SunCar Technology Group Inc. Q4 FY2023 earnings call

Key Points

• Since inception in 2007, SunCar has grown with China's tech landscape.
• Auto Service segment: Expanded to over 47,000 providers in over 350 cities and all 33 provinces in China.
• Auto e-Insurance segment: Network of over 64,000 insurance sales partners as of Dec 31, 2023, and strong relationships with over 80 leading insurance companies (including top 10 with over 90% market share in auto insurance in China).
• Leverages a cloud-based technology platform with features like an easy-to-use mobile app, seamless API integrations, user-friendly management tools, and AI-powered e-Insurance buying process.
• Synergies between Auto Service and Auto e-Insurance businesses, such as Auto Service providers serving as e-Insurance sales channels and insurance relationships bringing new Auto Service clients.
• Expanded collaboration with electric vehicle and smart car manufacturers, working with top 20 EV OEMs in China.

In the Auto Service segment, revenue was $215 million in fiscal year 2023, an increase of 8% from $199 million in fiscal year 2022. In the Auto e-Insurance segment, revenue was $149 million in fiscal year 2023, a significant increase of 79% from $83 million in fiscal year 2022. The Auto Service segment provided a technology platform for booking Auto Services, while the Auto e-Insurance segment saw growth in its network of insurance sales partners and relationships with leading insurance companies.

Forward-Looking Statements

• Look forward to growth in 2024.
• Expect the e-Insurance segment to become the larger portion of the business in the future due to rapid growth and synergies between segments.

Risks

• Forward-looking statements involve inherent risks and uncertainties. Further information regarding risks and uncertainties are included in the company’s annual report on Form 20-F for the fiscal year ended December 31, 2023, and other SEC filings.

Q: Why and how do banks, insurance companies and enterprise clients use SunCar Auto Service?

A: Stanley Yang explains that key customers like banks, insurance companies, and airlines use the cloud-based platform to offer various services to their clients. The platform allows these enterprises to separate from competitors by offering Auto Services to retain clients, with a network of over 47,000 suppliers across 350 cities ensuring broad service selection for end clients.

Q: What differentiates you and why do people choose you over your competitors?

A: SunCar is a nationwide cloud-based platform offering both e-Insurance and Auto Service, unlike competitors operating regionally. It has technology integrations with most large insurance companies in China, enabling delivery of e-Insurance policies to end customers in less than two minutes, whereas competitors use manual processes.

Q: Which business is the more profitable? Services or insurance?

A: Currently, the Auto Service segment is more profitable than the e-Insurance segment. However, the e-Insurance market is rapidly growing, and the company is investing in growth to gain market share, with profitability to be focused on as the business scales.

Q: Given the growth in the Insurance business, do you expect it to be the bigger, more dominant portion of the company?

A: The e-Insurance business is in rapid growth due to increased vehicle sales in China and adoption of electric vehicles. It is expected to become the larger portion of the business in the future, with growth in one segment positively impacting the other due to synergies.

Q: What is your go-to market strategy for insurance?

A: The go-to market strategy for e-Insurance is leveraging over 64,000 sales partners, including a large Auto Service network with frequent exposure to car owners and auto manufacturers, to deliver cloud-based insurance solutions to end customers, with policies delivered in under two minutes via the cloud-based platform.

Q: What is driving the growth of the business?

A: Growth is driven by continued adoption of e-Insurance technology via over 64,000 sales partners in China, a 29% year-over-year increase in total revenue in 2023, a 79% year-over-year growth in the Auto e-Insurance segment due to increased gross premiums written and policy issuances, and deepening relations with electric vehicle manufacturers as electric vehicle sales in China increase.