7 Billion War Investment Agreement Finalized: Why Did China'S Headquarters End Up Landing In Hefei?

Two months after the signing of the framework agreement with the Hefei municipal government, in April 29th, the Chinese electric vehicle manufacturer Wei Lai automobile announced that it had signed a final agreement with Hefei Construction Investment Holdings (Group) Limited by Share Ltd, China Merchants investment Cci Capital Ltd and Anhui high tech Industrial Investment Co., Ltd. And reached an agreement with the Hefei economic and Technological Development Zone on the arrival of China headquarters.

According to the agreement, strategic investors such as Hefei construction investment holding group (Limited by Share Ltd), China Merchants investment Cci Capital Ltd and Anhui high tech Industry Investment Co., Ltd. will invest 7 billion yuan to China.

At the same time, Wei Lai will be the main legal entity of Wei Lai China (Anhui) Holdings Limited, which includes China's R & D, supply chain and manufacturing, sales and services, energy services and other related assets. The above businesses and assets will be valued at 17 billion 770 million yuan based on the average value of 85% of the 30 publicly traded days in April 21, 2020.

In addition, Wei Lai will invest 4 billion 260 million yuan to China. After the completion of the transaction, Wei Lai will hold 75.9% of the controlling shares of Wei Lai China, and the strategic investors will hold 24.1% of the total shares.

At the same time, according to the agreement signed between Wei Lai and Hefei economic and Technological Development Zone, Wei Lai will set up a Chinese headquarters in Hefei economic and Technological Development Zone, and set up an integrated base for headquarters management, R & D, sales and service, supply chain manufacturing, and timely start the planning and construction of the second manufacturing base. Hefei will also give full support to the establishment of China's headquarters and the construction of a follow-up R & D and manufacturing base.

The industry believes that with the signing of cooperation with the strategic investors of the local government, Wei Lai car will go back to the fast track of development. With the support of the Hefei municipal government, the financial situation of Wei will be greatly improved.

As soon as the news came out, at the time of the press release, Wei Lai's share price rose by 15.87%, to 3.86 dollars / share.

However, facing the heavy impact of the 2020 epidemic on the global automotive industry and the changes in the domestic and foreign market environment, how will the future automobile meet the challenge? What will be the impact of this cooperation with the Hefei government?

This series of problems is also placed in front of Wei Lai car and its founder, Li Bin.

Why Hefei?

In fact, it seems to be expected that China's headquarters will land in Hefei after Yizhuang's investment in the Qing Dynasty and other local governments.

"The establishment of China's headquarters in another area involves factory landing demand. If it is too fast, it will lead to overcapacity, which is certainly not economic." After the announcement of the April 29th announcement, Li Bin said in an interview with the twenty-first Century economic report reporter that establishing the headquarters of Wei Lai China in Hefei is the best and the most reasonable choice from the perspective of enterprise development.

It is understood that at present, the annual production capacity of Wei Lai and Jianghuai Automobile manufacturing plants is 120 thousand vehicles. According to the sales volume of 20565 new cars in 2019, there is still a long way to go.

"But we believe that as the products become more competitive and users become more and more, we can not always have 120 thousand capacity." Li Bin said that when demand exceeds production capacity, Wei will start the construction of second bases.

In addition, Anhui's increasingly sophisticated parts supply system has also provided great convenience to the production and R & D of Wei Lai automobile.

In February 25th this year, the Hefei municipal government concentrated (cloud) signed 8 major projects, including the China Automotive headquarters, the Guo Xuan battery, the integrated recycling and wafer fabrication, and the strategic cooperation of Huarun group, focusing on the strategic emerging industries and advanced manufacturing fields such as integrated circuits, new energy vehicles, high-end equipment, with a total investment of 102 billion yuan.

However, although Hefei's new energy automotive industry chain is relatively complete, there is no larger scale new energy vehicle manufacturing enterprise. With the coming of Hefei automobile, the new energy automobile industry in Hefei will be filled with short boards, so as to promote the new energy automobile industry in Hefei to form a larger scale.

Over the past 4 years, Wei Lai has invested a lot of resources in Hefei's advanced manufacturing base, which has contributed to the coordinated development of Hefei's upstream and downstream industrial chains, and has made great contributions to local social and economic development. Hefei will add another brand name of smart electric vehicle after its headquarters in China.

And with the future China headquarters settled, the first small goal of the two sides is: "Wei Lai China settled in Hefei within 5 years, will build a leading enterprise of 100 billion output value. Within three years, the successful launch of the volume of the two models has proved that Wei Lai and Jianghuai's" Internet + Advanced Manufacturing "strategy is forward-looking.

Opening Sino US dual financing

For a long time, all the actions of Wei Lai automobile, regarded as "China's Tesla", are all concerned by the industry. At the same time, the success of Wei Lai has the meaning of the vane for the new force of Chinese car manufacturing and even the high-end electric vehicle brand in China.

The conclusion of the strategic investment agreement with the Hefei municipal government is to give Wei a continuous injection of "strong heart".

In addition to solving the demand for funds, with the arrival of China's headquarters in Hefei, Wei Lai will officially open up domestic fund-raising channels, and the US listed companies have opened up a two way financing channel for China and the United States, which is a major positive for Wei. It seemed that Li Bin could finally breathe a sigh of relief.

"Our Renminbi fundraising channel has also been opened through the establishment of China, so that we have both the fundraising channel for us dollars and the fundraising channel for Renminbi, which is also more secure for our subsequent product development, technology development and user services needs." Li Bin told reporters.

And Wei Lai has always insisted on the mode of electricity exchange, has become the new energy vehicle subsidies the biggest beneficiaries of the new deal.

"From the perspective of national policy, the direction of supporting the technology exchange is very clear, and the business mode of encouraging separation of vehicles and electric power is also mentioned in the document." Li Bin said that in the context of subsidised decline, users can use a lower threshold to buy electric vehicles and enhance the safety of batteries are very good.

At the same time, Li Bin is very optimistic about China's electric vehicle market. "Because of the downturn in last year's subsidies and the sluggish market in the second half of last year, Tesla's localization and sales service network is becoming more and more mature this year. It has a stimulating effect on the development of the whole industry. With the improvement of product launch and infrastructure, consumers should be more and more accepting smart electric vehicle products."

It is worth noting that in accordance with the agreement, the strategic investors and the future investment transactions with China will be completed in the second quarter of 2020, but must meet the conventional completion conditions.

Strategic investors and Wei Lai will inject cash into China in five separate ways, namely, injecting 3 billion 500 million yuan and 1 billion 278 million yuan into the five working days to meet the delivery conditions, respectively, injecting 1 billion 500 million yuan and 1 billion 278 million yuan in June 30, 2020 or before, respectively, 1 billion yuan and 852 million yuan in September 30, 2020 or December 31, 2020, or December 31, 2020. They were 500 million yuan and 426 million yuan respectively, 500 million yuan and 426 million yuan in March 31, 2021 or before. Asset value should be injected into China within one year after delivery. ?

"Funds are mainly used in R & D and user services, and, of course, supplement some of the company's operating cash flows, including expansion of user service networks and subsequent development of new vehicles." In response to the above strategic investment, Li Bin finally said, "in general, it is still focused on R & D and user services."

Despite the recent good news, there are still people in the industry who believe that the development of Wei Lai still has fatal problems. ?

"Wei Lai's current financial situation is indeed unhealthy. The most lethal embodiment is gross profit being negative. No matter how good a company's technology, products and services are, if it has always been a negative gross margin, it will certainly not be able to continue operation." Zhang Kangkang, a doctor of power engineering and Engineering Thermophysics at Tsinghua University, wrote.

In his view, optimizing human resources structure, reducing marketing costs, and launching volume models are all good for reversing the financial situation, but it takes time. (Editor: Zhang Xing)

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