership points Membership points Zhongsheng CRM Collision GO centers centers Accident Leads vehicles Goals 4mn users RMB 20bn in auto RMB 20bn in insurance premium revenue brokered 52
Slide 53: Agenda
Agenda 1 Opening remarks 2 Market outlook and growth opportunities 3 Zhongsheng services as a brand: overview 4 Zhongsheng services as a brand: customer services 5 Zhongsheng services as a brand: collision centers 6 Zhongsheng services as a brand: used car services 53
Slide 54: Used car market in China will see a brand selling over 1mn cars
We believe used car market in China will see a brand that sells more than 1mn cars As used car market in China matures overtime, sales of a Key success factors of becoming a leading brand is expected to reach 2.2mn units1 when used-to- leading used car brand new ratio is close to that of mature mark
Slide 55: Industry-leading UCC model
To capture the opportunities, Zhongsheng adopts the industry-leading UCC1 model In May 2022, Zhongsheng transformed the traditional decentralized operating model to the UCC model that sells used cars from multiple brands with specialized teams Single brand Multi-brands How a used car is distributed
Slide 56: UCCs: sourcing, precision pricing and distribution
Zhongsheng UCCs leverage their own endowments and make breakthroughs and innovations in used car sourcing, precision pricing and sales/distribution Zhongsheng has A Used car Broad access to 2C channel: trade-in, customer engagement high-quality used (e.g., Zhongsheng Go membership program) set up UC
Slide 57: Used car sourcing: broad access to high-quality sources
A: Used car sourcing: Zhongsheng builds broad access to high-quality used car sources and captures synergies with other business units within the group 2C 2B Centrally procure replacement vehicles via Centralized rental company and turn Gain access to used cars them into used car for when customers
Slide 58: Precision pricing: specialized team and big data analytics
B: Precision pricing: Zhongsheng builds industry-leading pricing capabilities with a specialized pricing team and big data analytics Specialized pricing team Big data analytics model Support quotation and negotiation process Inform decision-making Region and brand specialization Proprietary data of
Slide 59: Sales and distribution: four key levers
C: Sales and distribution: Zhongsheng builds its used car brand via four key levers Zhongsheng’s used car sales mechanism Key levers Wide regional coverage with scale Used car Store 1 Store 2 Store 3 Store 4 Store 5 Store 6 Store N 1 advantage sources Build regional “big stores” based on broad acces
Slide 60: Case study: Zhongsheng Mercedes-Benz Nanjing Store
Case study: Zhongsheng Monthly sales in 2023 reaches Mercedes-Benz Used car sourcing Sales uplift 200 units (RMB 9,600 gross Nanjing Store Gain access to high-quality “Fixed” price + “used car margin per unit) with a used-to- new ratio of 0.72 initiatives used cars via internal auction new retail” m
Slide 61: To become the most trusted auto service brand for premium
Zhongsheng’s strategic vision: To become the most trusted auto service brand for premium consumers in China To build a household name for auto services for the upcoming 130mn high-income families in China Next strategic milestones 100 +100% 1.0 No. of Collision Revenue of car Used-to-new Centers acc