Most will be eliminated, and the path of new forces in car manufacturing is becoming clearer

New car-making forces that were once considered disruptors of the automotive industry are now gradually becoming allies of traditional car companies. On July 3, a Beijing Business Daily reporter learned that Byton Auto and China First Automobile Group Co., Ltd. (hereinafter referred to as "FAW Group") signed a strategic cooperation framework agreement in Nanjing, and both parties will accelerate their layout in the field of new energy vehicles.

Industry insiders believe that the cooperation between Byton and FAW Group can be seen as a signal that new car-making forces are gradually returning to the traditional car-making path. Many new car-making forces have realized that it is difficult to survive on their own, so they have begun to try to establish cooperative relationships with traditional car companies. However, except for a few car companies that can successfully break through, most new car-making forces have only two options in the future - either be acquired or be eliminated.

New and old car companies strengthen cooperation

According to the cooperation agreement between Byton and FAW Group, the two parties will play an industrial synergy role and carry out a series of cooperation in platform technology, investment and shareholding, parts procurement, etc. At the same time, both parties will accelerate their layout in the field of smart new energy vehicles. On the technical level, FAW Group plans to share and integrate FAW's new energy vehicle platform with Byton's electric vehicle platform to jointly develop a new generation of Byton's electric vehicle products.

Beijing Business Daily reporter noted that this is not the first time that Byton and FAW Group have joined hands. On June 11 this year, Byton announced the completion of a $500 million Series B financing led by FAW Group. At the same time, Byton's global headquarters was officially opened in Nanjing on the same day. A Byton official said that the Series B financing will further enhance Byton's financial strength and provide strong financial support for the production of the first mass-produced car in the next stage, as well as product and technology research and development.

In fact, the cooperation between Byton and FAW Group is very similar to the previous cooperation between GAC and NIO. In December 2017, GAC and NIO held a signing ceremony for strategic cooperation and new energy vehicle projects. According to the cooperation agreement, the two parties will cooperate in the research and development of intelligent networked new energy vehicle industry technology, parts production, and operations. As the first step of the strategic cooperation, the two parties jointly invested in the establishment of a joint venture.

"There is a lot of room for imagination in the cooperation model, which also includes the construction of future sales channels, travel services and other aspects." Cui Dongshu, secretary-general of the National Passenger Car Joint Conference, said, "FAW Group can provide Byton with resources for channel construction, which is very important for channel sinking, and may also provide support in personnel transportation in the future. In the future, the trend of integration between traditional car companies and new car-making forces will become stronger and stronger."

However, some industry insiders pointed out that compared with FAW Group, Byton is a new car company with a shallow foundation. As FAW Group fully intervenes in Byton in terms of financing, production, qualifications, platforms, suppliers, sales network and after-sales service system, the control of Byton's founders and management will be significantly reduced. In this case, how Byton can maintain its independence remains to be seen.

Acquisition may be an ideal solution

For some new car manufacturers, once they sense the risk, finding a buyer to sell themselves is also a more feasible option. On June 25, Evergrande Health, a subsidiary of Evergrande Group, announced that Evergrande Group acquired 100% of the shares of Hong Kong Shiying Company for HK$6.746 billion, indirectly acquiring 45% of the equity of Smart King Company, becoming the company's largest shareholder and also the largest shareholder of Faraday Future (hereinafter referred to as "FF"), a US new energy vehicle company.

As early as April this year, news about Evergrande Group's participation in a new round of investment in FF was reported. At that time, it was reported that Evergrande Group's Hong Kong-based fund invested in FF's offshore company registered in the Cayman Islands at the end of 2017, with an investment amount of approximately US$300 million. Since FF's valuation was only US$1.5 billion, Evergrande's investment was a life-saving money, otherwise FF might face the risk of bankruptcy.

After Evergrande Group invested in FF, FF91, the first mass-produced car of FF, became a hot topic again. It is understood that Evergrande Group, as the investor, has signed a gambling agreement with the original shareholders of FF. If FF91 cannot be mass-produced on time, the control of FF will be fully transferred to Evergrande.

Industry insiders said that it would be difficult for FF91 to go into mass production on time, because the current $800 million invested by Evergrande is not enough to support the mass production of the high-end FF91, and the subsequent $1.2 billion will not be invested until the end of 2019 and the end of 2020. Moreover, there is only half a year left to complete the overall mass production preparations, so time will be very tight.

On June 25, shortly after FF officially announced the completion of its first round of financing, He Xiaopeng, chairman of Xpeng Motors, commented: "Invest $2 billion in a shell company, and then use debt to acquire $800 million. Similar to the previous LeTV Sports, wait for the reversal version in a few years."

Most will be eliminated

Although many new car-making forces can maintain their survival by finding buyers, more companies will continue to face the risk of being eliminated. On June 13, Xiaokang Shares issued an announcement stating that it had received an inquiry letter from the Shanghai Stock Exchange, requiring the company to explain the relevant matters regarding the company's acquisition of the US battery system company InEVit, including explaining whether the relevant assets are overvalued. Xiaokang Shares' previous acquisition announcement showed that InEvit's net assets were -391,100 US dollars, the assessed value was 34.3 million US dollars, the appreciation rate was 8772.7%, and the final transaction price was determined to be 33 million US dollars.

However, on June 22, Xiaokang Shares issued an announcement stating that it was unable to respond to the Shanghai Stock Exchange's "Inquiry Letter" on time for some reason. Regarding the decision-making process of the above-mentioned asset acquisition, Beijing Business Daily reporters also tried to contact Xiaokang Shares to understand the relevant situation. However, as of press time, no response has been received from the other party.

In an interview with a Beijing Business Daily reporter, famous economist Song Qinghui said that it was puzzling that a company with negative net assets could be traded at a price of $33 million. Such a high premium acquisition was extremely abnormal and could be suspected of stock price speculation or money laundering.

In fact, since March this year, Xiaokang Shares has been questioned by the Shanghai Stock Exchange five times due to multiple issues such as cooperation, acquisitions, and performance. Industry insiders believe that Xiaokang Shares' "Great Leap Forward"-style new energy layout strategy faces greater uncertainty risks.

In the opinion of Yan Jinghui, an expert from the Expert Committee of the China Automobile Dealers Association, Xiaokang Shares' investment in research and development and production bases has already run into a funding gap, and with SF MOTORS' products not yet on the market, there is a high risk of a broken capital chain.

As competition in the entire new energy vehicle industry becomes increasingly fierce, the first batch of new car-making forces that can no longer hold on have emerged. In addition to LeEco Internet Car, which has fallen into financial difficulties amid heated public opinion, Horizon Motors, which was previously exposed to have a farewell dinner, has gradually stopped its car-making plan in 2015, and the controversial "Star Valley Laboratory" seems to have fallen into oblivion. Youxia Motors, the originator of "PPT car-making", was also taken over by Xituo Industrial Group in April 2017.

Statistics show that the number of new energy vehicle companies registered with the Ministry of Industry and Information Technology has reached 503, including both traditional car companies that are already producing cars and new car-making forces, the latter of which number about 51. Among the 51 new car-making forces, only 16 have obtained the approval target of the National Development and Reform Commission, and 6 have passed the review of the Ministry of Industry and Information Technology. "Most of the new energy car-making forces will hardly survive for five years." Cui Dongshu said in an interview with a Beijing Business Daily reporter.

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.