Cango Inc., a Chinese company with a history deeply intertwined with China’s evolving car industry, is making a significant shift. The company, which initially focused on car finance, has gone through a series of transformations, including domestic auto trading services, before recently putting the brakes on its direct car trading business due to concerns about unsold inventory in a slowing market. Now, Cango is accelerating its latest initiative: exporting used Chinese cars to the rest of the world.
This pivot comes at a crucial time for China’s auto market. The industry, once a powerhouse of growth, is now facing a painful correction after more than two decades of explosive expansion. Cango’s move to an asset-light model, focusing on services rather than direct car trading, reflects its cautious approach to navigate this challenging market landscape.
The company’s financial results reflect this strategy. Cango’s revenue tumbled by 93% in the second quarter year-on-year, largely due to its shift away from car buying and selling. However, investors seem to appreciate the company’s conservative approach, as evidenced by its share price increase of 74% so far this year. This stands in stark contrast to leading car trading services providers, like Autohome, which has experienced a 10.8% decline over the same period.
Cango’s focus on exports is driven by the booming global demand for Chinese cars. The company launched its Autocango.com website in March, and by the end of August, it had attracted over 20,000 registered users in 207 countries and regions. The platform currently lists over 60,000 car models and boasts an average of over 10,000 views per day. Cango’s CEO, Lin Jiayuan, expressed confidence in the platform’s quick traction among global audiences, aiming to position Autocango.com as the leading gateway for exporting used Chinese cars.
While Cango’s export drive is gaining momentum, the company’s domestic business continues to evolve. Its Cango U-Car platform, launched early last year, is focused on providing services to car traders rather than directly engaging in car trading. The platform facilitated 266 vehicle transactions and successfully auctioned 124 vehicles during the second quarter.
Despite the revenue decline, Cango’s shift to an asset-light model has had a positive impact on its profitability. The company’s cost of sales decreased significantly, and its net profit more than doubled in the second quarter compared to the previous year. Cango’s large cash pile, accumulated through a cautious approach and dividend payouts, provides a strong financial cushion during this turbulent period.
While Cango’s journey through China’s evolving car market has been marked by change and adaptation, its focus on export and its transition to a service-oriented model indicate its commitment to navigating the complexities of the industry and securing a foothold in the global market. As China’s export drive continues, Cango is well-positioned to capitalize on the growing demand for Chinese vehicles on the international stage.