Why did Zhuhai Yinlong's value increase 100 times overnight?

With the support of Gree Electric Appliances Chairman Dong Mingzhu, Zhuhai Yinlong has become a star enterprise. How did this unknown new energy vehicle company increase its value 223 times in 8 years?

Zhuhai Yinlong was a dark horse that Dong Mingzhu spotted in 2016. By acquiring the American technology company Altair Nanotechnologies Inc. (hereinafter referred to as Altair), Zhuhai Yinlong claimed to have mastered a nanotechnology, which was regarded by Dong Mingzhu as "gold long buried in the desert."

However, Gree Electric's small and medium shareholders were not buying it. They joined forces to veto Gree Electric's plan to acquire Zhuhai Yinlong.

But Dong Mingzhu did not give up. In December 2016, in the latest round of capital increase, Dong Mingzhu, in her personal capacity, joined hands with Dalian Wanda Group headed by Wang Jianlin, Suqian Hanbang Investment Management Co., Ltd. under Liu Qiangdong, CIMC Group and mysterious shareholder Beijing Yanzhao Huijin International Investment Co., Ltd. to jointly increase the capital of Zhuhai Yinlong by 3 billion yuan.

According to the capital increase and the shares held, Zhuhai Yinlong's valuation has reached 13.4 billion yuan, which is 223 times its initial registered capital. Since its establishment in 2009, Zhuhai Yinlong has completed 10 equity transfers and 7 capital increases. It was during this process that the company achieved a leap in valuation, and Zhuhai Yinlong Chairman Wei Yincang also recovered his investment costs.

Zhuhai Yinlong has been controversial for its technological route, but has been crazily pursued by local governments and capital. What kind of company is it?

“Creating something out of nothing”

Wei Yincang's hometown, Wu'an City, is a county-level city under the jurisdiction of Handan City, Hebei Province. It is mountainous, poor and has been a prosperous trade since ancient times. However, Wei Yincang did not go abroad to do business, but completed primitive accumulation locally. His early business territory involved highways, minerals and auto parts repair.

When Zhuhai Yinlong was first established in 2009, its official website showed that "BVI Yinda Holdings Co., Ltd." registered in the British Virgin Islands was a member of Zhuhai Yinlong. This company and Handan Guangda Highway Development Co., Ltd. jointly controlled Handan Handu Highway Development Co., Ltd. Industrial and commercial data showed that Handan Guangda Highway Development Co., Ltd. was funded and established by two departments of the Handan Municipal Transportation Bureau.

Handan Handanwu Highway Development Co., Ltd. was established in December 1996 and has the right to operate the toll collection for the Handan-Wu'an section of National Highway 309. Zhuhai Yinlong's official website once introduced that Handanwu Highway is part of National Highway 309 and is a national standard first-class highway. It passes through Congtai District, Fuxing District, Handan County, and Wu'an City in Handan City. It is the throat of the transportation of Shanxi coal to the east and one of the important transportation routes in Handan City. It officially started to collect tolls in 2000, and realized toll revenue of 80.8 million yuan in 2009, and a total of 83.48 million yuan in 2010.

Zhuhai Yinlong also had Yinlong Investment Group (Hong Kong) Co., Ltd., which mainly engaged in the production, development and trade of three major pillar products: iron ore, coal and non-ferrous metals.

Yinlong Investment Group (Hong Kong) Co., Ltd. has a subsidiary, Hebei Yinda Transportation Industry Group Co., Ltd., with total assets of 1.01 billion yuan. It is a large private enterprise whose main business is road investment and development and highway construction.

After entering the new energy sector, these early companies and businesses can no longer be seen in Zhuhai Yinlong's latest equity structure. Wei Yincang indirectly controls Zhuhai Yinlong through a series of companies established in the British Virgin Islands, the Cayman Islands and Hong Kong.

In 2014, Zhang Chenliang, secretary of the Wu'an Municipal Party Committee, was interviewed by China National Radio. When talking about the transformation of Wu'an's economic structure, he revealed Wei Yincang's movements after leaving Wu'an:

After the new century, Wu'an City mobilized local bosses working outside to return home to start businesses, including Wei Yincang. Wei Yincang had already become an American citizen at the time. Under the mobilization of Wu'an City leaders, he gave up his American green card, bought out the technology of American Aoti, and returned to his hometown to invest in building a factory and develop new energy vehicles.

According to Zhang Chenliang's calculations, Zhuhai Yinlong and another new energy vehicle company invested in Wu'an have great development potential. If the three phases of the project are fully launched, with an investment of 30 billion yuan, the output value can reach 120 billion yuan, which is equivalent to creating another Wu'an city.

Zhang Chenliang believes that by introducing these new energy vehicles, Wu'an has found a path to transformation and upgrading and green rise. This path is to "create something new out of something existing" in traditional industries and "create something out of nothing" in emerging industries.

A battery industry insider who has dealt with Wei Yincang many times told reporters that Wei Yincang was not from a technical background, but has now become a battery expert and can talk endlessly about batteries.

Aoti

It was Aoti of the United States that supported Zhuhai Yinlong's "creation out of nothing". In 2010, Zhuhai Yinlong spent 57.5 million US dollars (about 400 million RMB) to acquire 53.3% of the shares of Aoti of the United States, and mastered the stone-based nano-ball making technology mentioned by Wei Yincang.

Previously, Zhuhai Yinlong had done little in the new energy sector. An economic official in Zhuhai told reporters that before Gree Electric acquired it, he only knew of the existence of such a company.

Aoti is a 40-year-old technology company, but its operating performance has been poor. In 2010, when it was acquired by Zhuhai Yinlong, Aoti's total assets, revenue and net profit were US$24.26 million, US$7.83 million and -US$22.3 million respectively. The company was listed on NASDAQ, but after being acquired by Zhuhai Yinlong, it was unable to submit financial statements on time due to differences in Chinese and foreign audits, and was forced to suspend trading and subsequently delist.

The poor performance is partly due to the failure of Aoti's early commercialization. Its business path ranges from life science to pharmaceuticals to military use. It was once ridiculed by foreign media that its main business changes faster than Oprah's clothes.

It was only in the last decade that American Autem gradually established two main commercialization lines: energy storage systems and lithium titanate batteries.

Looking through the financial reports of Aoti, the energy storage system has been the main contributor to the company's revenue in recent years. For example, in the first half of 2013, 43% of the $5 million in revenue came from Hawaiian Electric Light Company. Hawaiian Electric Light Company also showed multiple purchase records for different energy storage purposes such as wind energy and solar energy. In addition, some internationally renowned companies such as AES Corporation and multinational wind power company Vestas are also customers of Aoti.

In the process of increasing capital in Zhuhai Yinlong, Dong Mingzhu and Wang Jianlin also clearly expressed their hopes for the energy storage field. At the shareholders' meeting in 2016 when Gree Electric acquired Zhuhai Yinlong, Dong Mingzhu frankly said that she did not like Zhuhai Yinlong's cars, and cars were just an extension of batteries for her. After acquiring Yinlong, they will speed up the production of energy storage equipment, and then throw out the golden sentence, "We must eliminate more than half of the smog." Wang Jianlin said more directly when increasing capital in Zhuhai Yinlong: "I don't think its future lies in new energy vehicles, I think it is more in energy storage."

In contrast, Aoti's lithium titanate battery lacks successful examples in the U.S. In 2006, Aoti developed a lithium titanate battery named NanoSafe and launched it as a core product.

The so-called lithium titanate battery uses lithium titanate as the negative electrode material of the battery. Compared with the more popular lithium iron phosphate and ternary materials used by Tesla in the international market, lithium titanate has the fastest charging speed, which only takes a few minutes; at the same time, lithium titanate batteries also have the advantages of long service life, good safety and stability. However, its energy density is the lowest, as low as half of that of ternary materials, which means that less power can be stored in the same volume, and the car needs to be charged after a short distance.

NanoSafe was sold to several car companies, one of which was a strategic partner, Phoenix Motorcar, which mainly manufactures trucks. A reporter from Forbes magazine who has been following Aoti for a long time wrote that after seeing the pure electric truck jointly produced by the two companies, then-President Bush looked under the hood and said that the United States would have the hope of reducing fuel consumption by 20% within ten years. Aoti's stock rose 18% the next day. However, the cars jointly produced by the two parties were not followed, and Phoenix Motorcar declared bankruptcy in 2009.

The US bus manufacturer Proterra also purchased Autac’s lithium titanate batteries. When the buses jointly produced by the two parties debuted in 2013, they were praised by the then US Secretary of Transportation as “the bus of tomorrow”. Proterra ordered batteries for about 80 buses, but it is unknown whether it has renewed the order.

The reporter sent an email to Proterra to inquire about renewal and battery quality, but no response was received as of press time. However, the sales director of a large domestic lithium titanate battery supplier told the reporter that he visited the American Public Transportation Association in 2014, and at least three bus companies said that Proterra's batteries deteriorated too quickly.

At Gongbei, the largest bus terminal in Zhuhai, the reporter saw dozens of identical Zhuhai Yinlong buses and five charging piles. According to the bus drivers and battery maintenance personnel on site, the charging time of Zhuhai Yinlong buses is about 10 minutes. Theoretically, they can run 60 kilometers, but in reality they can only run 30 kilometers, that is, they need to be charged for a single trip, because when the power is less than 50%, it feels insufficient. In addition, a bus is equipped with about 10 boxes of batteries, which need to be replaced once a year.

The sales director also told reporters that the synthesis process cost of Aoti's lithium titanate battery was too high at the time and the price was very expensive, which was one of the reasons why it was not popular in the United States.

Among Aoti's competitors, the most powerful one is A123. A123 is a listed company spun off from the Massachusetts Institute of Technology. It focuses on lithium iron phosphate batteries. Its strategic cooperation with automakers includes GM and Ford. Its reputation is better than Aoti. However, A123 eventually fell into bankruptcy because of its high cost. Coincidentally, A123 was later acquired by a Chinese entrepreneur named Lu Guanqiu.

The successive failures of US battery companies have sparked a lot of discussion in the industry. In 2013, the Associated Press interviewed 10 battery veterans, who generally believed that the development of the battery industry has reached a bottleneck period, and that existing batteries have two main defects: the first is that the cost is too high, and the second is that the battery life is insufficient. But none of them could describe what the next generation of breakthrough products will look like.

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.