image credit: Bamboo Works
Key Takeaways
Autohome's first quarter revenue fell nearly 28%, as automakers cut advertising and fewer dealers paid for its services in a sharply contracting China car market
The company is more protected than car traders that hold inventory, but its results show how China's auto slump is hurting online commerce, advertising and transaction services
An extended price war in China's auto sector has already taken a toll on carmakers, dealers and used car traders. Now, the pain is growing more acute in a place that doesn't actually build or stockpile cars.
That place is Autohome Inc. (NYSE:ATHM) (2518.HK), one of China's best known online auto service platforms. Founded in 2005 by car enthusiast Li Xiang, who later built electric vehicle maker Li Auto, Autohome became a go-to destination for Chinese car buyers, offering model databases, reviews, price comparisons and forums.
That legacy makes the company's latest financial results feel bigger than just another soft quarter for a single company. Autohome is a useful gauge for both China's auto market and online commerce. It earns most of its money not by directly selling cars, but by helping automakers and dealers reach buyers, generate leads and complete transactions. That keeps it less exposed to falling car prices than inventory-heavy new and used car sellers. But it also means the company relies on transactions for its business, as well as confidence. And right now, both of those are scarce.
Ad engine stalls
Autohome's first quarter revenue skidded 27.9% year-on-year to 1.05 billion yuan ($152 million) from 1.45 billion yuan a year earlier. Its net income dropped by an even bigger 87.6% to 44.3 million yuan from 356.6 million yuan. And ominously, the company also slipped into the red on an operating basis, reporting an operating loss of 34.4 million yuan, ending years of profitable operations on that basis.
The pressure showed up across all of the company's main businesses. Media services revenue fell 32.8% to 162.7 million yuan, as automakers tightened advertising budgets. Leads generation revenue fell 22% to 503.5 million yuan, ...
