The “disappeared” Chunlan: What happened to the former air-conditioning giant and Gree idol?

From being the former overlord of the air-conditioning industry to having layouts in seven major fields including new energy, real estate, and hotels, Tao Jianxing's road to diversified expansion has been both up and down.

As a core figure of Gree Electric Appliances, Dong Mingzhu became the focus of media during the two sessions. In contrast, Tao Jianxing, the head of Chunlan Group, who also attended the two sessions and was once regarded as an "idol" by Gree and started the road of diversification as early as 1997 and entered the fields of power batteries and other fields, received little attention.

However, Tao Jianxing and his Chunlan Group are an important case that cannot be ignored in the wave of development of Chinese enterprises. From being an air-conditioning giant with a market share of up to 30% to having annual operating income of only around 100 million yuan, the story behind its rise and fall is truly regrettable.

Chunlan in the past: the air conditioner overlord and Gree idol

Time goes back to twenty-two years ago.

At that time in China, Midea had not yet achieved “as low as one kilowatt-hour of electricity per night”, and Gree had not yet “mastered core technology”.

At that time, the first company to dominate the Chinese air-conditioning market was called Chunlan.

In 1985, Chunlan was called "Taizhou Air Conditioning Factory", a small state-owned enterprise on the verge of bankruptcy; in 1989, Tao Jianxing, who was once an ordinary technician, was appointed as the factory director, and the factory turned losses into profits the following year; in 1989, Jiangsu Chunlan Refrigeration Equipment Co., Ltd. was established, and Tao Jianxing served as chairman and general manager. Two years later, Chunlan Group began to build the largest air-conditioning production base in China at that time.

It should be said that Tao Jianxiong had a keen sense of smell. At that time in China, on the one hand, the demand for air-conditioning market began to emerge and grow rapidly; on the other hand, foreign-funded air-conditioning companies had not yet entered my country, and there were also only a handful of local companies.

Chunlan, which seized the opportunity, also received rich rewards. In 1994, Chunlan's air-conditioning business achieved sales of 5.3 billion yuan and a net profit of 600 million yuan. On April 25, 1994, Chunlan Shares, jointly funded by Chunlan Refrigeration Equipment, Chunlan Special Air Conditioning, and Chunlan Sales, successfully landed on the secondary market with the stock code: 600854.SZ. In contrast, Gree Air Conditioning's sales in the same year were only 600 million yuan.

After the IPO, Chunlan Air Conditioner continued to advance by leaps and bounds. In 1995, it was awarded the title of "King of Chinese Air Conditioners" by the National Bureau of Statistics. In 2003, Chunlan Air Conditioner's production and sales volume exceeded 30 million units. In 2004, Chunlan Air Conditioner's market share continued to rank first. Tao Jianxing himself was also elected as one of the "Top Ten Economic Figures of the Year" in 2002.

At that time, Chunlan shares once became one of the "three horses" leading the stock market. According to China Economic and Informationization magazine, Zhu Jianghong, the founder of Gree Electric Appliances, once publicly stated: "At that time, Chunlan air conditioners were in full swing in the domestic market, so as a fan of Chunlan, Gree has been imitating Chunlan."

Indeed, Gree's growth has many similarities with Chunlan's, such as the "obsession" with technology. "Developing the company with technology and going global" is Chunlan's vision, and Gree's "mastering core technology" has long been deeply rooted in the hearts of the people.

In addition to technology, Chunlan at that time, like Gree today, was also very interested in "diversification".

Transformation and expansion: Initial success is not as good as fate

Chunlan's journey to diversification began in 1994.

In 1994, Chunlan Co., Ltd. was officially listed on the Shanghai Stock Exchange, and its capital operation capabilities were greatly enhanced. In the same year, Chunlan Co., Ltd. entered the motorcycle field together with Chunlan Group, and launched two series of products, "Chunlan Tiger" and "Chunlan Leopard". In the first half of 1997, it achieved sales of 60,000 units and sales revenue of nearly 1 billion yuan.

Having tasted success for the first time, Tao Jianxing immediately accelerated his pace of expansion. By 2005, Chunlan had been involved in projects such as motorcycles, washing machines, refrigerators, and automobile chassis. However, the rapid expansion of diversification gave rise to a series of problems:

In 1996, it invested 10 billion yuan to launch a family car project but failed to obtain a "birth permit"; in 1997, it launched a 0.8-micron integrated circuit project but was frustrated because it could not acquire the "908 Project" of the Ministry of Electronics; in 2000, it voluntarily gave up the $600 million investment in the LCD project because it saw the rapid changes in technology...

The 2007 annual report showed that Chunlan Holdings achieved operating income of RMB 2.22 billion and a net loss of RMB 198 million. Among them, the revenue of the air-conditioning business decreased by 31.52% year-on-year. The four holding subsidiaries, including Jiangsu Chunlan Washing Machinery Co., Ltd., which produces and sells refrigerators and other products, and Jiangsu Chunlan Power Manufacturing Co., Ltd., which produces and sells motorcycle engines and other products, all had negative net profits.

Due to the unsuccessful expansion, the air-conditioning business began to decline. From 2005 to 2007, Chunlan shares suffered losses for three consecutive years and was suspended from listing by the Shanghai Stock Exchange in May 2008.

It is worth pondering that in 2002, Tao Jianxing also tried to restructure Chunlan, carry out MBO share reform and all employees hold shares, but it failed due to various reasons. A former Chunlan Group person told Yema Finance that the corporate mechanism determines the life and death of the enterprise, and the failure of the share reform has affected Chunlan's morale to some extent. In sharp contrast, Midea Group has accelerated its development again after the successful MBO.

Although ST Chunlan later maintained its profitability by investing in real estate projects, the 2016 interim report shows that Chunlan shares achieved operating income of RMB 107 million and net profit of RMB 53 million in the first half of 2016, and the operating income of the air-conditioning business was only RMB 63 million (other income came from real estate, compressor and other businesses); in comparison, Gree Electric achieved operating income of RMB 49.182 billion in the first half of 2016, of which the operating income of the air-conditioning business was RMB 41.98 billion.

The changes in the past twenty years are really touching in comparison.

Seven major industries: the gains and losses of diversification

Chunlan shares have been declining in the air-conditioning field, and its diversified expansion has also been quite bumpy. However, the official website of Chunlan Group shows that the group's current seven major industry layouts have basically been formed: air-conditioning, new energy, finance and investment, machinery manufacturing, real estate, hotels, and commerce.

In addition to Chunlan shares in the air-conditioning field, the new energy industry is also one of the key industries developed by Chunlan Group. The leading products include: power nickel-hydrogen batteries, power lithium-ion batteries, fuel cells, and power supply management system assemblies. Kong Lingguo, deputy general manager of Jiangsu Chunlan Clean Energy Research Institute Co., Ltd., once said in an interview with "First Financial Daily" that Chunlan started making power batteries in 1997. In 2012, nickel-hydrogen batteries accounted for 70% of the domestic hybrid vehicle market and have been used in thousands of hybrid vehicles.

In the field of machinery manufacturing, Chunlan Group's products are widely used in home appliances, machinery, die-casting, molds, rail transit and other fields.

In addition, Chunlan Group has made fruitful investments in hotels, real estate and commerce. It owns many industries including Taizhou Hotel, Chunlan Guest House, Chunlan Business Center and Xingwei Garden.

It is worth noting that the official website of Chunlan Group shows that the company has a presence in securities, funds, insurance and other fields, but no relevant information has been found from the national industrial and commercial system, and no one has answered the call as of press time.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.