17 February 2019
Over 3.7 million trucks are registered on Huochebang truck app, the largest of its kind in China. Photo: Huochebang
Over 3.7 million trucks are registered on Huochebang truck app, the largest of its kind in China. Photo: Huochebang

Huochebang: How a truck app gained traction in China

Huochebang, an Uber-type service for trucks, now works with over 3.7 million trucks in China, using a cloud-based logistics platform. The company has been in the spotlight as it is believed that its service helped the mainland save a substantial amount of money in fuel costs.

The app is also said to have contributed to a reduction of carbon emission to the extent of 33 million tons, attracting praise from top leaders including President Xi Jinping and Premier Li Keqiang.

Based in Guiyang, the capital of Guizhou province, which the China positions as the big data powerhouse of the future, Huochebang has kept a relatively low profile. Not much is known about its background or shareholding details.

The company achieved astounding growth in the last couple of years. It has lured big giants like Tencent Holdings, Baidu and International Finance Corp. as investors and raised about US$370 million in a financing round that valued the startup at over US$1 billion.

Huochebang also partnered with Alibaba’s cloud unit and Zhong An Online Property and Casualty Insurance, China’s first internet-only insurer.

The platform matches freight trucks across the nation with shippers in need of transportation help.

It’s estimated that there are around 7 million freight trucks in China, most of which are owned by individuals, who find it hard to improve the efficiency.

Mismatch of supply demand for truck services is one major problem facing the industry. In other words, there may be lots of idle trucks in one place while some customers could be urgently looking for trucks at a different part of the country.

Another common headache is trucks often get one-way order and have to return to their base empty.

Huochebang utilizes big data to match shipper and truckers in real time to solve mismatch. Truckers can also more easily find another customer on the way back through the app. That is how Huochebang helped cut fuel costs and carbon emissions.

Much like Uber, the platform has a rating system. Shippers would give truck drivers scores based on punctuality, services and reliability, etc. Truck drivers are incentivized to provide better service for higher ratings, which leads to a bigger chance of getting more orders next time.

The platform now serves 630,000 shippers and handles more than 130,000 orders per day, involving as much as 1.5 billion yuan in shipping fees daily.

As for its revenue model, basic matching service is free. Huochebang earns money by selling auxiliary services, ranging from loans to insurance, auto parts and second-hand truck dealing.

For example, with ample data about each driver’s business turnover, service rating and driving habits, Huochebang can more precisely set the right premium to run a profitable insurance business.

Huochebang has yet to make profit, according to company executives. But it is just a matter of time. Once the scale reaches a certain level, profit will come naturally.

This article appeared in the Hong Kong Economic Journal on Aug 24

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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