An Interview With Cango Inc
1. Why was Cango founded?
Cango's mission is to make the car buying experience simple and enjoyable. Cango was founded in 2010, when China's auto market entered a "golden decade" of explosive growth. Given this rapid growth, the pain points in China's auto market, especially those in lower-tier markets, have gradually become obvious. Consumers want a convenient way to view, assess and purchase cars, as well as safe and reliable auto loans, insurance and other related products and services. Due to increasingly fierce competition and high inventory caused by the massive expansion of production capacity, OEMs and dealers urgently need to boost sales. They see huge opportunities related to consumption upgrades in the lower-tier markets, but they lack an effective way to reach end consumers and understand their demands. To satisfy these unmet needs, we established Cango as a "connector" between consumers and dealers, creating value for all parties in the auto transaction value chain.
We began with Cango's automotive financing facilitation business and penetrated the lower-tier markets with a network covering nearly 50,000 dealers nationwide. Based on this solid foundation, we are now actively expanding both upstream and downstream, extending our business to car trading transactions and after-market services facilitation. Over the past two years, Cango has made significant progress in both areas, enriching our product matrix and increasing our value to consumers and the auto industry.
2. Since the company's founding, what have been your most memorable milestones?
In 2010 we established our main business model, the automotive financing facilitation service, and set up a nationwide dealer network penetrate lower-tier cities. Prior to 2016, Chinese financial leasing companies were our only source of funding. However, in 2016 we began cooperating with commercial banks, after which our transaction volume grew very rapidly. We have since become a leading auto financing service platform in China.
In 2017, we closed our Series A and Series A+ funding, which was led by Warburg Pincus, and commenced cooperation with WeBank, an internet bank controlled by Tencent Group. In 2018, we closed rounds of Series B and Series C funding; Series B was led by Tencent Group and Taikang Life Insurance Group and Series C was led by DiDi Mobility, which is China's largest ride-sharing company.
In July 2018, we were listed on the New York Stock Exchange, becoming a public company.
With our goal of "serving consumers and the auto industry as a whole" in mind, Cango recently made the strategic decision to expand to after-market services facilitation. We are now able to better serve consumers through a diversified insurance business. Despite the impact of COVID-19 on the overall economy and the industry, Cango is still working assiduously to achieve our mission and realize our vision for the coming decade. Our goal is to complete our transformation from an auto financial services provider to a comprehensive retail platform for the automotive industry. During the second half of 2020, we began to explore car trading transactions services. Thanks to our established presence in the lower-tier markets, this business has developed quickly, and car trading transactions' contribution to the company's total revenues have grown to approximately 50%. We are committed to making car purchasing simple and enjoyable and becoming consumers' auto service platform of choice.
3. Regarding your investment in Li Auto, what excited you about that company? Are large investments like this part of your future plans? Are you working with any other NEV manufacturers (e.g., Tesla)?
As a leading tech-enabled auto services platform in China, we closely follow auto industry development trends and integrate them into Cango's strategic development plan. New energy vehicle or NEV is an inevitable trend in the evolution of the automotive industry. We are firmly optimistic about this market and have begun to invest in this field. Our investment in Li Auto back in 2018 has brought significant investment returns and strategic cooperation opportunities following its listing on Nasdaq in July 2020.
Our investment in Li Auto is not only financially significant, but also strategically important. In recent years, given industry-related policy changes and scientific and technological progress, emerging NEV manufacturers have begun to seize traditional car manufacturers' market share. Traditional auto giants have also announced new energy models, illustrating the evolution of the automobile industry as a whole. NEV are the future of the auto industry's upgrade and transformation. We are firmly optimistic about NEV and will continue to implement strategic initiatives in this sector.
Cango's business model is highly compatible with NEV brands, which typically adopt a direct sales model. NEV brands build self-owned exhibition stores and utilize a minimalist process to allow customers to complete their vehicle orders online. This standard operating procedure of NEV brands requires seamless support services. A business like Cango is a natural match for NEV brands; our dealer network and on-the-ground capabilities go deep into the heart of auto sales transactions. We have relationships with diverse financial institutions and can easily connect NEV customers to our financing services and products through their apps. We also have more than 10 years' experience in the lower-tier markets and China's largest offline dealer network, as well as rich professional capabilities in the auto services industry. Cooperation with Cango helps NEV manufacturers effectively and efficiently realize the "last mile" of their online and direct sales model.
Our extensive dealer network and on-the-ground service capabilities in the lower-tier markets can also add value for NEV manufacturers. After a decade of development, we have become a large-scale and efficient service platform, which connects auto trading, financing and insurance services. We also have strong risk control audit and asset management capabilities. By utilizing Cango's existing platform, NEV manufacturers can avoid a large investment in infrastructure construction. We can securely manage their entire transaction process online and provide a one-stop, efficient, affordable, and transparent shopping experience for their customers.
We are currently Li Auto's nationwide service partner, and cover all Tesla stores in Shanghai. Meanwhile, we have cooperated with XPeng, GAC New Energy, GAC Toyota New Energy and other manufacturers to provide trading, financing, insurance and other products and services. At present, based on our financing and insurance facilitation capabilities, we provide auto financing and insurance products and services to NEV manufacturers on a relatively large scale. We also utilize our offline services network to provide manufacturers with delivery (including long-distance delivery), registration and other services in lower-tier markets that cannot be covered by their direct sales model. We can even support their promotion efforts and help them better attract customers. Leveraging these advantages, we will constantly deepen and expand our strategic cooperation with major NEV brands, strengthening our core position in the NEV transaction and after-market services markets.
4. Do you foresee the used vehicle market to continue to expand at the rate it has been? If so, how do you plan on scaling along with that?
China's used car market is still in a stage of rapid expansion. China's government is promoting this market, as demonstrated by the Ministry of Commerce's series of official documents encouraging the used car market's development. In addition, the number of available used cars will rise significantly as the new car market grows, leading to strong prices. That is why we believe the used car market will continue to expand over the long term.
China's used car market has sustained fast growth over the past few years. However, compared with mature markets like the U.S., it is still in an early development stage, with a lower proportion of used cars than new cars, which is an indicator of massive potential. In comparison, the U.S. has long had a highly developed auto industry with strong manufacturing capabilities, resulting in a saturated market and a profoundly influential auto ownership culture. Of course, given the characteristics of the infrastructure planning in the U.S., cars are positioned more as a means of transportation. It's not uncommon for Americans to own a car from an early age, usually a used car given to them as a gift by their parents. Therefore, Americans have a higher level of acceptance of used cars or older models than Chinese consumers.
Let's take a look at the used car market in China. As the new car market expands, the number of cars available for civilian purposes has grown steadily, suggesting a substantial increase in the future number of used cars as well. In addition, the government's new supportive policies have led to a better-regulated used car market. According to the China Automobile Dealers Association's forecast, the used car market's annual transaction volume will exceed 21 million by 2025. China's used car market has high value potential, both as a link in China's automotive value chain and as a part of China's internal economic system. As such, we believe it will continue to expand over the long term. Even facing the pandemic's headwinds, the used car market is still growing at a steady pace, a testament to its resilience and strength and a motivation for our expansion in this segment.
5. I've noticed that Cango has taken on a variety of charitable initiatives. Which causes are most important to you and why?
At Cango, we prioritize our corporate social responsibilities and strive to become outstanding corporate citizens. In 2019, we founded our own corporate charity organization, Cango CSR. Our volunteers participate in charity programs echoing our core values, empowering society and contributing to shared growth. We focus on orphaned and impoverished children and children with disabilities, caring for them and helping improve their lives. With every project we roll out, Cango volunteers bring love and hope to children in need. We also donate to eligible external charity organizations via the Cango Charity Plan. Our standing charity projects include Chunhui Care Home, Cango Dream Fund and Cango Charity Market.
In 2019, Cango began collaborating with Beijing Chunhui Children's Foundation and donating to its Chunhui Care Home program. Chunhui Care Home provides medical services for children with disabilities and orphaned children suffering from intractable or severe diseases in welfare institutions across China. In addition to accompanying the children throughout their medical journey, the program provides care before, during and after surgeries. The program recruits professional pediatricians and nurses and trains full-time "Chunhui Moms" to ensure that the children's medical and emotional needs are fully met. These dedicated medical professionals and volunteers provide love and care and help to expedite the children's recovery, after which they are placed for adoption by loving families. To date, Cango has donated a cumulative RMB1.8 million to sponsor twelve children in need, bringing them to Shanghai for medical treatment and special care.
At the end of 2020, in collaboration with the Bairen Benevolent Foundation, Cango Charity launched an elementary schoolbook donation program in the villages where Bairen conducts its long-term Rural Education Support Campaign. To date, Cango Charity and Bairen have established CANGO Book Corners in three elementary schools in the villages in Honghe Hani and Yi Autonomous Prefecture in Yunnan. Cango Charity worked with volunteer teachers at each school to choose and purchase books based on their students' diverse needs. As discussions progressed, Cango Charity discovered that these teachers had ideas for other projects to improve their students' wellbeing and facilitate their healthy mental and physical development, but lacked funding and support. With this in mind, Cango Charity and Bairen jointly rolled out the Cango Dream Fund initiative, which not only includes the existing CANGO Book Corners project but also allows volunteer teachers to apply for funding to help them implement their charitable projects and realize their dreams for their students. Cango Charity has already funded several such projects including "campus diabolo team," "psychological counseling studio" and "hand-painted performance costumes for Children's Day."
Cango Charity also advocates a hands-on approach to charity work. Started by Cango volunteers, Cango Market aims to popularize charity work while providing Cango employees with a platform for fun-filled interactions. Second-hand and handmade products can be exchanged or put up for charity sale on Cango Market, while Cango volunteers can recruit coworkers and share their own charity efforts. Funds raised through Cango Market are remitted to the Cango Charity Plan to be used for various charity projects.
In addition, Cango Charity has taken an active part in various social charity events, such as Egg Walkathon, a charity fundraising walkathon.
6. How did you manage to develop such a strong company culture, and how did you identify your key values?
Cango is a team of down-to-earth entrepreneurs with a fighting spirit. Thanks to our determination and market focus, we built the company from a team of fewer than 10 people and a few dozen orders per month, to a public company recognized by the capital market and listed on the New York Stock Exchange. Each time I look back on our journey, I become more convinced that the combination of common-sense practicality, dedication and sheer tenacity has made Cango what it is today. These attributes also distinguish the Cango team in the industry. Dedication and tenacity will always be our unwavering commitment to our customers and shareholders.
As we built our organization and culture, Cango's management team examined the company's history to identify our differentiators and secrets to our past success, as well as the values Cango needs to embrace for its future development. Our senior managers were aligned in their answers - to achieve future success, Cango needs a collective mission and vision, long-term goals and clear, practical strategies. We came up with these five values and priorities: mission-driven, courage to challenge, desire to grow, value creation and respect for the individual.
Alongside these five values, everyone at Cango embraces integrity as our ultimate guiding principle and the baseline of our business ethos. We are confident that our values will continue to drive our entire team to forge ahead with our vision for the next decade regardless of market and industry headwinds.