Although Chinese social media conglomerate ByteDance has not yet pursued a public listing, one of its subsidiaries is racing toward an IPO.
ByteDance, the highest valued private company globally with a conservative estimate of its valuation at US225 billion, is seeking financing for its automotive information and trading platform, Dongchedi (also named DCar), in preparation for the subsidiary’s independent IPO.
How Much Dongchedi Is Seeking To Raise?
This would be Dongchedi’s first financing since its establishment in 2017, aiming to raise as much as US$700 million to US$800 million. It would value the company at approximately US$3 billion, similar to the market value of industry leader Autohome.
If successful, it would become the first IPO among ByteDance’s vast business empire and would offer public stock market investors an entry point into TikTok’s parent company.
The investors in the IPO include long-time shareholders of ByteDance. Sequoia China is leading this round with an investment of US$400 million to US$500 million, while KKR and General Atlantic will also participate.
Back in January, ByteDance reportedly moved employees of Dongchedi to a newly established wholly-owned subsidiary and provided the subsidiary with its own independent office space. It was speculated that Dongchedi’s spin-off was a step toward an IPO or raising external financing.
This IPO plan is part of ByteDance’s larger strategy, which aims to spin off businesses that are no longer considered core. ByteDance has not yet publicly responded regarding the IPO.
What Is Dongchedi?
Dongchedi has been established for seven years with over seven million daily active users currently. It was initially incubated internally from the automotive channel of Jinri Toutiao, which was ByteDance’s original content aggregation platform. It officially launched as a standalone app in 2017, serving as a one-stop automotive information and service platform, offering content, tools, and community features for car users.
Its growth relied heavily on ByteDance’s traffic, often by generating controversial content. Examples include real car collision tests and a recent winter endurance test. Similar to other competitors including Autohome and Bitauto, Dongchedi relies primarily on advertising revenue. However, it differentiates itself by operating across multiple ByteDance platforms, including Jinri Toutiao, Xigua Video, Douyin, and Huoshan Short Video, leveraging ByteDance’s focus on content.
Public data from 2018 shows that Dongchedi had over 75 million registered users and a daily active user count (DAU) of 4 million. By the end of 2020, its DAU grew to nearly 5 million. According to QuestMobile data, from 2021 to the first half of 2023, Dongchedi’s daily active users increased by 57%, reaching 7.32 million.
Dongchedi launched its car trading service in 2021. By May 2022, it opened its first offline new car experience store in Chongqing in July 2022, showcasing models from various brand dealers. It also extended to the automotive aftermarket, including all services needed by consumers post-purchase, such as maintenance, repairs, and second-hand car sales. In August 2022, Dongchedi launched its offline used car trading market, “Dongdong Used Cars”, setting a goal to become the largest car trading service platform in China within five years.
Why Did ByteDance Choose Dongchedi As Its First Subsidiary IPO?
An overview of ByteDance’s enormous business empire reveals that the choice to pick Dongchedi as the first test of an IPO is a natural one.
Back in November 2021, ByteDance underwent a significant organizational restructuring. CEO Liang Rubo announced the establishment of six business units: Douyin, Dali Education, Feishu, Volcano Engine, Nuverse, and TikTok. Each of these primary business units has its own challenges.
TikTok is facing potential bans in the U.S. and pressures in other geographies, while Douyin is becoming a mature business facing further revenue generation challenges. Another consumer-facing business, the gaming unit Nuverse, has undergone significant downsizing since last year and sought potential buyers for the entire unit.
Dali Education, meanwhile, suffered from drastic policy changes. In March 2020, ByteDance’s education business announced a recruitment plan for over 10,000 people. By October of the same year, ByteDance launched an independent education brand, Dali Education. However, in July 2021, following a policy aimed at lessening student burdens and cracking down on after-school tutoring institutions, Dali Education began laying off employees and shutting down many operations.
The remaining business-facing units, Feishu and Volcano Engine, have had mixed results. On March 26, Feishu, ByteDance’s cloud-based business-to-business super-app with a collection of collaboration and productivity tools, announced a new round of organizational adjustments, primarily due to less-than-ideal return on investment. Despite significant investment and commitment, Feishu’s revenue figures did not meet expectations.
Volcano Engine, which offers technologies and tools to businesses and where ByteDance’s AI capabilities are based, is gaining traction. Volcano Engine offers large language models and computing resources, offering its services to many of China’s leading AI companies. However, it is not yet mature enough for an independent IPO.
Dongchedi’s IPO Is Just the Beginning
At the moment, Dongchedi appears to be the best option for ByteDance to test the waters for an IPO of its subsidiaries.
ByteDance previously considered spinning off its real estate platform Xingfuri, bringing in external shareholders for independent development. However, Xingfuri has now been merged into Douyin’s life services.
Even if Dongchedi successfully goes public in the future, it will still face the harsh scrutiny of the capital markets.
As of the close of trading on June 11, Autohome’s stock price on the Hong Kong Stock Exchange was 52.55 HKD per share, reflecting a 68.51% decline from its initial trading day.
This significant drop underscores the broader slowdown in China’s automobile market, which has left behind its era of consistent rapid growth and entered more volatile market cycles.