With annual revenue exceeding 2 billion, can this blockbuster company be successfully listed?

When a company grows to a certain size, it will often complete the capitalization process through listing. However, the road to listing is not always smooth. For example, Zhejiang Taotao Automobile Industry Co., Ltd. has been suspended from listing review by the Shenzhen Stock Exchange for several times due to reasons related to financial information.

On May 25, Taotao Automobile updated its prospectus, issuance underwriting letter and other materials. According to the Shenzhen Stock Exchange's Growth Enterprise Market announcement, the Listing Committee will hold a review meeting on June 1. It is still unknown whether Taotao Automobile can successfully pass the review.

Annual revenue exceeds 2 billion, Taotao Automotive grows rapidly

Zhejiang Taotao Vehicle Industry Co., Ltd. is a company that focuses on outdoor leisure and entertainment as well as short-distance transportation functions.

It is a high-tech enterprise engaged in the research and development, production and sales of automobiles. Its products are mainly sold to dozens of countries and regions including the United States, the United Kingdom, France, Canada, etc., with overseas sales accounting for more than 98%.

In the latest relevant information released, Taotao Automobile revealed the latest operating situation. Data shows that from January to March 2022, Taotao Automobile's operating income was 380 million yuan, a year-on-year increase of 1.59%; operating profit was 14.98 million yuan, a year-on-year decrease of 45.69%; total profit was 15 million yuan, a year-on-year decrease of 47.24%.

From January to March, operating income increased, but operating profit and total profit fell sharply. Taotao Automobile explained that shipping costs increased significantly year-on-year. Affected by the complex global macroeconomic situation, rising inflation, tariffs and fluctuations in shipping costs, Taotao Automobile expects that operating income and net profit in the first half of 2022 may also face the risk of short-term decline.

Taotao Motors mainly deals in all-terrain vehicles, electric scooters, electric balance bikes, motorcycles, helmets and other products, and has a relatively complete production line. Its production model varies depending on the size of the market.

In its largest markets, the United States and Canada, Taotao Automotive Market mainly adopts a "warehouse-style" production model , that is, production is scheduled based on the local market's sales over the years and future market demand expectations, and after production is completed, it is exported to the warehouses of subsidiaries (grandchildren) in the United States or Canada, and then sold through various channels.

In overseas markets other than the United States and Canada, Taotao Vehicle Industry mainly adopts an "order-based" production model, that is, organizing production according to customer order requirements, putting the products into storage after production is completed and passed inspection, and finally delivering them to customers according to the order requirements.

In terms of sales channels, Taotao Bicycle Industry has established diversified sales channels including wholesalers, retailers, its own websites, third-party e-commerce platforms, etc.

In 2021, Taotao Auto's top five customers were Walmart, SUNDANCE GS LLC, Amazon, LOGICOM SA and SOFLOW. The sales on Walmart and Amazon were RMB 235 million and RMB 163 million, respectively, accounting for 11.64% and 8.06% of the total revenue .

With the increase in investment in new product research and development, Taotao Automobile's product categories are constantly enriched, and sales revenue and profits are also growing rapidly.

Public data shows that in 2019, 2020 and 2021, Taotao Automobile's operating income was RMB 751.6635 million, RMB 1385.5663 million and RMB 2017.6938 million respectively , showing a rapid growth trend. From 2019 to 2021, Taotao Automobile's operating income had a compound annual growth rate of 63.84% .

The rapid development of Taotao Automobile Industry is also closely related to the prospects of the industry in which it is located.

Development prospects of the industry to which Taotao Automobile belongs

The all-terrain vehicles, electric scooters and electric balance vehicles involved in Taotao Motors belong to the off-road recreational vehicle industry. Its road motorcycles and off-road motorcycles belong to the motorcycle industry. With the increasing popularity of outdoor activities, these industries have shown positive signs.

At present, North America is still the main production base of ATVs . In 2015, the ATV production of manufacturers such as Polaris, Arctic Cat, Bombardier, and John Deere accounted for about 52% of the world's total, while the ATV production of manufacturers such as Honda, Yamaha, and Kawasaki accounted for about 29% of the world's total production capacity . The ATV production of Chinese manufacturers accounted for a relatively low proportion.

Global ATV consumption is mainly concentrated in developed countries such as Europe and the United States. In 2015, North America and Europe accounted for about 89% of the global consumption of ATVs. More than 90% of ATVs produced by Chinese manufacturers are exported.

According to Global   Market   Insights research data shows that the all-terrain vehicle (ATV) market size exceeded US$2.5 billion in 2018, and it is expected that by 2025, the global all-terrain vehicle (ATV) market size will exceed US$3.3 billion; the all-terrain vehicle (UTV) market size exceeded US$6 billion in 2018, and the annual compound growth rate is expected to reach 5% between 2019 and 2025.

Electric scooters are a new industry in China and are classified as leisure toys. Their main consumer groups are outdoor sports enthusiasts. Currently, they are not yet available on the road in China. However, in Europe and the United States, electric scooters can be used on the road as long as they obtain the corresponding certification. As a short-distance means of transportation, they are widely loved by consumers and have a large market space.

The shared electric scooter business is very popular among consumers in the United States and Europe. According to NHTS statistics, short-distance shared travel of less than 5 miles accounts for about 60% of Americans' travel needs, mainly including shared bicycles , electric scooters and electric bicycles. The global electric scooter market capacity is expected to increase further in the future.

As for self-balancing scooters , their exports are mainly to the European and American markets, with poleless two-wheeled scooters (commonly known as twisting scooters) being the most popular among consumers. The domestic production of self-balancing scooters has surged from 30,000 in 2011 to 12.8 million in 2017. The steady increase in global market demand will also drive the growth of domestic self-balancing scooter production, and the industry is expected to show a year-on-year growth trend in the next few years .

At present, the motorcycles sold at home and abroad are mainly 100-150cc commuter motorcycles, which are mainly sold to developing countries and regions such as Asia, Africa and Latin America. In 2021, the top five series of motorcycles exported by China are: 125 series, 150 series, 110 series, 250 series and 50 series .

Analysis of the competitive advantages and disadvantages of Taotao Automobile

After years of development, Taotao Bicycle Industry has significant advantages in product production and cost control , with a high rate of self-production of core components . Through independent research and development and production of core components of major products, the manufacturing cost is effectively reduced, and cost control is the basis for its products to have a high cost-effective advantage.

At the same time, Taotao Motors focuses on brand building, with obvious advantages in its own brand, and gives full play to the advantages of its market-oriented and constantly innovative R&D and production system. The application of advanced technology in the product manufacturing process has once again improved the user experience and enhanced the core market competitiveness of the product.

In addition, Taotao Vehicle Industry develops both manufacturing and distribution, and its three-dimensional sales channels combining online and offline also have strong advantages.

However, as far as the current situation is concerned, Taotao Automobile's existing financing channels are only bank loans and shareholders' continuous investment, which are relatively single, and the financing scale does not match the company's development speed. While increasing the company's financial risks, it also restricts the company's further development to a certain extent, which is not conducive to the improvement of its comprehensive competitiveness. At the same time, facing the increasingly fierce market competition, it needs to strengthen its talent introduction.

Overall, this attempt to go public is both an opportunity and a challenge for Taotao Vehicle Industry. The off-road recreational vehicle and motorcycle industry in which it operates has room for development, but competition is also fierce. Whether Taotao Vehicle Industry can successfully go public in the future remains to be seen.

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