Executive Summary / Key Takeaways

• Cheche Group has engineered a deliberate pivot from low-margin traditional auto insurance transactions to high-margin NEV insurance, sacrificing 17.7% of revenue in the first half of 2025 while expanding gross profit by 1.7%—a classic quality-over-quantity move that puts full-year adjusted operating profitability within reach for the first time.

• The company's NEV business is scaling at 140% CAGR, capturing 22.5% of total premiums with just 10% market share of new car deliveries, positioning CCG to seize 30-40% of China's NEV insurance market as the fleet expands to 80-100 million units over the next three to five years.

• A forthcoming AI-driven global expansion—launching Q4 2025 across Asia Pacific, Europe, and Latin America—could transform CCG from a China-focused transaction platform into a high-margin software provider, with management projecting RMB 300-500 million in AI solutions revenue that would largely flow directly to profit.

• CCG's competitive moat rests on proprietary SaaS platforms and deep OEM partnerships (15 major NEV manufacturers), enabling faster innovation cycles than traditional insurers like PICC (1339.HK) and Ping An (2318.HK), though its $81 million market cap and -2% operating margins reveal stark scale disadvantages versus these multi-billion-dollar incumbents.

• Trading at $0.97 with a 0.17x price-to-sales ratio and a clear path to profitability, CCG offers asymmetric risk/reward: the market prices it as a distressed asset, yet the NEV tailwind and AI monetization could drive a fundamental re-rating if execution holds.

Setting the Scene: The NEV Insurance Revolution

Cheche Group, founded in 2014 and headquartered in Beijing, began as a digital auto insurance transaction platform but has spent the past three years executing a strategic metamorphosis. The company recognized early that China's NEV market—growing 41% to RMB 66 billion in premiums in the first half of 2025, nearly ten times the overall industry's pace—would demand fundamentally different insurance infrastructure. While traditional auto insurance operates on decades-old actuarial models, NEVs generate real-time driving data that enables dynamic underwriting, automated claims, and fraud detection. CCG positioned itself as the digital backbone connecting NEV manufacturers with insurers, capturing the transaction flow while building proprietary AI tools that enhance liability determination and claims automation.

The industry structure reveals why this matters. China's auto insurance market is dominated by state-backed giants like PICC and Ping An, which command massive distribution networks but move slowly on NEV-specific innovation. Their scale—PICC with 30% market share and Ping An with 200 million users—creates bureaucratic inertia that CCG's agile, tech-first model exploits. Meanwhile, pure-play insurtechs like ZhongAn (6060.HK) focus on broad P&C products, lacking CCG's deep OEM integration. CCG's niche dominance in digital NEV transactions gives it data advantages and faster product cycles, though its $491.8 million in annual revenue pales against Ping An's $1184 billion market cap and PICC's $349.5 billion valuation.

CCG's current positioning emerged from this deliberate pivot. The company consciously accepted lower service fee rates on NEV premiums—currently much lower than traditional auto insurance because nearly all insurers are suffering losses in this nascent market—in exchange for higher gross margins and stickier SaaS revenue. This trade-off explains the 17.7% revenue decline in the first half of 2025 to RMB 1.35 billion, even as gross profit rose 1.7% to RMB 65.8 million. The business mix is improving, and the market has yet to price in the implications.

Technology, Products, and Strategic Differentiation

CCG's competitive edge rests on two proprietary SaaS platforms: Digital Surge for insurance intermediaries and Sky Frontier for auto carriers. These cloud-based solutions enable real-time risk management and transaction processing, translating to faster innovation cycles and stronger customer loyalty via integrated services. Unlike traditional insurers that rely on manual underwriting and claims adjustment, CCG's systems ingest telematics data directly from NEVs, allowing AI-driven liability determination that can increase claims accuracy by around 50% and reduce processing time to minutes rather than days.

The economic impact is material. This technology allows CCG to capture higher gross margins on NEV business despite lower take rates, as the automation reduces cost of revenue and creates network effects. Each additional OEM partner—15 major NEV manufacturers including NIO (NIO) and XPeng (XPEV) as of the first half of 2025—adds more data to the platform, improving the AI models and making the system more valuable to insurers. This creates a moat that pure transaction platforms like Huize (HUIZ) cannot replicate, as they lack the deep integration and data feedback loops.

The AI-driven global initiative launching in Q4 2025 represents the next evolution. CCG will export its mature NEV digital pricing models to international markets, offering automakers a fintech toolbox for overseas expansion. The projected RMB 300-500 million revenue from AI solutions over three to five years comes with "very high gross margin," meaning most of it should convert to profit. This matters because it diversifies CCG away from China's market and transforms the business model from transaction-based to software-subscription, potentially justifying a higher valuation multiple. The anti-fraud claims system, developed with the China Insurance Automotive Research Institute, addresses intelligent driving scenarios—a capability that becomes more critical as autonomous features proliferate.

Financial Performance & Segment Dynamics

CCG's first-half 2025 results tell a story of strategic transition rather than deterioration. Net revenues fell 17.7% to RMB 1.35 billion, but this decline was entirely driven by the shift toward NEV premiums with lower service fee rates. The crucial metric—gross profit—increased 1.7% to RMB 65.8 million, lifting gross margin as the higher-margin NEV business grew to 22.5% of total premiums from 9.3% a year prior. This demonstrates the thesis that revenue quality matters more than quantity.

Segment performance reveals the engine of this transformation. The NEV insurance solution transacted 810,000 policies in the first half, up 135% year-over-year, with written premiums surging 150% to RMB 2.6 billion. Traditional auto insurance (Easy-Insur) grew premiums a modest 4% to RMB 11.5 billion, showing the core business is stable but mature. The mix shift is working: NEV's rapid growth more than offsets its lower take rate, and management expects this segment to account for 50-70% of total business within three to five years.

Operating leverage is emerging. Total operating expenses declined 23.9% to RMB 92.8 million, driven by decreased staff costs and share-based compensation. Management has maintained "very good control on our headcount" and developed a "very good technology network," reducing the need for significant R&D investment. This cost discipline, combined with gross margin expansion, improved the adjusted net loss by 47% to RMB 10 million, putting full-year adjusted operating profitability firmly on track.

The balance sheet provides adequate but not abundant resources. With RMB 167.2 million in cash and short-term investments at the end of the first half of 2024 (the most recent figure disclosed), CCG must manage cash flow carefully.

The company is confident operating expenses "won't go up drastically," which should lead to significantly increasing profitability and net margin. However, the -2% operating margin and -1% profit margin show the business is still burning cash, making execution critical before resources run thin.

Outlook, Management Guidance, and Execution Risk

Management's guidance for 2025 reflects confidence in the margin inflection trajectory. The company revised net revenue guidance down to RMB 3.0-3.3 billion from RMB 3.6-3.8 billion, explicitly acknowledging the business mix shift toward lower-fee NEV premiums. Yet it affirmed expectations for RMB 25.5-27 billion in total written premiums and RMB 7-8 billion in NEV premiums, while reiterating the target of shifting from loss to profit. This guidance is internally consistent: lower revenue but higher margins leading to profitability.

The key assumptions underpinning this outlook are ambitious but plausible. Management expects China's NEV fleet to reach 80-100 million units in 3-5 years, with an industry-average claim rate of 30% creating a serviceable market of 30 million claims. CCG aims to capture 30-40% of this market, up from its current 10% share of new car deliveries. The 140% CAGR in NEV business over the past three years, far exceeding the industry's 40% growth, suggests market share gains are achievable if the company maintains its technology lead and OEM partnerships.

The AI global expansion represents the highest-stakes execution risk. Launching in Q4 2025 across Asia Pacific, Europe, and Latin America requires replicating CCG's China model in diverse regulatory environments. The company is cooperating with local partners in Thailand and Australia, but success is not guaranteed. If the rollout validates and refines China's mature NEV digital pricing models internationally, overseas business could become a key growth engine in 2026, justifying the investment. If it falters, CCG remains concentrated in China's competitive NEV market.

Management's commentary on take rates provides insight into long-term earnings power. CFO Sandra Ji explained that insurers currently can't offer higher take rates because they're suffering losses in NEV insurance. However, as the market matures and insurers shift from loss to profit, "they are willing to give more and more take rate to us." This implies significant operating leverage: if CCG maintains its 30-40% market share target and take rates normalize upward, revenue could accelerate dramatically while margins expand further.

Risks and Asymmetries

The most material risk is concentration in the nascent NEV insurance market. While CCG's 140% growth demonstrates execution, the segment remains in a "preliminary stage" where nearly all insurers are unprofitable. If loss ratios don't improve or if regulatory changes compress fees further, the entire NEV insurance model could face structural headwinds. This would undermine both the margin improvement thesis and the AI solutions revenue projection, as those products depend on a healthy insurer ecosystem.

Execution risk on the global AI rollout is equally significant. CCG's RMB 300-500 million revenue target assumes successful commercialization of AI-driven claims and liability tools in multiple international markets. The company has limited experience operating outside China, and its technology may require substantial adaptation for different regulatory frameworks. If the Q4 2025 launch encounters technical or commercial hurdles, the promised high-margin revenue stream could fail to materialize, leaving CCG as a China-dependent transaction platform with modest profitability.

Competitive pressure from scale players poses a constant threat. Ping An's 200 million users and PICC's 30% market share give them distribution advantages that CCG cannot match. While these incumbents move slower on NEV innovation, they have the resources to replicate CCG's technology if they prioritize it. ZhongAn's tech exports grew 12.2% in the first half of 2024 to RMB 496 million, showing that larger insurtechs are also monetizing software solutions, potentially crowding CCG's AI ambitions.

On the upside, the asymmetry is compelling. If CCG achieves its 30-40% NEV market share target and take rates normalize, revenue could grow multiples of current levels while margins expand toward industry norms. The AI global business, if successful, would transform the company from a transaction-based intermediary to a high-margin software provider, likely commanding a valuation multiple several times the current 0.17x sales. With only $81 million in market cap and a clear path to profitability, the downside appears limited relative to the potential re-rating upside.

Valuation Context

At $0.97 per share, CCG trades at an enterprise value of $76.3 million, or 0.16x trailing revenue of $491.8 million. This multiple places it in deep value territory, below even distressed peers. Huize, with similar scale and modest profitability, trades at 0.19x sales. ZhongAn commands 6.82x sales with 12.48% gross margins and 6.17% operating margins, while Ping An trades at 8.66x sales with 37% gross margins. CCG's 5.1% gross margin and -2% operating margin explain the discount, but the trajectory matters more than the absolute level.

The balance sheet provides a limited but not immediate liquidity concern. With RMB 167.2 million ($23.6 million) in cash and short-term investments as of mid-2024, and operating cash burn of $16.2 million annually, CCG has roughly 1.5 years of runway at current burn rates. However, management's guidance toward profitability in 2025 suggests the burn should narrow significantly, reducing dilution risk. The debt-to-equity ratio of 0.39 is manageable, and the current ratio of 1.31 indicates adequate near-term liquidity.

For an unprofitable company, the relevant metrics are revenue multiple, cash position, and path to profitability signals. CCG's revenue multiple of 0.16x is below even the most challenged peers, suggesting the market prices in either failure or minimal growth. Yet the 140% NEV CAGR and imminent AI revenue stream contradict this assumption. If CCG achieves adjusted operating profitability in 2025 as guided, the stock would likely re-rate toward at least 0.5-1.0x sales, implying 200-500% upside from current levels. The key variable is execution: delivering on the NEV market share target and launching the AI global business successfully.

Conclusion

Cheche Group has engineered a rare strategic pivot—trading revenue scale for margin quality while positioning itself at the epicenter of China's NEV revolution. The 135% surge in NEV policies and 150% growth in NEV premiums demonstrate market capture, while the 47% improvement in adjusted net loss shows operational leverage emerging. The imminent launch of AI-driven global solutions in Q4 2025 offers a potential transformation from transaction intermediary to high-margin software provider.

The investment case hinges on two variables: CCG's ability to capture 30-40% of China's NEV insurance market as the fleet scales to 80-100 million units, and successful execution of its international AI rollout. If both materialize, the current 0.16x sales valuation will appear severely mispriced. If either falters, concentration risk and limited cash runway could pressure the stock further.

With profitability on track for 2025 and a clear path to RMB 300-500 million in high-margin AI revenue, CCG offers asymmetric risk/reward. The market sees a struggling Chinese insurtech; the fundamentals suggest a technology platform approaching an inflection point. The gap between perception and reality defines the opportunity.