Cross-border car-making real estate developers enter the new energy vehicle market

When Evergrande Health announced that it would take over Jia Yueting's FF Automobile for HK$6.746 billion and become the largest shareholder of the latter, the discussion about "why the richest man Xu Jiayin rushed to help Jia Yueting" has never stopped. But there is no doubt that Evergrande Group has officially entered the field of new energy vehicle manufacturing. This kind of cross-border is not uncommon after Baoneng acquired Zhiji and China Fortune Land Development acquired Hezhong, but it reveals a trend: after Internet giants have flocked into the field of car manufacturing, domestic real estate developers have also set their sights on the new energy cake and quickly started to lay out with huge funds and resources.

In a year and a half, five real estate giants entered the car manufacturing field

The first real estate developer to enter the automotive industry with a big investment was Baoneng Group. On June 15, 2017, when I first learned about Baoneng's acquisition of Qoros and tried to search for relevant clues, I couldn't find a single article on the Internet that mentioned "Baoneng and Qoros" together. When this blockbuster news was reported the next day, it dominated the headlines of major media for several consecutive days. Many people began to realize that in addition to traditional car companies that are in urgent need of transformation and new forces that are coming with disruption, there will also be real estate developers with huge funds and resources.

Qoros Auto wanted to maintain its development direction despite the urgent need for funds, and Baoneng was undoubtedly a good sponsor. Baoneng also took the opportunity to acquire 51% of Qoros Auto for 6.63 billion yuan and officially entered the automobile manufacturing industry. Yao Zhenhua, chairman of Baoneng Group, announced that starting from 2018, Baoneng Group will invest 10 billion yuan in Qoros Auto every year for five consecutive years for the research and development of new cars, and set a sales target of "impacting 100,000 vehicles and challenging 120,000 vehicles" for Qoros in 2018.

Almost at the same time as Baoneng Group, China Fortune Land Development, a real estate giant that focuses on building industrial new cities, industrial towns and industrial communities, also entered the car manufacturing track. On October 31, 2017, Zhejiang Hezhong New Energy Automobile Co., Ltd., a new car-making force, changed its equity structure. The actual controller changed from Fang Yunzhou, the former deputy director of the Energy Conservation and New Energy Vehicle Center of Tsinghua University, to Wang Wenxue, chairman of China Fortune Land Development, who invested 330 million yuan to acquire nearly 53.4% ​​of Hezhong New Energy's shares. China Fortune's senior management also told the media: "It is no secret that it has long been controlling Hezhong, and China Fortune Land Development's determination to invest in new energy vehicles has been planned for a long time." After that, Wang Wenxue further expanded its layout in the automotive field. Zhihe Travel and Zhixing Innovation invested in the shared car platform "PonyCar Immediate Use of Cars" and Bagu Travel respectively, and Zhihe Travel, Zhixing Innovation, and China Fortune Land Development are all subsidiaries of Zhihe Holdings Co., Ltd., and the legal representative of Zhihe Holdings Co., Ltd. is Wang Wenxue. On May 23, Hozon New Energy officially obtained the qualification to produce pure electric passenger vehicles, becoming the seventh newly built pure electric passenger vehicle manufacturer to pass the review of the Ministry of Industry and Information Technology. On June 1, Zhejiang Hozon New Energy Automobile Co., Ltd. officially launched its own car brand - NETA Nezha Automobile. Hozon New Energy has also signed strategic procurement agreements with Tomato Travel, Bagu Travel, Xiaoer Car Rental, and PonyCar. The latter four companies will purchase a total of 20,000 Nezha cars.

In addition, Country Garden, which is "optimistic about the third- and fourth-tier markets" and insists on the development of all-tier cities, has also been developing in the field of new energy vehicles in recent years. From the perspective of supporting facilities and services, Country Garden has seen the development obstacles and huge demand for new energy vehicles in third- and fourth-tier cities. In September 2017, Country Garden signed a strategic cooperation agreement with the Shenzhen New Energy Vehicle Industry Association. The two parties plan to build a large platform for the development of the new energy vehicle industry with a new generation of vehicles as the core, facing new energy, vehicle-mounted Internet of Things, smart cars and other cutting-edge fields, and promote the development of science and technology industries and regional economies. In mid-October 2017, Country Garden spent 640 million yuan to buy a total area of ​​118,000 square meters of land in the Chuangzhicheng area of ​​Shunde New Town, Foshan City, Guangdong Province. It plans to establish five major research institutes in the area, including power batteries, new materials, complete vehicles, motor controllers, and powertrains, to create a new energy vehicle town and build a product format that integrates the three areas of parks, communities, and blocks. Fang Xingyong, general manager of Shunde New Energy Vehicle Town Industrial Park, said in an interview with the media that there is a relatively large gap between supply and demand in the new energy vehicle market. He will pay careful attention to the whole vehicle, but the core components of the automotive industry, software testing, vehicle operation services and other aspects are the development focus.

As for Wanda Chairman Wang Jianlin, the "small investment" of 500 million yuan in Yinlong also attracted much attention. Wang Jianlin said that he invested in Yinlong mainly for two reasons: he is a friend of Dong Mingzhu and he believes that Dong Mingzhu's vision is not wrong. But he also said: "The role of entrepreneurs is to be forward-looking and to see things that others cannot see."

Compared with Wang Jianlin's investment, which is quite "friendship", Evergrande Group's Xu Jiayin's investment in FF Automobile has obviously been carefully thought out and operated. On June 25, Evergrande Health issued an announcement stating that the company acquired 100% of the shares of Hong Kong Shiying Company for HK$6.746 billion, indirectly obtaining 45% of the equity of Smart King, which wholly owns FF USA and FF Hong Kong. As a result, Evergrande became the largest shareholder of FF Automobile. It is not difficult to see that Shiying Company plays more like a "shell" role for Evergrande to collect FF. Some media reported that as early as the beginning of 2018, Evergrande Group sent financial personnel to FF as an investment direction and took over, and FF also signed a bet agreement with Evergrande, promising mass production and delivery in the first quarter of 2019. For this investment, FF stated that "consensus on the opportunities for change in the automotive industry" is the premise of cooperation between the two parties. Evergrande Health believes that it can obtain "the world's leading new energy vehicles" and have the opportunity to gain strong competitiveness in the fast-growing new energy vehicle industry.

After real estate, the new energy vehicle industry is the second largest cake

On June 28, Niu Jinming, director of the Beijing New Energy Vehicle Development Promotion Center, introduced the latest development of new energy vehicles in Beijing. He said that the quota for individual new energy passenger car quotas in 2018 was 54,000, but on February 26, these 54,000 new energy passenger car quotas had been fully allocated, and the number of people applying for private passenger car quotas in Beijing has now exceeded 280,000. This means that if the policy is not adjusted, those who want to buy new energy vehicles will have to wait until after 2023.

Although there is still a lot of room for improvement in new energy products, new energy vehicles are still the development trend of the global industry. Guo Chunlin, director of the Electric Vehicle and New Energy Power Source Research Center of North China Electric Power University, said that many people doubt the prospects of new energy vehicles, but it is actually a consensus product under global energy conservation and emission reduction, and carries many important responsibilities, not just product prices and technical issues.

China has also always attached great importance to the development of new energy vehicles from a national strategic perspective. Since 2009, it has introduced a series of encouraging subsidy policies and management regulations. Today, China's new energy vehicle production and sales have ranked first in the world for three consecutive years. In the process of the country promoting the transformation of the new energy vehicle industry from a policy-oriented to a market-oriented one, the capital market has long foreseen the huge business opportunities.

Chinese real estate developers also realize that after nearly 20 years of prosperity, the domestic real estate market has indeed entered a critical juncture: on the one hand, the country has vigorously suppressed speculative demand. Against the background of "houses are for living, not for speculation", since last year, from the central government to local governments, many regulatory measures such as purchase restrictions, loan restrictions, and sales restrictions have also vigorously suppressed speculative trends. At the same time, the financing channels of real estate companies have been blocked, and channels such as banks, trusts, bonds, and equity have been tightened. As the locomotive of the "old economy", real estate may slow down due to "lack of money". Analysts believe that the real estate market regulation policy has shown a strict control state of "purchase restrictions, loan restrictions, price restrictions, sales restrictions, and luxury restrictions". At the same time, the "patch" policies issued by various places are also continuously introduced. A researcher from the Chinese Academy of Social Sciences said that due to the decline in sales, it is expected that the real estate market prices will remain stable and fall throughout 2018.

On the other hand, the transformation of the real estate industry has also entered a stage of diversified development. Relying on capital and finance, real estate companies that are not experts in automobile manufacturing are looking for new economic growth points that can be integrated with new energy vehicles and their original real estate businesses to solve the problems of difficulty in acquiring land and high land prices.

In addition, "new energy vehicles" is a landmark industry of the "new economy" in the industrial field, and policy support continues to increase. The vehicle manufacturing, core components, supporting facilities, operation services and cutting-edge technologies surrounding the new energy vehicle industry are all booming, and "cross-border integration" has also become the key to the transformation and upgrading of enterprises. Yang Yusheng, an academician of the Chinese Academy of Engineering, recently revealed that during the 13th Five-Year Plan period, the central government alone will spend 390 billion yuan on subsidies for new energy vehicles. According to statistics, global investment in the field of intelligent driving has exceeded 80 billion US dollars between 2014 and 2017 alone. This trending industry contains countless global resources and business opportunities.

Looking at the real estate developers’ “car-making bureau” from Baoneng

In front of the huge cake of the new energy vehicle industry, all participants are vying for the opportunity to sit at the table. Traditional enterprises are weighing the existing interests and market trends, Internet car companies are still crossing the river by feeling the stones, and core component companies need time to build technical barriers. In comparison, real estate developers with great financial and resource advantages are more likely to come forward through large-scale investment and mergers and acquisitions.

At present, Baoneng's investment and layout in the automotive field are relatively comprehensive. After a series of open and covert battles with Vanke, "capital hunter" Yao Zhenhua has been looking for high-yield investment targets, and among the top high-dividend industrial chains, the automotive industry is undoubtedly the right time.

First, the development of new energy vehicles still has a lot of room for development to achieve the goal of "Made in China 2025". Under the encouragement of the country's continuous policies, new energy vehicles have become a breakthrough for leading enterprises to seize the initiative and catch up with the development; second, the current number of cars in my country has exceeded 300 million, and the "after-the-car" businesses such as finance, logistics, insurance, and e-commerce attached to cars and new energy vehicles are sectors that Baoneng Group can expand; third, the trend of cross-border integration in the automotive industry is strengthening, and cars are transforming from simple means of transportation to an extension of human life and work, which also has many intersections with the transformation and expansion of Baoneng's existing business.

In terms of the layout of production bases, on October 19, 2017, Baoneng Group signed a project cooperation framework agreement with the Fuyang District Government of Hangzhou and Hangzhou Xintiandi Group, planning to invest approximately RMB 14 billion to build a new energy vehicle production base covering an area of ​​3,000 acres and with an annual output of 300,000 vehicles; in December 2017, Baoneng started construction of a new energy vehicle industrial park in Guangzhou, with a total investment of RMB 30 billion. The first phase of the project has a planned production capacity of 500,000 new energy vehicles and related supporting projects. In addition, Baoneng is accelerating the establishment of the Baoneng Automobile Research and Development Institute, and is committed to building an automobile research and development center that integrates complete vehicles, systems and components, new energy and other fields.

In terms of parts, last year Baoneng acquired a controlling stake in the listed company Shaoneng Power through a private placement. The latter is involved in the new energy parts business and is a powertrain parts supplier for new energy vehicle manufacturers such as BYD, Dongfeng Group and GAC Group.

In terms of production and channels, from January to May this year, Qoros Auto sold 23,754 units of its five products, with overall sales increasing by 366% year-on-year, but still far from the annual "small goal" of 100,000 units. Currently, Qoros Auto only has fuel vehicle business. Its first new energy vehicle, Guangzhi 3 EV, is expected to be launched around the Guangzhou Auto Show, and plans to launch 1-2 new energy vehicles every year in the future. After signing 51 new first-tier dealers, Qoros officials said that the current number of dealers has reached 255.

In terms of talent, three generals from the BAIC Group, Li Feng, Cai Jianjun and Chen Siying, have joined Baoneng since the beginning of this year and are directly involved in the management of Qoros Auto.

In terms of sales, Qoros Auto has received a large order from Shenzhen Qianhai Liandongyun Car Rental Co., Ltd. (Liandongyun), with the order quantity exceeding 10,000 vehicles. Liandongyun Car Rental is a car rental company under Baoneng.

At present, it seems that Baoneng Group has entered the emerging hot field of new energy vehicles in all aspects. Yao Zhenhua, chairman of Baoneng Group, once stated at the groundbreaking ceremony of the new energy vehicle industrial park that he would firmly and vigorously develop the new energy vehicle business, optimize and upgrade the fuel vehicle business, create an "R&D-manufacturing-after-market" industrial chain, and use 10-15 years to build Baoneng Automobile into an automobile group with strong competitiveness and international influence.

On the other hand, there are also doubts in the industry about Baoneng Group's car manufacturing. With Baoneng's entry, Qoros Auto has seen an unprecedented wave of resignations, with senior executives at the vice president level and above in charge of design, R&D, procurement, personnel, finance, marketing and other business lines leaving one after another. Whether the external force of capital will retain Qoros' core genes while driving its rapid development is also a double-edged sword problem.

In addition, some analysts believe that Baoneng can achieve considerable profits by entering the new energy vehicle field to solve the problems of difficulty in obtaining land and high land prices. For example, it has landed a new energy vehicle project with an annual output of 300,000 vehicles in Fuyang District, Hangzhou, completed the Xintian Real Estate City Complex Project, and achieved a double harvest of new energy vehicles and real estate businesses, which may help real estate developers obtain tens of billions of yuan in revenue. And this potential business opportunity is crucial for real estate developers: China Fortune Land Development is also relying on Hezhong New Energy Vehicles to build an industrial new city and help regional local governments complete industrial chain investment promotion, etc.; and FF Hong Kong's wholly-owned subsidiary Ruichi Intelligent Automobile (Guangzhou) Co., Ltd. spent 364.1 million yuan to officially bid for a manufacturing land of about 601 acres in Nansha District, Guangzhou, which was also said to be promoted by Evergrande. However, Evergrande also stated at the latest performance conference that the company's latest strategy will be based on people's livelihood real estate and led by high-tech industries. Perhaps for Evergrande, the new energy vehicle market in transformation and upgrading will be a gathering place for high-tech, and real estate developers are also trending in cross-border car manufacturing.

Whether from the perspective of domestic and international environment, policy orientation or changes in the automotive industry, new energy vehicles are the hottest industries in the current domestic manufacturing industry. Driven by this trend, electrification, intelligence and sharing under the huge industrial chain are also becoming new economic growth points, and various cross-border, subversive and international integration of the automotive industry are coming. Real estate developers who enter the new energy vehicle industry with huge funds and resources may accelerate the survival of the fittest, mergers and reorganizations in the automotive industry, and gradually become important participants in the automotive track.

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.