Geely's CaoCao ride-hailing unit has big plans for mobility

UPDATE: Over the last month and a half, Geely has signed separate deals with Daimler Mobility Services, China Aerospace Science and Industry Corporation (CASIC) and China Telecom Group to offer premium ride-hailing services in China, develop supersonic trains and work on building three-dimensional future mobility ecology, respectively. Geely's CaoCao ride-hailing unit had more than 17 million registered users at the end of October, with one million regular active users on the app providing more than 29,000 pure electric vehicles in 28 cities across the country and with over 360,000 completed trips throughout the country on a daily basis.

TIANJIN – Now that it has ¥1 billion in fresh capital from its first round of financing completed early this year, Geely's Cao Cao ride-hailing unit has set an ambitious target of becoming a full-fledged mobility platform rivaling the likes of Didi Chuxing, UCAR and Shouqi Limousine & Chauffeur.

"We want to become the world's largest new energy vehicle mobility platform, B2C ride-hailing franchise, O2O travel company and shared mobility platform," said Liu Jinliang, chairman of Cao Cao and a veteran executive of Geely.

Liu Jinliang

Liu announced the ambitious goals at a media briefing in Tianjin on July 18 updating the latest development of the ride-hailing unit, which is already valued at more than ¥10 billion after the Series A funding round.

Fast expansion

Cao Cao was established in May 2015 as the first ride-hailing platform invested in and operated by a Chinese automaker. As of July 15, it has entered into operation in 25 cities across China with more than 27,000 Geely Emgrand EVs in service and over 20 million registered users. The platform now sees over 900,000 active daily users and 450,000 rides ordered each day. By the end of 2017, it had cumulatively reduced carbon emissions by over 309,000 tons and saved more than 150 million liters of fuel compared to a traditional taxi vehicle (at an average fuel consumption of 7L/100 km) through the use of 340 million kWh of electricity. Total emissions free mileage traveled on the platform had reached nearly 2.2 billion km. Cao Cao is also the first mobility platform to offer "carbon banking" based on the China Certified Emissions Reduction (CCER).

According to data from Analysys Consulting, Cao Cao's rankings in monthly active users have surpassed UCAR, Yidao and Shouqi Limousine & Chauffeur in numerous cities across China to become the No. 1 B2C ride-hailing platform, just behind DiDi.

App Annie data also showed that Cao Cao's monthly active users in 24 cities in May totaled 4.667 million, averaging 194,500 users per city, also juts behind DiDi's 124.73 million active users across 347 cities and average active users of 324,000 people per city.

With almost all of the 27,000 vehicles in service using the Emgrand EV model, Cao Cao also has become China's largest EV mobility platform.

Less than two years after it was established, Cao Cao got its appraisal from the Zhejiang Department for Transport in February 2017, making it the first NEV mobility solutions platform to receive a business license in China. By the end of July 15, it had received internet ride-hailing permits from 43 cities in China.

Based on Liu's plans for fleet and city expansion, Cao Cao plans to increase the number of cities where the service is available by 10 by 2020: 30 in 2018, 40 in 2019 and 50 in 2020. By then, approximately 50,000 vehicles will be in service.

Aside from ride-hailing, Cao Cao has already expanded mobility solutions services into concierge service "Cao Cao Assistant," online e-shop, emissions-free travel for corporate needs and "Cao Cao Travel," which was to be launched in Qingdao at the end of July.

Designated driver, ride pooling, car rental, cargo hauling and even media are just some of the new products and services Cao Cao plans to launch in the future.

Dedicated technology and vehicles for mobility

Cao Cao is an OEM-invested mobility platform, which gives it the ability to offer a dedicated model such as the Emgrand EV specifically designed for mobility services, giving it an advantage over others in ride-hailing, according to Liu.

Cao Cao has also invested in making its fleet management more intelligent, customer experience more individualized and driver training more professional.

Some of the telematics and vehicle connectivity technologies that Geely and subsidiary Volvo Cars have jointly developed for Cao Cao include smarter dispatch system so that the vehicle arrives faster (all dispatches are automatically selected by the platform), cloud-based individualized passenger seating configuration for riders, smart real-time vehicle diagnostics systems detecting range and tire pressure making sure that the vehicles are safe, customized in-car fragrance and smart interior ambience lighting.

For driver recruiting and training, Cao Cao has established its own academy incorporating London Taxi service standards and certification systems. Driver application acceptance rate is about 60 percent, according to Liu, and drivers are tested not only on driving skills but also areas such as emergency rescue. Drivers also receive annual physicals and if certain metrics such as weight and blood pressure are over limit, they will be asked to be off the platform. Cao Cao has also set up driver posts in Hangzhou where they can rest or take a shower to make sure they are in the best physical condition to service customers. The platform also strictly limits the amount of hours of operation to within 10 hours per day.

Because Cao Cao runs on EVs, the systems offers discounts of up to 40-50 percent off during regular hours and 10 percent off during rush hours thanks to the savings in fuel cost, and pricing in each city correlates with local taxi rates. Cao Cao also works with charging infrastructure partners such as TELD, Star Charge and State Grid to offer charging discounts and infrastructure for drivers.

Liu revealed that Cao Cao will also benefit from new business units from parent company Geely including U.S. flying car manufacturer Terrafugia which Geely acquired late last year and the recently established China Railway Gecent Technology Co., Ltd. (Gecent) offering WiFi service platform for China's high-speed rail network.

A flying car possibly running on Cao Cao's platform in the future? Not out of the question.

"Geely will begin local production of Terrafugia's first volume production flying car model in 2019 for sale in the U.S. market," said Liu. "And a flying car project is expected to go into trial operation in 2021 in the island province of Hainan shuttling local herders." Gecent, in partnership with Tencent, on the other hand, is both heeding China's call for mixed ownership reform and a key platform to provide Cao Cao with millions of potential customers from high-speed rail.

A low-carbon, healthy and shared people and car life circle, utilizing cloud computing, autonomous driving, telematics, internet of things and big data technologies and business model innovations, for a sustained business ecosystem centered on customers. That is Liu's vision of Cao Cao.

In order to finance for these future developments and goals, Cao Cao has already started a roadshow for its Series B funding round, according to Liu.

"We have met about a dozen investors each in Beijing and Hangzhou, and expect to complete it in October," said Liu.

He declined to reveal the amount of capital to be financed but indicated that Geely would offer about 10-15 percent of the equity in Cao Cao. CBU/CARexpects it will be at least in the billion RMB range based on the last round of financing which Geely gave up about 10 percent of equity.

Challenges: driver cost and recruitment

The only factors now holding Cao Cao back is driver cost and retention, common problems on all ride-hailing platforms.

Liu told CBU/CARthat drivers currently account for nearly three-quarters of the cost for Cao Cao, with purchasing, electricity and marketing costs the three additional major cost factors. While running EVs provides a one-third to nearly one-half cost reduction compared to traditional fuel vehicles, driver cost and retention remain a burden.

"We want to be the first mobility platform in China to run driverless cars," Liu said, thanks to support from Geely and Volvo Cars who are working together on commercializing autonomous driving technologies.

One of the other issues is adding cars into the fleet in cities with license plate restrictions such as Beijing and Shenzhen. Cao Cao has worked with local taxi companies and car rental companies to put into service limited number of vehicles into fleets (only 300 in Beijing and Shenzhen respectively). Future plan is gradually increase the number to the thousands.

Once the driver issue is solved, Liu expects Cao Cao's profitability to increase dramatically. Currently EBITDA earnings in many cities have almost reached break even, according to Liu.

"We expect Cao Cao to break even in most of cities it operates in 2020," Liu predicted.

Two uncertain factors that Liu sees affecting China's ride-haling sector will be legal enforcement efforts toward ride-hailing and taxi reform, and Cao Cao's goal is to become the biggest B2C rid-haling platform.

"In the long term, I predict there will be one C2C platform (in DiDi), one B2C platform in Cao Cao and various regionalbased smaller ride-hailing platforms in China," said Liu.

©本刊所有圖片、文字及版式版權均為【中國汽車要聞】（China Business Update）所有，未經授權許可，不得複製或用作其它商業用途，其他網站及平面媒體如需轉載，須註明作者及出處。