Baidu Capital Leading The Fundraising Efforts Of A Chinese Trucking Service

Baidu Capital, a subsidiary of the Baidu search engine, is leading the fundraising efforts for Truck Alliance which is looking to raise approximately $156 million. A deal could be reached this week. Truck Alliance operates like Uber but instead of passengers offers transport services for physical goods.

The latest fundraising effort by the trucking service comes less than six months after a similar effort last year in December which sought to raise $115 million and which placed the valuation of Huochebang at approximately $1 billion. According to sources both of these fundraising efforts are part of a B funding round that is currently underway. A third tranche is also being planned.

Other Chinese firms that have invested in Huochebang include Tencent Holdings. The Hong Kong-based All-Stars Investments is also an investing in the truck-hailing service.

Trillion-dollar logistics sector

In the Chinese market alone, Huochebang is in competition with 200 similar services as they seek to improve the efficiency of the country’s trucking system that is widely considered inefficient. Over 80% of the goods in China are transported via the road network and this takes up the lion’s share of the $1.6 trillion Chinese logistics sector. Some of the inefficiencies have to do with overcapacity as trucks in the country are idle for around 40% of the time. This is because these trucks belong to individuals.

Currently, Huochebang has 2.6 million trucks registered on its platform and this nets about $120 million in delivery transactions on average every day. The deliveries made through this platform range from bulky items such as coal and cement to less-bulky items such as farming tools and seeds.

Toll cards

Huochebang is, however, different from Uber in that it does not earn a commission on every delivery but rather generates revenues by selling toll cards where it gets a cut from every time a trucker tops up. It also helps the truckers by meeting their financing needs. Presently, Huochebang is putting up service centers that will offer truckers backup support. Two months ago, the number of such service centers in China had reached 1,000.

The deal is further evidence of the increased activity in the Chinese venture capital market. In greater China last year, the value of the investments made this way exceeded $49 billion. This year promises to be no different as the biggest venture capital investment on record has been reported with Didi Chuxing, a ride-hailing service raising $5.5 billion.