The logic behind Xu Jiayin's entry into new energy vehicles: In addition to acquiring land, there is also a desire to survive

Jia Yueting or Xu Jiayin’s FF91 car is about to go into mass production.

On August 28, local time in the United States, Faraday Future (FF) held a celebration ceremony for the first pre-production car at the Hanford plant. This means that FF has entered the final stage in production preparation and product testing, and the mass production of FF 91 has entered the final countdown.

Jia Yueting can take a breath, but Xu Jiayin should be happier. After Evergrande Health's investment, FF's mass production pace has been greatly accelerated.

On July 15, the first FF91 body-in-white was completed;

On August 2, vehicle assembly started;

Now, the first pre-production car has rolled off the assembly line.

It is reported that FF will advance simultaneously in Hanford, the United States and Guangzhou Nansha. The first mass-produced car will be born in Hanford, while the Guangzhou Nansha factory is preparing for localization.

Xu Jiayin's investment vision is so accurate that it can be called a master's hand - he spent $2 billion to buy a car factory that is about to open for production. Even the most powerful investment manager in China is probably not even one tenth as good as him.

Behind the appearance of everyone getting what they want is the sharp downturn in the real estate market

Evergrande is not the only real estate company to bet on the auto industry. Recently, real estate companies investing in the auto industry has become a trend.

Baoneng previously acquired 51% of Qoros Auto's shares for 6.63 billion yuan, and plans to invest 10 billion yuan in Qoros Auto every year for five consecutive years.

China Fortune Land Development acquired 53.4% ​​of the shares of Hozon New Energy for 330 million yuan, and plans to launch its first model, Nezha N01, in the third quarter of this year.

Country Garden invested 640 million yuan to build a new energy vehicle town in Shunde New City, Foshan, Guangdong.

Previously, Wanda's Wang Jianlin was persuaded by Dong Mingzhu to invest 500 million yuan in Yinlong New Energy. Some real estate companies have also invested in core components of new energy vehicles such as batteries.

Why are so many real estate companies eyeing the automotive industry?

In recent years, with the tightening of monetary policy, the property market has encountered a cold winter, and it is no longer a secret that real estate developers have had a hard time. Real estate tycoons, whose desire to survive has soared, have begun to seek new profit growth points.

In sharp contrast to the downturn in the real estate industry, the automobile industry, especially the new energy automobile industry, is booming. In 2017, China's automobile production and sales both exceeded 28 million units, ranking first in the world for nine consecutive years. In the first half of the year, the production and sales of new energy vehicles reached 413,000 and 412,000 units respectively, up 94.9% and 111.6% year-on-year, and there is considerable room for future growth.

At present, the country strongly supports the development of new energy vehicles and smart cars, and has a series of preferential policies for related car companies. Real estate companies, which have always been very sensitive to national policies, naturally do not want to miss this opportunity.

The automobile industry not only has a good development prospect, but is also a capital-intensive industry that small-scale capital cannot get involved in. The large amount of funds in the hands of real estate companies is exactly what the automobile industry urgently needs.

On the surface, Evergrande's investment in FF saved FF, which was on the verge of bankruptcy. Objectively, it was also a major move by Xu Jiayin to actively seek transformation. After the news of taking over FF came out, Evergrande Health's highest increase reached 80%, and its market value increased by HK$26.35 billion (about US$3.358 billion) in a single day. The US$2 billion used to invest in FF was earned back in one day.

Before being acquired by Baoneng, Qoros had been half-dead. In the first half of this year, Qoros' cumulative sales reached 27,313 units, a year-on-year increase of 358%, ranking first among all brands in terms of sales growth, achieving the best performance since the birth of Qoros.

Compared with large real estate companies, small and medium-sized real estate companies are more willing to invest in projects such as lithium batteries. The battery industry also needs blood transfusions due to the decline in subsidies for new energy vehicles and tight capital chains.

Real estate capital and the automobile industry, one needs transformation, the other needs a lot of funds; one needs future development, the other needs current emergency relief. The two can each take what they need, or they can each keep each other warm.

Car manufacturing also does not forget the old business of land grabbing

However, real estate companies will never forget their old business and will not give up the real estate business brought by car manufacturing.

The most direct one among them is Country Garden. Although Country Garden is also involved in the investment of the automobile industry, it adopts a model that combines automobiles with real estate.

Country Garden has invested 2.5 billion yuan to build a new energy vehicle town in Shunde. The town will focus on the goal of "building a full automotive innovation industry chain" and build an innovation center and a smart manufacturing center. Although Country Garden can use this to reduce its dependence on commercial real estate, it is still essentially a real estate business.

Other real estate companies investing in the automotive industry are more like playing a trick. It is normal to build factories to make cars and to build factories you need to acquire land. However, these car companies have acquired too much land to build factories.

Less than two months after Baoneng took over Qoros, it signed agreements to build production bases in Guangzhou, Hangzhou and Kunming, with a total investment of more than 60 billion yuan. In March this year, Baoneng invested 40 billion yuan to build a new energy vehicle production base in Xixian New District, Shaanxi Province.

After Evergrande invested in FF, before the products were put into mass production, it planned to build five major R&D and production bases in East China, West China, South China, North China and Central China.

Such a large-scale expansion makes people wonder whether these real estate companies are expanding for the purpose of building cars or to acquire land more conveniently and cheaply.

Perhaps these companies consider that car manufacturing is not as profitable as real estate, so they hoard some land to calm down. After all, even if they fail to manufacture cars, the land is still in their hands, and they can reap the benefits of land appreciation.

What are the chances of success for a real estate developer who is not a real estate developer to build a car?

Even if these real estate companies really want to build cars, what are their chances of success?

Real estate and automobile manufacturing are two completely different industries. It is absolutely impossible to produce cars with the same mindset as building houses.

After acquiring a stake in FF, Evergrande still retained the original management team. But at the same time, Evergrande and FF signed a bet agreement: if mass production cannot be achieved in 2019, Jia Yueting will lose the power of 10 votes per share, and Evergrande will dominate the operation of FF.

After acquiring Qoros, Baoneng made a major change in the original management team. Real estate companies and car companies have different corporate cultures and business philosophies, and it is worrying whether the two sides can effectively connect.

Although Qoros' sales have increased significantly after being acquired, most of the sales growth did not come from ordinary consumers, but from Liandongyun, a leasing company under the Baoneng Group, which is actually self-produced and self-sold.

Compared with real estate, the automobile industry has a longer investment cycle and higher operating risks. Although real estate companies are enthusiastic now, it is doubtful how long the investment in automobile manufacturing can last. If the real estate market picks up, can real estate companies that are used to making quick money continue to invest on a large scale?

In the power battery industry, CATL and BYD account for more than 60% of the market share. For those small and medium-sized real estate companies that invest in batteries, how many opportunities there are remains unknown.

Overly high goals and too fast expansion speed in car manufacturing have also added uncertainty to real estate companies' car manufacturing.

Peng Jianjun, vice president of Evergrande Group, disclosed the strategic plan of Evergrande Faraday Future (FF) for the next ten years - the company plans to build five major R&D and production bases in East China, West China, South China, North China and Central China. Ten years later, the annual production capacity is planned to reach 5 million vehicles. However, this kind of planning that tramples on industrial laws is difficult for people with normal intelligence to be convinced.

Baoneng's investment plan for automobile production base construction alone has exceeded 100 billion yuan. The last company to make such an aggressive layout was Dong Mingzhu's Yinlong. Blindly expanding the scale will lead to many hidden dangers. Once it breaks out, the previous investment is likely to become a burden on the company.

Real estate companies should be cautious when making cars. After all, car manufacturing is not something that can be done by just throwing money at it.

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.