Chinese electric vehicle (EV) start-up Hozon New Energy Automobile, reeling from a cutthroat price war on the mainland, plans to sell half of its cars abroad as early as 2026 and in the same years to become profitable, according to the founder.
The decade-old Shanghai automaker recently downsized its operations after a series of challenges, including a cash crunch, threatened its survival.
“Through optimization and reorganization, the company’s management structure will be simplified and operations will become more efficient,” Fang Yunzhou, who is also chairman, said in a statement to the Post. “Administrative costs are reduced and a team of young professionals is built.”
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Fang did not elaborate on the layoffs, but said they were necessary to “establish a new Hozon”, adding that the company was committed to launching an initial public offering in Hong Kong despite cash flow problems. He didn’t work it out.
Fang Yunzhou, founder and chairman of Hozon New Energy Automobile, said the automaker is cutting fat to become lean and efficient. Photo: May Tse alt=Fang Yunzhou, founder and chairman of Hozon New Energy Automobile, says the automaker is cutting fat to become lean and efficient. Photo: May Tse>
The maker of electric vehicles under the Neta brand will also target middle-income consumers in China and break even in 2026, Fang said.
Sales of pure electric and plug-in hybrid cars in the mainland, the world’s largest EV market, accounted for 65 percent of the global total in the first half of 2024, according to the China Passenger Car Association (CPCA).
But the domestic industry, full of more than 50 EV assemblers, is experiencing overcapacity that has led to the collapse of many underperforming players, including WM Motor and Human Horizons.
According to Goldman Sachs, EV manufacturers in mainland China were able to produce 17 million units per year by the end of 2023, with an overall factory utilization rate of 54 percent.
“Hozon is facing difficulties because its vehicles are not as popular as its rivals,” said Chen Jinzhu, CEO of consultancy Shanghai Mingliang Auto Service. “The brutal price war is exacerbating financial problems, and the automaker will have to cut costs to survive the fierce competition.”
Hozon delivered 85,908 vehicles in the first nine months of 2024, a decline of 12 percent from a year earlier, the CPCA said. Meanwhile, total EV sales on the mainland rose 34 percent to 7.9 million units.
Hozon is actively working towards its goal of selling half of its production abroad. The company has started assembling vehicles in Thailand and is also exporting from the mainland to Southeast Asian countries to meet growing consumer interest in battery-powered vehicles.
Last year, Hozon exported 17,019 cars, accounting for almost 14 percent of total deliveries.
The average sales price of its cars rose from 109,000 yuan in 2023 to 113,000 yuan ($15,549) at the end of April, as the automaker made the Neta brand “more hi-tech and refined,” Fang said in July.
Neta is a variation on the name Nezha, a protective deity in Chinese mythology. On the mainland, the brand falls into the budget category.
According to data collected by Crunchbase, Hozon has raised 26.4 billion yuan in venture capital funding from 19 investors in eleven rounds. Backers include Chinese cybersecurity firm Qihoo 360 Technology and Citic Securities, the mainland’s largest brokerage.
Hozon’s losses amounted to 6.9 billion yuan last year, down 40 percent from a year earlier.
The China Association of Automobile Manufacturers expects EV deliveries in the mainland to exceed 11 million units this year, accounting for about 55 percent of the total EV capacity of 20.2 million – virtually unchanged from a year earlier.
So far, only BYD, the world’s largest EV maker, Li Auto, Tesla’s biggest rival in China, and Aito, backed by telecommunications giant Huawei Technologies, have made a profit.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice covering China and Asia for more than a century. For more SCMP stories, explore the SCMP app or visit the SCMP Facebook page Tweet pages. Copyright © 2024 South China Morning Post Publishers Ltd. All rights reserved.
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