Date
23 August 2017

Where Autohome gets its mojo

After a rip-roaring debut on the New York Stock Exchange, Autohome Inc. (ATHM.US), China’s most popular vehicle information website, is nearly as big as some of the carmakers on which it built its business.

It took a few hours of frenzied trading on Wednesday to vault the stock 77 percent over its initial public offering price. When the dust settled, the company had achieved a market cap beyond its wildest dreams — US$3 billion. 

It’s a typical story about the immense potential of internet companies in China. But in Autohome’s case, the narrative is about a combination of a successful online model, a simple business strategy called vertical integration and niche marketing.

Autohome is focused on providing consumer data on anything car-related. The list is practically inexhaustible — comprehensive technical specifications, trial reports, refit ideas, interactive forums, price comparisons, aftermarket services and used car trading.

The company offers these services from end to end, providing a direct bridge between buyer and seller.

It saw the need early on.

Although China is the world’s biggest vehicle market with estimated sales of 21.5 million new cars this year alone, it lacks the sophistication of its more developed western counterparts in customer services. Getting accurate and reliable information on individual vehicles and the larger market has been painfully frustrating.

Autohome plunged in not a moment too soon, and by most accounts, the timing was perfect.   

According a iUserTracker, internet-savvy Chinese motorists who surf the web spend almost half of the time on Autohome. That is the kind of statistic that draws advertisers to the site and fosters exchanges between like-minded motorists, creating a virtuous cycle of buying and selling.

With a dream IPO tucked under its belt, Autohome is already thinking ahead. It plans to enter the booming online to offline (O2O) e-commerce market and expand its mobile app presence. That should help support its stock price going forward.

Autohome made just US$54.5 million in the first nine months, taking its price-to-earnings ratio to as much as 42 times 2013 forward profit. The valuation may look demanding on the surface, but given the company’s promising future it may not be off the mark. 

– Contact the writer at [email protected]

RA

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