One has a decline in sales and has fallen into huge losses, and the other has intensified losses and a slowdown in sales growth. Jianghuai Automobile (600418.SH) and Weilai Automobile (9866.HK, NIO.NYSE), the “difficult brothers and sisters”, have to help each other.
On December 23, Jianghuai Automobile announced that it plans to acquire some assets of Weilai Automobile at a premium of 1.704 billion yuan. The company stated that this move is conducive to continuing to deepen the strategic cooperation with NIO.
Aotou Finance and Economics found that from 2014 to the third quarter of 2022, Jianghuai Automobile achieved a total net profit of 1.86 billion yuan. In other words, the above-mentioned acquisition will consume nearly 9 years of net profit of Jianghuai Automobile.
Interestingly, on December 23, Jianghuai Automobile was listed as the person subject to execution by the People’s Court of Xiangdu District, Xingtai City, and the execution target was 3,226 yuan.
The joint venture between the two parties is an “empty shell”
On December 23, Jianghuai Automobile announced that based on the long-term strategic partnership established between JAC and Anhui Weilai, in order to jointly promote new energy vehicle manufacturing cooperation, Jianghuai Automobile intends to acquire the construction-in-progress held by Anhui Weilai- Project assets related to equipment installation engineering (including equipment, tooling assets, etc.).
After auditing, the original book value of the subject of this transaction was 1.508 billion yuan (tax excluded), and the transaction price after evaluation was 1.704 billion yuan (tax included). From this point of view, JAC is a premium acquisition this time.
From 2014 to the third quarter of 2022, JAC achieved a total net profit of 1.86 billion yuan. In other words, the above-mentioned acquisitions used up nearly 9 years of net profit of Jianghuai Automobile.
However, Jianghuai Automobile stated that this acquisition of assets will not affect the company’s normal production and operation. If this transaction is successfully implemented, it will help continue to deepen the strategic cooperation with Weilai Automobile.
For a long time, Jianghuai Automobile has been regarded as the foundry of Weilai Automobile. In April 2016, Weilai Automobile and Jianghuai Automobile signed a five-year “Manufacturing Cooperation Framework Agreement”. 100 million yuan, and confirmed the plan of Jianghuai OEM Phase I to produce 50,000 units. The agreement expires at the end of March 2021.
In May 2021, Weilai Automobile announced that from May 2021 to May 2024, JAC will continue to produce ES8, ES6, EC6, ET7 and other possible Weilai models.
According to 2021, Jianghuai Automobile and Weilai cooperated to deliver about 93,000 vehicles throughout the year. However, NIO data shows that a total of 91,429 vehicles will be delivered in 2021, a year-on-year increase of 109.1%.
In the 2022 semi-annual report, Jianghuai Automobile did not announce the delivery volume of its cooperation with Weilai Automobile.
Jianghuai Automobile is not just an OEM of Weilai Automobile. In March 2021, Jianghuai Automobile announced that it signed a letter of intent for a joint venture with Weilai Holdings Co., Ltd., and the two parties jointly established Jianglai Advanced Manufacturing Technology (Anhui) Co., Ltd. (referred to as “Jianglai Technology Company”). The registered capital of Jianglai Technology Co., Ltd. is proposed to be 500 million yuan, of which Jianghuai Automobile intends to contribute 51%, and Weilai Automobile intends to contribute 49%.
In October 2022, Jianghuai Automobile issued an announcement on adjusting daily related matters in 2022, showing that the company holds 50% of Jianglai Technology Company and Weilai Holdings Co., Ltd. holds 50%.
Financial data shows that at the end of 2021, Jianglai Technology Company’s total assets were 28.4354 million yuan and its net assets were 17.4045 million yuan. In 2021, its operating income was 0 and its net profit was -2.5955 million yuan. It is actually a shell company. However, in the first eight months of 2022, the related transaction between Jianghuai Automobile and Jianglai Technology Co., Ltd. reached 43.0609 million yuan, while the original planned amount was 0 yuan. After adjustment, the estimated amount in 2022 will reach 80 million yuan.
In the first November of 2022, JAC sold 173,000 pure electric passenger vehicles, a year-on-year increase of 47.46%. In the same period, NIO delivered 106,700 new cars, a year-on-year increase of 31.8%.
Overall, Jianghuai Automobile’s sales in the first November of 2022 will reach 457,500 units, a year-on-year decrease of 5.12%.
Interestingly, on December 23, Jianghuai Automobile was listed as the person subject to execution by the People’s Court of Xiangdu District, Xingtai City, and the execution target was 3,226 yuan. The case number is (2022) Ji 0502 Zhi No. 2193, and the filing date is December 22, 2022.
JAC involved 495 judicial cases involving 408 risk-related objects, 553 judgment documents and 284 court announcements. In addition, the company has 2 administrative penalty records, with a total fine of about 170 million yuan.
Jianghuai suffered serious losses, and Weilai’s sales were poor
What is Jianghuai Automobile’s intention to acquire part of the assets of Weilai Automobile?
The 2021 annual report shows that Jianghuai Automobile has a production capacity of 250,000 light commercial vehicles, 80,000 heavy commercial vehicles, 370,000 passenger vehicles and 12,000 passenger cars, with a total production capacity of 712,000 vehicles and a production capacity of 524,400 vehicles in 2021. The overall capacity utilization rate reached 73.65%.
In the first three quarters of 2022, JAC’s total output will reach 466,700 units, a year-on-year decrease of 3.63%, and the overall capacity utilization rate will reach 71.5%. Obviously, the company still has a lot of excess capacity.
Moreover, Jianghuai Automobile is not rich at present. In the first three quarters of 2022, the company’s operating income reached 27.601 billion yuan, a year-on-year decrease of 10.38%; the net profit loss was 784 million yuan, a year-on-year decrease of 502.26%.
As of the end of the third quarter of 2022, JAC’s monetary funds reached 11.347 billion yuan, transactional financial assets reached 3.001 billion yuan, and notes receivable and accounts receivable reached 4.911 billion yuan. During the same period, the company’s short-term loans reached 1.018 billion yuan, and notes payable and accounts payable reached 15.757 billion yuan.
At the same time, Weilai Automobile encountered difficulties such as a sharp drop in cash, increasing losses, and a slowdown in sales growth.
According to data from the Passenger Federation, in the first November of 2022, the cumulative sales of Weilai Automobile were 106,700 vehicles, a year-on-year increase of 31.8%. Among them, in November, the monthly retail sales of Weilai Automobile were 14,200 vehicles, a year-on-year increase of 30.3%.
From the perspective of the entire industry, in November, the retail sales of new energy passenger vehicles in my country reached 598,000 units, a year-on-year increase of 58.2%; the domestic retail sales in the first November were 5.03 million units, a year-on-year increase of 100.1%.
In contrast, the growth rate of Weilai car sales lags far behind the overall level of the country.
In the third quarter of 2022, NIO’s revenue was 13.002 billion yuan, a year-on-year increase of 32.6% and a month-on-month increase of 26.3%. Among them, the sales revenue of automobiles reached 11.933 billion yuan, a year-on-year increase of 38.2% and a month-on-month increase of 24.7%.
During the same period, NIO’s operating loss was 3.8703 billion yuan, an increase of 90.2% year-on-year and 36% month-on-month. At the same time, the company’s net loss was 4.1108 billion yuan, an increase of 392.1% year-on-year and 49.1% month-on-month.
Not only that, the gross profit margin of Weilai Automobile is also declining. The gross profit margin in the third quarter of 2022 will be 16.4%, and the gross profit margin in 2021 will reach 18%.
In this regard, Weilai Automobile said: “The gross profit margin of vehicles has decreased compared with the third quarter of last year, mainly due to the increase in the cost of single-vehicle batteries, which is partially offset by the reduction in subsidies for users’ auto finance schemes. The rise in the price of lithium mines is not currently a matter of supply and demand. At present, no electric vehicle company has affected delivery because it cannot buy batteries.”
According to Weilai Automobile, as of the third quarter of 2022, the company’s cash reserves will reach 51.4 billion yuan. During the same period, Ideal Automobile had a revenue of 9.34 billion yuan and a cash reserve of 55.83 billion yuan; Xiaopeng Motors had a revenue of 6.82 billion yuan and a cash reserve of 40.12 billion yuan.
Although NIO’s profitability is not good, it still firmly set itself the goal of “achieving breakeven by 2024”. Li Bin, the founder of Weilai Automobile, also publicly stated that the time for Weilai to achieve profitability will be shorter than that of Tesla.
But judging from the current situation, it is not easy for NIO to achieve its profit target, and even maintaining sales growth is not a matter of course.
This article is from the WeChat public account “Aotou Finance and Economics” (ID: theSankei) , author: Ning Xiaomin and Tu Ling, published with authorization by 36 Krypton.
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