A former employee reveals the inside story of Keliyuan's huge losses

The financial report recently released by Hunan Kelong New Energy Co., Ltd. (hereinafter referred to as "Kelong") shows that Kelong suffered a net loss of 211 million yuan in 2016, which is the sixth consecutive year of losses in its main business.

Despite years of losses, the company still persists

Key financial data of Corun in 2016 and comparison with the same period

From the above table, we can see that although the overall operating income of CRRC has increased, the net profit attributable to shareholders of the listed company has shown negative growth. So, where did the income go?

According to the financial report of Corun, the money was used to build a hybrid power system production line, and most of the projects under construction are in the investment stage and have not yet recovered their costs. In addition, the company's products are still in the promotion period and cannot be sold at a high price. However, these statements seem far-fetched and untenable.

It is generally believed in the industry that the continuous losses of Corun are closely related to its long-term layout in the field of hybrid vehicles. At present, hybrid vehicles basically no longer have a growth environment in China. First, since 2013, hybrid vehicles have no longer enjoyed policy subsidies, and the country's support for them has been significantly reduced; second, hybrid vehicles are not very advantageous as energy-saving vehicles. For example, some companies can achieve similar energy-saving effects by optimizing engines, turbocharging and other technical routes; third, it is also a key factor that makes it difficult for hybrid vehicles in my country to have a breakthrough development. Compared with pure electric vehicles, although fuel hybrid technology is more mature internationally, it is basically monopolized by Japanese car companies such as Toyota and Honda, and it is too difficult for China to make technological breakthroughs in this field. It is also for this reason that the price and maintenance costs of hybrid vehicles in the domestic market remain high, making it difficult to form a competitive advantage.

Even so, Zhong Faping, chairman of Corun, has repeatedly publicly expressed his support for hybrid vehicles. He believes that the country's policy of promoting pure electric new energy vehicle industry is not in line with the laws of scientific development, nor the laws of the market. One day, the country's automobile industry strategy will return to the hybrid route. An industry insider said that it was Zhong Faping's willful behavior and his choice of a development concept that runs counter to the country's new energy vehicle strategy that put Corun into its current predicament.

The inside story of the huge loss surfaced

There is no policy support, technical breakthroughs are difficult, and consumers are not buying it... Changan, FAW and other automakers have turned back on the road to developing hybrid technology. Why is CRRC still "persevering" and continuing to invest even though it has been losing money for years?

Mr. A, who has worked at Kolion for many years, revealed some inside information to the reporter.

"If I hadn't resigned, there are some things I would never say and couldn't say." On the other side of the interview call, Mr. A breathed a sigh of relief. However, from the entire conversation, the reporter could feel that Mr. A had deep feelings for both CRRC and the development of the entire hybrid industry.

Mr. A told the reporter that the hybrid technology mastered by Corun is far behind that of Japanese automakers. Currently, Toyota's hybrid technology has developed to the fourth generation, while Corun's hybrid technology is still at the first generation. However, in the current domestic market, there are not many companies that are stronger than Corun in hybrid system manufacturing. It can be seen that the gap between domestic hybrid technology and Japanese automakers is huge.

When talking about the fact that Corun was still expanding its investment despite huge losses, Mr. A revealed some helplessness in his words. "No company is willing to do a business that loses money. Once something is done, it is difficult to turn back." Mr. A said, "In recent years, some domestic vehicle manufacturers have cooperated with Corun, but the vehicle manufacturers think that hybrid vehicles are not profitable, so they simply don't want to do it." (When talking about this issue, Mr. A directly mentioned the name "Geely".)

In Mr. A's opinion, there are currently few experts in China who truly understand hybrid technology. In addition, the attitude of the policy level towards hybrid technology and the not very good user experience of hybrid vehicles are restricting the development of hybrid technology in China. As a company, Corun is also trying to achieve some technological breakthroughs and strive to turn losses into profits.

"In fact, Corun has invested in setting up a research institute in Nagoya, Japan, and hired some retired researchers from Toyota Motor to overcome technical difficulties, but this approach still has great limitations," said Mr. A. "Due to the technical caution and conservatism of Japanese researchers, it is still uncertain whether Corun can truly access Japan's core hybrid technology."

Of course, in addition to the reasons mentioned by Mr. A, there are many other factors that make the development of hybrid technology in China difficult. But it is undeniable that the fact that CRRC is still expanding its investment despite huge losses is not only the result of external factors, but also many active factors, such as the social responsibility of a company and the prediction of the future prospects of hybrid technology. Regardless of the reason, CRRC will have a harder time on the road of hybrid technology development.

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.