According to what is worth buying, taking a certain type of engine oil as an example, in order for consumers to enjoy the "Zhenhu price", they need to add classic 618 gameplay such as discount coupons and full discounts within a limited period of time, and also need to go to JD's car maintenance store offline to verify the return to Beijing beans, and then post orders for return to Beijing beans.

The platform operation has achieved KPI, JD's car maintenance stores have attracted customer traffic, and even received positive reviews in pictures and text, everyone is happy, except for consumers who are confused by rules.

Rather than going against the trend with consumers, Liu Qiangdong has made up his mind to compete fiercely with Touareg's car owners for a wave of customer traffic in this 618 shopping festival.

After all, although the revenue scale of Tuhu Car Maintenance is only 10 billion yuan, it is the largest automotive aftermarket enterprise in China for 13 consecutive years. Now, it has over 6000 Tuhu Car Maintenance workshops, covering 332 cities nationwide.

In contrast, JD.com, which started laying out its automotive aftermarket in 2017, although has cooperated with over 40000 third-party stores, has only 1600 self branded JD car care stores, which is even worse than this year's relatively low-key Tmall car care, which already has over 2000 stores.

The automotive aftermarket service cannot avoid opening stores. In order to surpass Tiggo in scale, franchisees need to see the hope of making money, and customer flow is the core.

It can be foreseen that the "Zhenhu Price" formula of "low price" and "diversion" will continue, after all, Liu Qiangdong's intention to gamble heavily on the automotive business is already very obvious.

02

Relying on automobiles to rebuild JD.com

Last year on June 18th, at the 20th anniversary celebration of JD.com, the newly appointed CEO of JD.com Group, Xu Ran, proposed the "35711 Dream" for the next 20 years: JD.com could have three companies with revenue exceeding one trillion yuan and net profit exceeding 70 billion yuan; 5 companies that have entered the Fortune Global 500; Seven listed companies with a market value of no less than 100 billion yuan starting from scratch.

JD once started by selling CDs, and built today's huge empire by taking advantage of Internet e-commerce and selling 3C digital products. According to the 2023 financial report, the revenue share of 3C digital products still exceeds 50% of JD's retail revenue.

But it is obvious that the Chinese and even global markets, represented by smartphones, have been sluggish for many years, and new products such as VR and metaverse are far from reaching the level of a new trend.

In the eyes of JD.com, whose core business is still retail, the hottest consumer category currently is undoubtedly automobiles.

According to the China Association of Automobile Manufacturers, the sales of automobiles in China reached 30.094 million units in 2023, a year-on-year increase of 12%. Among them, the sales of new energy vehicles reached 9.495 million units, a year-on-year increase of up to 37.9%. In terms of stock, according to official data, as of the end of May 2024, China's automobile stock exceeded 350 million units, ranking first in the world in total.

The scale of the automotive aftermarket is also very huge. According to iMedia Consulting, the size of China's automotive aftermarket industry reached 12.1 trillion yuan in 2022, with a compound annual growth rate of 10.1% over the next five years.

JD.com has over 600 million annual active members, including over 200 million car owners. The high proportion of car owners and the huge market behind them are worth Liu Qiangdong's effort to explore.

As early as 2012, JD.com launched automotive products. In 2017, it began to layout the automotive aftermarket. In June 2023, it integrated the entire channels of vehicle, automotive, second wheel, and car maintenance businesses and teams, and established a new JD Retail Automotive Business Unit.

After nearly a year of polishing, although the current focus is mainly on fighting head-on with JD and Tuhu car manufacturers, the ambition of this business unit has already expanded to the entire automotive ecosystem beyond car manufacturing.

03

Full chain, clear gameplay

If Tuhu's strategy is to use points to cover areas, then JD's strategy is more like vertical integration and comprehensive attack.

In the trillion dollar automotive aftermarket, the advantage of store size has not yet been fully demonstrated for the Tuhu Yangche, which only has a revenue of billions. In the final analysis, in the four years before listing, it had accumulated losses of more than 15 billion yuan. In fact, it was also an Internet game of burning money to grab share.

Looking at Tiggo's 2023 financial report, the adjusted net profit was only 480 million. In terms of operating revenue, tires and chassis components, as well as car maintenance, accounted for 40.8% and 36.3% respectively, while franchise revenue accounted for only 5.4%. Although Tuhu has nearly 6000 franchise stores, it still focuses on making money through the supply chain.

Tuhu is the largest tire retailer and service provider in China, not only deeply cooperating with multiple tire manufacturers, but also having more than ten of its own tire brands; Similarly, while cooperating with major oil and accessory manufacturers, Tuhu is also selling its own brand on the same market. By expanding Tuhu's brand power and increasing its gross profit margin, this is also similar to the logic of "JD Jingzao".

In addition, in response to the new energy era, Tiggo has also become an after-sales maintenance enterprise for 13 mainstream battery manufacturers in China, providing the industry's largest 22000 single battery service orders in 2023.

It can be seen that although Tiggo has taken many actions, it still focuses on the core point of automotive after-sales service and conducts in-depth expansion in self operated and cooperative brands, supply chain, new energy, and other directions.

And JD.com, with its abundant wealth, also replicates the above model of Touareg's car maintenance. Moreover, based on the strong advantages of JD.com's e-commerce and self owned logistics, their cooperation with enterprises is even deeper.

In addition, JD.com has also shifted its focus to selling cars. This year, it has reached strategic partnerships with Lantu, BYD, Citroen, and Xiaomi to sell official parts and even complete vehicles online.

Not only that, offline, JD.com has launched six new energy experience centers for JD.com automobiles, covering test drive experience, vehicle sales, premium accessories, after-sales service, and more, including more than 30 models from more than 10 brands.

JD.com also announced that it will hold 30 JD Auto dealerships nationwide this year, and increase them to 100 next year, promoting the trade in of old cars for new ones in the sinking market.

In the opinion of Mr. Blackboard, Liu Qiangdong's automotive business has great ambitions, and it is indeed a bit like replicating the full chain strategy of JD 3C Digital. Apart from not manufacturing cars, the entire lifecycle from pre-sales to after-sales is deeply linked to consumers, and the benefits contained in it are naturally self-evident.

The disadvantages are also very obvious. The stalls are too large, and we want to promote everything at the same time, which also requires high funding. In the current economic environment, major companies are cutting back on non core businesses without hesitation.

Recently, an obvious phenomenon is that both Tmall's car maintenance and ByteDance's Dongdong car maintenance have significantly slowed down their pace. The most fierce battle on the surface is only between the tiger and the dog.

How much patience will Liu Qiangdong have in the current unclear battlefield of e-commerce for JD Auto's business, which is difficult to bear profits and losses for a short period of time? How much will it cost to expand the scale of JD's car maintenance?

This year's 618 shopping festival was much quieter than before. The excitement, however, came from the close-quarters battle between JD.com and Tuhu.

Recently, both sides sent out advertising-covered buses parked in front of each other's stores, with a sense of provocation before the battle. Throughout the 618 shopping festival, JD.com launched a vast array of "Zhenhu Price" car products and directed traffic to JD.com car maintenance stores.

In fact, the rivalry between the two sides has been brewing since Tuhu went public on the Hong Kong Stock Exchange in September last year.

At that time, Miao Qin, Vice President of JD.com Group and President of JD.com's Automotive Retail Business Unit, posted a congratulatory message on WeChat, but in reality, it was promoting JD.com's "Zhenhu Price" car products that were 5% lower than competitors.

Image Source: Weibo

Due to this statement, Tuhu sued JD.com's car maintenance entities in January this year for "commercial defamation." However, JD.com, which has been through many battles, explained that it was challenging the "obstacles" that affect user experience in the car maintenance market.

Amidst the onlookers' curiosity, one might ask: Why isn't Liu Qiangdong concentrating on dealing with the pressure from Pinduoduo instead of engaging in a tussle with a company whose revenue is only 1% of JD.com's?

According to our analysis, Liu Qiangdong built JD.com with 3C products, and he now wants to recreate a new JD.com through automotive business.

And the obstacle in front is indeed Tuhu.

01

Low Prices to Attract Customers to Stores

This year's 618, major e-commerce giants canceled pre-sales to make the shopping process more direct and promote consumption. However, JD.com's "Zhenhu Price" became more complicated.