What’s different about Chery after the stock reform?


Editor’s note: This article is from Krypton 36 “Future Automotive Daily” (micro-channel public number ID: auto-time), Author: Zhang.Author | Zhang Yi Editor | On the 27th day after the completion of Wu Yan’s listing announcement, the highly anticipated Chery capital increase and expansion project finally ushered in a “strength buyer”.On December 4, the Yangtze River Equity Exchange issued an announcement saying that Chery Holdings Group Co., Ltd. and Chery Automobile Co., Ltd. had completed capital increase and share expansion projects, and Qingdao Wudaokou New Energy Automobile Industry Fund Enterprise (Limited Partnership) (hereinafter referred to as Qingdao Wudaokou) successfully delisted.The announcement showed that Qingdao Wudaokou invested 7.586372336 billion yuan in Chery Holdings, with a stake of 30.99%, and invested approximately 6.868217664 billion in Chery shares, with a shareholding ratio of 18.5185%.Qingdao Wudaokou won the bid with 14.45 billion yuan, exceeding the 14.35 billion yuan increase in capital price of 100 million yuan in September this year.This means that with the completion of Chery’s capital increase and expansion project, Qingdao Wudaokou will become the largest shareholder of Chery Holdings and Chery Automobile, and the shareholding ratio of Wuhu State-owned Wuhu Construction Investment will dilute and become the second shareholder of Chery Holdings.Qingdao Wudaokou will hold a 51% stake in Chery Holdings and indirectly a 32.4815% stake in Chery Automobile, and its stake in Chery Automobile will also reach 51%.The end of several years of stock market reforms means that Chery has taken a key step towards marketization.But at the same time, Chery, welcoming a new shareholder, may not be as “autonomous” in the future as it was in the past.It is worth mentioning that the new shareholder was established only three months ago. Qingdao Wudaokou, the new shareholder that has joined Chery, was established in August 2019. It is a fund body specially established to participate in Chery’s capital increase and expansion project. Its registered place is Qingdao, Shandong Province.Jimo District, Qingdao Auto Industry New City, Qingdao Jimo District is an important cornerstone investor in Qingdao Wudaokou.Zhou Jianmin, chairman and founding partner of Qingdao Wudaokou, said that after Qingdao Wudaokou’s stake in Chery, it will continue to promote Chery to establish a market-based incentive mechanism, increase the introduction of resource funds, strengthen capital operations, and accelerate the nationwide global layout.He said that Chery has a good competitive advantage in technology research and development, global division of labor, and has a good accumulation of new energy, intelligent network connection, and positive system construction. It is believed that this restructuring will further stimulate Chery’s potential.According to Caixin, Qingdao Wudaokou previously paid 5 billion yuan in intention money from Qingdao Jimo District Government. Qingdao Wudaokou Fund is expected to complete the settlement of Chery Automobile and Chery Holdings around New Year’s Day and reorganize the board of directors.For the new shareholders joining this time, Yin Tongyue, chairman of Chery Holdings and Chery Automobile, said that the Qingdao Wudaokou team understands the automotive industry and has rich industry and customer resources, as well as industrial investment and capital operation experience, which can help Chery achieve the strategic blueprint for 2025.As early as 2016, Chery started a capital increase and share expansion project, and was officially listed in September 2018.At the time, Yin Tongyue wrote in an open letter that the rules of the game in the automotive industry have changed. Under the influence of new technologies, Chery must seize the new track in the next round of competition. To this end, a series of layouts were required, which required huge capital investment..Although there are many institutions competing, due to high valuations and other reasons, Chery’s capital increase and share expansion project finally failed after four consecutive extensions.In 2019, Wuhu City and Chery set up a working group and plan to restart capital increase and share expansion.On September 2, 2019, Chery’s capital increase and expansion project was re-listed on the Yangtze River Property Exchange, and the capital increase price was lowered, but the threshold of control was not relaxed.On November 7, the night of the deadline for the listing announcement, the project status display was updated from “Extended Announcement” to “Completed” and entered the review stage.The entry of more than 14 billion new funds means that Chery’s lack of funds will be eased.What will be the difference between Chery’s official website after the stock reform?The announcement of capital increase and share expansion shows that the purpose of the funds raised in this round is to repay liabilities and the development and daily operations of existing and new businesses.Before 2010, Chery Automobile, which had been established for 22 years, had achieved sales of more than one million in 8 years, becoming a leader among independent car brands.However, under the influence of multiple factors such as products, investment, management, etc., the sales of this car company, which once had a high reputation, fell and gradually dipped.In 2018, Chery’s new car sales fell 12.32% year-on-year to 364,600 units.Since 2008, Chery’s main business has continued to lose money.The announcement of the capital increase and share expansion shows that in 2018, Chery Automobile’s net profit lost 530 million yuan, and the loss in the first half of 2019 expanded to 1.37 billion yuan.As of the first half of this year as of June 30, Chery Holdings lost 156 million yuan, total liabilities reached 68.508 billion yuan, and the asset-liability ratio reached 75.8%.During the same period, Chery’s share loss increased by 92% year-on-year to 1.374 billion yuan, with total liabilities of 62.29 billion yuan.For Chery, it is imperative to get out of the funding distress as soon as possible.Regarding this long-planned capital increase and share expansion project, Yin Tongyue has publicly stated that in the “Chery 2025 Strategy” plan, the company’s new products, new technologies, new energy, intelligent interconnection + driverless, brand building, and high-end international marketsA series of layouts have been carried out in other aspects. Planning and landing requires huge capital investment and the introduction of strategic capital.At the same time, in response to the central government’s call for “de-leveraging”, Chery hopes to reduce corporate costs through capital increase and share expansion, maintain and increase the value of state-owned assets, and promote enterprises to become larger and stronger.Auto analyst Zhong Shi told Future Auto Daily (ID: auto-time) that Chery’s funding situation has been relatively tight in recent years. To continue to expand the company, it is necessary to invest a lot of money in product research and development, plant construction and new business development.Zhong Shi said that for Chery, compared with the method of directly borrowing from banks, the introduction of new capital can reduce cost pressure and risk, but the entry of new shareholders also dilutes the original shareholders’ shares and will intervene in the company’sManagement is inevitable.Image source: Pexels At present, Chery has started the transformation and upgrading.In the second half of 2017, Chery established a smart car business group and five major smart car departments, and proposed a “Chery Lion” intelligent strategy.In June of this year, the smart car business group was officially established as Chery’s seventh business group.Yin Tongyue said, “The Chery Lion represents Chery’s future.”Chery Automobile has a number of models of the Tiggo and Arrizo series, as well as a number of new energy models such as Tiggo e, Little Ant, Arrizo e, Tiggo 3xe and eQ models.In 2018, Chery launched two independent brands, Jetta and Xingtu, in an attempt to push the brand up.According to the latest sales express data, in the first 11 months of this year, Chery sold a total of 651,800 new cars, of which the sales of independent brand models increased by 6.8% year-on-year.In November, Chery’s sales volume increased by 6.2% month-on-month to 74,700 units, and sales of independent brand models increased 5.8% month-on-month to 64,100 units.Today, the entry of fresh blood may bring new vitality to Chery, but this does not guarantee that the company will be on the fast track to development.While obtaining new funds, Chery may also face the impact of the institutional structure and management level, as well as new difficulties in balancing the strength of all parties.To what extent Qingdao Wudaokou, which owns 51% of the shares, will influence the company’s decision-making, there is no clear information for the time being.At a new starting point, Chery’s future is still unknown.(I’m Zhang Yi, author of 36 氪 Future Automobile Daily. I’m concerned about intelligent network connection, autonomous driving and shared travel dynamics. My WeChat is ro20110723. Welcome to exchange. Please add your name, position, and company.)