Prospectus Summary
You should read the following summary together with the entire prospectus, including the more detailed information regarding us, the ADSs being sold in this offering, and our consolidated financial statements and related notes appearing elsewhere in this prospectus. You should consider carefully, among other things, the matters discussed in the section entitled “Risk Factors.” This summary and other sections of this prospectus contain information from a report, referred to in this prospectus as the iResearch Report, which we commissioned iResearch Consulting Group, or iResearch, an independent market research firm, to provide information on the industry in which we operate, including our market position in that industry.
Our Company
We are a leading provider of Internet content and marketing services for China’s fast-growing automotive industry. Our bitauto.com and ucar.cn websites provide consumers with up-to-date new and used automobile pricing information, specifications, reviews and consumer feedback. According to iResearch, our websites were the most visited automotive vertical websites in China for new and used automobile pricing information in the third quarter of 2010. Through our innovative “vertical plus portal” model, we also distribute our dealer customers’ automobile pricing and promotional information through 67 partner websites, including major portals operated by Tencent, Sina, Netease, Yahoo China and Tom Online. As a result, our automotive content had the broadest consumer reach to China’s Internet users in the third quarter of 2010, according to iResearch.
We manage our businesses in three segments, namely, our bitauto.com business, our ucar.cn business and our digital marketing solutions business. Our bitauto.com business provides subscription services to new automobile dealers that enable them to list pricing and promotional information on our bitauto.com website and our partner websites and to interact with consumers through our virtual call center. It also provides advertising services to dealers and automakers on our bitauto.com website. Our ucar.cn business provides listing services to used automobile dealers that enable them to display used automobile inventory information on our ucar.cn website and our partner websites. It also provides advertising services to used automobile dealers and automakers with certified pre-owned automobile programs on our ucar.cn website. Our digital marketing solutions business provides automakers with one-stop digital marketing solutions, including website creation and maintenance, online public relations, online marketing campaigns and advertising agent services.
We have established a nationwide dealer customer base in China. Our new automobile dealer subscribers have increased from 981 in 2007 to 2,783 in the first nine months of 2010, and our used automobile listing customers have increased from 265 in the first half of 2009 to 1,094 in the first nine months of 2010. Furthermore, an increasing number of our dealer customers regularly place advertisements on our bitauto.com and ucar.cn websites. We maintain regular in-person contact with our dealer customers through our extensive nationwide sales and service representative network located in 77 cities across China. We provide our new automobile dealer subscription services through our proprietary Easypass platform and used automobile listing services through our proprietary Transtar platform. Both platforms enable our customers to manage their online marketing efforts in an efficient and cost-effective manner, and use these services as needed without having to make large upfront investments in software, hardware, implementation services and IT staff as they would with traditional software solutions. Our large dealer customer base has enabled us to build one of the most comprehensive automotive databases among China’s automotive vertical websites and gives us a significant advantage over our competitors.
In addition, we have a diverse base of automaker customers, to whom we provide advertising services and digital marketing solutions. Of the approximately 80 major automakers in China, consisting of international and Chinese automobile manufacturers and their joint ventures, 55 placed advertisements on our bitauto.com website in the nine months ended September 30, 2010. We are the largest Internet advertising agency for automakers in China, placing advertisements representing more than 30% of the overall online advertising spending by automakers in China in 2009, according to iResearch. We believe our customers value our ability to offer a wide range of high-value services and efficient solutions to assist them in reaching a broad group of automobile consumers and influencing their purchase decisions.
XBRL Pagebreak Begin End box 1 END PAGE WIDTH PAGEBREAK BEGIN PAGE WIDTH Begin box 1 XBRL Pagebreak EndOur revenues from continuing operations were RMB127.7 million, RMB239.0 million, RMB293.3 million ($43.8 million) and RMB299.3 million ($44.7 million) in 2007, 2008, 2009 and the nine months ended September 30, 2010. Under IFRS, we had a loss of RMB146.0 million, a profit of RMB84.3 million, a loss of RMB6.0 million ($0.9 million) and a loss of RMB786.9 million ($117.6 million) in 2007, 2008, 2009 and the nine months ended September 30, 2010, respectively, from our continuing operations. The losses were primarily attributable to the significant amounts of the charges recognized under IFRS in connection with the increase in fair value of our preference shares resulting from our improved business outlook. Our non-GAAP profit from continuing operations, defined as (loss)/profit from continuing operations excluding the charges relating to our preference shares and share-based payments, were RMB15.6 million, RMB54.3 million, RMB41.8 million ($6.2 million) and RMB33.4 million ($5.0 million) in 2007, 2008, 2009 and the nine months ended September 30, 2010, respectively. For a reconciliation of our non-GAAP profit from continuing operations to the IFRS (loss)/profit from continuing operations, see footnote (4) on page 9 of this prospectus.
Our Industry
China’s automobile market has experienced, and is expected to continue to experience, significant growth driven by increasing urbanization, continued macroeconomic growth and rising personal disposable income across the nation. In 2009, China overtook the U.S. to become the world’s largest automobile market based on domestic sales volume, according to China Automotive Dealers Association, or CADA. At the same time, China’s automobile market is still underpenetrated as compared to developed and certain other developing countries. According to J.D. Power and Associates, or J.D. Power, China’s personal automobile density, defined as the number of passenger vehicles per 1,000 persons of driving age, was 35 in 2009, significantly lower than that of the United States (985), Western Europe (611), Japan (541), Russia (277) and Brazil (142).
New automobile sales volume in China has grown rapidly at a CAGR of 24.2% from 5.8 million units in 2005 to 13.8 million units in 2009, and is expected to grow further at a CAGR of 11.5% to reach 21.3 million units in 2013, according to J.D. Power. Used automobile sales volume in China has also grown rapidly at a CAGR of 21.8% from 1.5 million units in 2005 to 3.3 million units in 2009, according to CADA. The used automobile market in China is still at an early stage of development, but is expected to grow quickly at a CAGR of 31.9% to reach 10.0 million units in 2013, according to CADA, driven by an overall increase of automobiles in the market and shorter average automobile holding periods, among other factors.
Along with the strong growth in China’s automobile market in recent years, automobile consumers’ demand for automobile information online has also increased significantly, as the Internet offers comprehensive, easily accessible, searchable and frequently updated content. Given automobile consumers’ increasing dependence on the Internet when searching for automobile-related information, the market has observed a growing adoption of online advertising and online listing by market participants in the automotive industry over the past few years.
According to iResearch, the online portion of China’s total automobile advertising spending has grown from 3.3% in 2005 to 7.4% in 2009, and is expected to grow to 10.9% in 2013. Total online automobile advertising spending in China has also increased at a CAGR of 54.3% from RMB254 million in 2005 to RMB1,440 million in 2009, and is expected to grow further at a CAGR of 27.5% to reach RMB3,806 million in 2013. At the same time, automakers and automobile dealers are rapidly adopting the Internet for brand marketing and pricing and product information listing to take advantage of the high visitor traffic of automobile vertical websites.
Our Strengths and Strategies
We believe that the following strengths have contributed to our success and differentiate us from our competitors:
XBRL Pagebreak Begin End box 1 END PAGE WIDTH PAGEBREAK BEGIN PAGE WIDTH Begin box 1 XBRL Pagebreak EndOur goal is to strengthen our position as a leading provider of Internet content and marketing services for China’s automotive industry. We intend to leverage our existing strengths and pursue the following strategies to achieve our goal:
Our Challenges
Our ability to realize our business objectives and execute our strategies is subject to many risks and uncertainties, including those relating to our ability to:
Please see “Risk Factors” and other information included in this prospectus for a detailed discussion of these risks and uncertainties.
Our Corporate Information
Our principal executive offices are located at New Century Hotel Office Tower, 6/F, No. 6 South Capital Stadium Road, Beijing, 100044, the People’s Republic of China. Our telephone number at this address is (86-10) 6849-2345. Our registered office in the Cayman Islands is located at Offshore Incorporations (Cayman) Limited, Scotia Centre, 4th Floor, P.O. Box 2804, George Town, Grand Cayman KY1-1112, Cayman Islands.
Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our main website is www.bitauto.com. The information contained on our website is not a part of this prospectus. Our agent for service of process in the United States is Law Debenture Corporate Services Inc., 400 Madison Avenue, 4th Floor, New York, New York 10017.
Our Corporate Structure
We are a Cayman Islands holding company incorporated on October 21, 2005. We conduct substantially all of our business through our operating subsidiary, Beijing Bitauto Internet Information Company Limited, or BBII, and our consolidated SPEs in China. We own 100% of the equity of BBII in China through a wholly owned subsidiary, Bitauto Hong Kong Limited, which was incorporated in Hong Kong on April 27, 2010.
XBRL Paragraph Pagebreak XBRL Pagebreak Begin End box 1 END PAGE WIDTH PAGEBREAK BEGIN PAGE WIDTH Begin box 1 XBRL Pagebreak EndBeijing C&I Advertising Company Limited, or CIG, which was incorporated in 2002, is one of our SPEs in China and provides digital marketing solutions to automakers. Beijing Bitauto Information Technology Company Limited, or BBIT, is another SPE of ours and was incorporated in 2005. BBIT conducts our bitauto.com business and our ucar.cn business. Beijing Easy Auto Media Company Limited, or BEAM, is one of our SPEs but is not actively conducting business at present.
Due to certain restrictions under PRC law on foreign ownerships of entities engaged in Internet and advertising businesses, we conduct our operations in China through contractual arrangements among BBII, our SPEs in China and the shareholders of these SPEs. As a result of these contractual arrangements, we control our SPEs and have consolidated the financial information of these SPEs and their subsidiaries in our consolidated financial statements in accordance with IFRS.
The following diagram illustrates our corporate structure as of the date of this prospectus:
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XBRL Pagebreak Begin End box 1 END PAGE WIDTH PAGEBREAK BEGIN PAGE WIDTH Begin box 1 XBRL Pagebreak EndThe number of ordinary shares that will be outstanding immediately after this offering:
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