Car companies dig holes for themselves: huge investment to build production base capacity but idle

category:Finance
 Car companies dig holes for themselves: huge investment to build production base capacity but idle


As an independent brand enterprise in the domestic automobile industry, since the acquisition of Jiangnan Automobile in 2007, Zhongtai has continued to promote capacity expansion under the policy dividend of vigorously developing fuel vehicles and new energy vehicles. However, the first financial 1 u2103 reporters investigation found that when the sales target is far from being completed, Zhongtai automobile and its major shareholder Tieniu group (hereinafter referred to as Zhongtai system) have built multiple production bases in the country, which cost a lot of money, but formed a huge idle production capacity.

The Zhongtai family is not alone in this situation.

In fact, there has been a global downturn in the industry in the past year. Not long ago, there was even news that many car companies may face bankruptcy. The rumor targets include Zhongtai, Huatai, Lifan and Changfeng (cheetah). Among these enterprises, except for Changfeng (cheetah) who once led the domestic SUV field, all of them belong to the low circle brand of domestic automobile, and they are facing the most serious survival test in this round of industry cycle.

On the Lixiang East Road, there are not only Zhongtais but also many employees waiting in the factory every day. Some are waiting for the information of post adjustment, some are waiting for the overdue salary, some are waiting for the resettlement fee to go home Everyone is waiting in the cold wind of late autumn, planning how to spend the coming winter.

Expansion dream

This amount of investment set a new record of investment and cooperation between Changsha construction machinery and automobile industry in that year. In May 2009, when Wu Jianzhong, then chairman of Zhongtai automobile, visited Hunan, he declared that with the location advantage of Hunan Changsha and Xiangtan production bases, Zhongtai will achieve an annual sales volume of 300000 in 2012, and strive to achieve the annual sales target of 500000 in the next five years.

According to media reports, in 2009, Zhongtai had two major production bases in Zhejiang and Hunan, with a production capacity of 200000 vehicles. However, this year, its sales volume only exceeded 100000 units for the first time. Wu Jianzhong was very proud to mention this achievement. In 2009, our sales volume reached 100000 for the first time. Its only a few years since we entered the automobile industry that we have achieved such development.

1 u2103 reporter survey found that there are policy dividend results behind this. In 2009, the state issued a series of policies to promote automobile sales, including halving the purchase tax and sending automobiles to the countryside. Zhongtai has successfully entered the automobile to the countryside catalogue, and farmers can enjoy 10% government subsidy for purchasing vehicles with relevant displacement of Zhongtai, which has increased our car sales by 30%. Wu Jianzhong told the media in an interview.

Not only Zhongtai, but also China achieved a record 13.64 million new car sales in 2009, becoming the worlds first car sales country. Facing the once-in-a-lifetime market opportunity, many enterprises have formulated capacity expansion plans. In China, Chery, Geely, BYD and other independent brand manufacturers were the representatives, and the production scale at that time was more than 300000.

In 2013, Zhongtai invested in Linyi, Shandong Province. The total investment of Zhongtai automobile Linyi base is 10 billion yuan, covering an area of 2000 mu, with an estimated annual output of 400000 cars and SUVs after all of them are put into production, Linyi Economic Development Zone official release said

But the expansion continues.

In April 2015, Zhongtai announced that it would invest 3.3 billion yuan to build an annual output of 200000 new energy vehicles project in Xiangyang, Hubei Province; in November of the same year, Zhongtai also announced that it would invest 10 billion yuan in Bishan District, Chongqing, to build a new SUV, new energy vehicles and core parts production project, to achieve the scale of 200000 new vehicles after production.

In December 2018, the foundation laying ceremony of Zhongtais annual output of 1 million sets of intelligent network automobile electronic parts production base was held in Shexian Economic Development Zone, Anhui Province. The project is located in Shexian Economic Development Zone, with a total investment of 1.5 billion yuan, a land area of 200 mu, and an annual sales revenue of 4-5 billion yuan and an annual tax revenue of 240 million yuan. After the commencement, it is expected to complete the construction of the main plant within one year and put into production within one and a half years.

Only from the above announced investment plans, its investment scale has exceeded 30 billion yuan.

According to the public information, Huatai claims that the total planned investment in Shandong, Ordos, Rongcheng and other bases in recent years is up to 30 billion yuan. Changfeng (cheetah), which only regained the qualification of vehicle production in 2014, also invested and built Changsha base, Chuzhou base and Jingmen base outside Yongzhou, Hunan Province. It claims to have an annual production capacity of 500000 SUVs and pickups, with a total planned investment of more than 10 billion yuan.

1 u2103 reporter found that, including Zhongtai, Huatai and other auto enterprise investment and construction bases are generally enclosed in the front, after the capital investment, so some projects are not put into production as scheduled as claimed, and some projects even die in the middle due to capital and other reasons.

On October 22, an official from Shexian economic and Technological Development Zone told reporters at 1 u2103, Zhongtais project in the local area was approved in the early stage of land bidding, auction, hanging and leveling. Later, the shutdown was mainly due to the problem of capital chain, and the progress was relatively slow for several months. But after the state owned assets supervision and Administration Commission of Jinhua City injected them with capital, it has contacted us now and is ready to start construction next month.

There is often a great distance between dream and reality. The expansion speed of car companies far exceeds their market performance.

According to the 1 u2103 reporter, Zhongtai fell into the awkward position of failing to achieve the sales target for four consecutive years. According to Zhongtai official and media reports, in 2015, Zhongtai sold 220000 vehicles in the whole year, with a sales target of 250000 vehicles; in 2016, 350000 vehicles, with a sales target of 330000 vehicles in the whole year; in 2017, 400000 vehicles, with a sales target of 317000 vehicles in the whole year; in 2018, 500000 vehicles, with a sales target of 154800 vehicles in the whole year.

But the scale of production capacity brought by the expansion to Zhongtai has been several times of its sales volume.

1 u2103 reporters investigation found that it is not clear whether all the capacity planned by Zhongtai in the previous years has reached the capacity, but as early as 2016, the capacity of 680000 vehicles has been formed in Zhongtai, but the capacity utilization rate is still low. According to the transaction draft disclosed by Zhongtai in its backdoor listing in February 2017, Zhongtai has Yongkang base (Yongkang Zhongtai branch of Jiangnan Automobile, with a production capacity of 200000 vehicles), Jintan base of Jiangsu (Jintan branch of Jiangnan Automobile, with a production capacity of 200000 vehicles), Hangzhou base (Zhejiang branch of Jiangnan automobile, with a production capacity of 100000 vehicles), Hunan base (Jiangnan Automobile, Xingsha manufacturing plant of Jiangnan Automobile, with a production capacity of 8 And Linyi base (Jiangnan Automobile Linyi Branch, with a production capacity of 100000 vehicles). The capacity utilization rates of these bases are 69%, 47%, 55%, 33% and 76%, respectively.

The situation of low capacity utilization rate has long been an open secret in the automobile industry. Many car companies are blindly expanding their production capacity for the sake of scale and effect. A car enterprise industry personage disclosed to 1 u2103 reporter.

According to 1 u2103, the reporter found that Huatai, which fell into the bankruptcy rumors, had a low utilization rate of production capacity for a long time.

Huatai issued 16 Huatai 01 bond and disclosed Huatai auto main body and related debt 2019 tracking rating report, which said that the lower capacity utilization rate and higher depreciation and amortization, to a certain extent, reduced the companys profitability.

According to the above tracking rating report, Huatai Automobile has four major vehicle production bases in Rongcheng, Shandong, Ordos, Tianjin and Dandong, Liaoning. By the end of 2018, the company has an annual production capacity of 638500 complete vehicles. From January to march of 2018 and 2019, the companys total vehicle output is 215300 and 33100 respectively, and the utilization ratio of vehicle manufacturing capacity is 36.31% and 23.20% respectively, which is still at a very low level. According to the above Huatai Automobile tracking rating report, in 2016 and 2017, Huatais production capacity was 620000 and 620000 respectively, and in the same period, the production capacity was 182800 and 205000 respectively, with the corresponding capacity utilization rate of 29.48% and 33.07% respectively.

Another example is Changfeng (cheetah). 2017 is the peak year since its establishment. In that year, it produced 137000 cars and sold 125000. However, the planned annual production capacity of the four bases of this enterprise is up to 500000 vehicles, that is to say, even in the best years, almost one bases production capacity can meet the production demand, resulting in idle and waste.

Lifan auto, which is in debt crisis, has been regarded as one of the several companies with high capacity utilization rate, and is also considered as low by rating agencies. According to the rating report of united credit rating company, in 2016, 2017 and 2018, Lifans passenger vehicle capacity was 180000, 180000 and 130000 respectively, with the capacity utilization rate of 69.06%, 73.88% and 75% respectively.

With reference to the evaluation criteria of developed countries such as Europe and the United States, the capacity utilization rate (or equipment utilization rate) is generally regarded as an important indicator of whether there is overcapacity. The normal range of capacity utilization rate is 79% - 83%. If it exceeds 90%, it is considered that capacity is insufficient; if it is lower than 79%, it indicates that there may be excess capacity.

Temptation and pit

In fact, car companies did not lose sight of the risks brought by rapid expansion. Some of the reasons for their desperate expansion were due to the consideration of strategic layout at that time, but some of them went for the dividend of local policies.

For a long time, vehicle enterprises have been the guests of local governments, especially those with vehicle manufacturing capacity, which are more popular and become hot goods.

1 u2103 reporter learned in the interview that the main reason why local governments need automobile investment is that the automobile industry is a technology intensive industry with the whole vehicle manufacturing as the core and many upstream and downstream industries matched with it, including machinery, metallurgy, energy, chemical industry, rubber, transportation and maintenance services. It can promote local taxes and drive the overall level of the local automobile industry. A local official in Anhui Province told reporters.

A complete vehicle factory can stimulate the development of surrounding parts, logistics and other enterprises, and in the process of after-sales, it also needs relevant supporting services, so as to obtain huge output value benefits and stimulate the local economy. Said the insiders of the car enterprises.

For example, for Zhongtai to invest in the construction of a factory in Linyi Economic Development Zone, the local official publicity materials said, fill in the blank of passenger vehicle manufacturing industry in Linyi City, absorb and drive the output value of related industries by 100 billion yuan. Its a temptation in many places.

Therefore, in order to attract vehicle enterprises to invest, local governments have thrown out Hydrangea, often offering a series of preferential policies such as preferential project land price and preferential subsidies.

Land assets acquired at low prices will facilitate the mortgage of these car enterprises. In addition, the governments nanny service can really solve problems for enterprises and sometimes bring direct economic benefits.

1 u2103 reporter found that Huatai is a master in terms of fully enjoying the policy dividend of local government. According to the public rating report, Huatai obtained a subsidy of 905 million yuan only for the first phase project of Tianjin Huatai headquarters and automobile production base.

The Ordos project is a more typical example. In 2005, Huatai announced that it plans to build a production base with an annual output of 500000 complete vehicles and 1 million clean car diesel engines and related auto parts in three phases in Ordos in seven years. After the completion of the third phase project, the annual sales revenue of the project can reach 90 billion yuan, the tax revenue is 13.8 billion yuan, and 20000 direct jobs are provided. For this reason, Huatai obtained 6000 mu of land in Ordos, 1 billion yuan of government loans and two coal mines at a low price of 10000 yuan / mu.

The civil ruling also pointed out that the above-mentioned coal mining right was transferred by Ordos Municipal government without evaluation at a price lower than the minimum transfer price stipulated by Inner Mongolia Autonomous Region, the transfer price of the mining right was 0.85 yuan / ton without evaluation, while the minimum transfer market price of the same coal type stipulated by the autonomous region government was 3.5 yuan / ton, and the transfer unit price was as low as 2.65 yuan / ton, resulting in the loss of state-owned assets. In July 2008, Hengtai company, which was funded by Huatai company, transferred the companys equity for profit without realizing the production of the two coal mines as promised.

As an addition to investing in automobiles in Ordos, the transfer transaction of the two coal mines brought at least 4 billion yuan of cash to Huatai Automobile. South Weekend reported.

However, Huatai failed to fulfill its promise. According to the information disclosed by the economic and Information Commission of Ordos City, in 2017, Huatai Ordos base produced 17600 complete vehicles with an output value of 1.35 billion yuan. Huatai once claimed that the Ordos project had a production capacity of 300000 complete vehicles and an annual output value of 60 billion yuan in 2015. In fact, not only the Ordos project, but also several major bases of Huatai have failed to meet their stated expectations. Most of them have been in a state of shutdown and bear huge financial pressure. Zhongtai, Lifan, etc. are also in the same predicament. Sales are blocked and capital pressure makes these low-level car companies suffer from enemies. Production suspension and layoffs become their means of self-help. In such a dilemma, a large number of idle production bases, which used to consume a large amount of capital for construction, have become a heavy drag. In the past, both sides (car companies and local governments) may wish to achieve their dreams for each other - local governments want enterprises to come in to help stimulate the economy, and enterprises hope to expand rapidly with preferential policies, or even get some extra benefits. But when difficulties arise, they will all face the torture and test of truthfulness. A former local official in charge of investment promotion in Hunan commented. Source: First Financial Editor: Guo Chenqi, nbj9931

However, Huatai failed to fulfill its promise. According to the information disclosed by the economic and Information Commission of Ordos City, in 2017, Huatai Ordos base produced 17600 complete vehicles with an output value of 1.35 billion yuan. Huatai once claimed that the Ordos project had a production capacity of 300000 complete vehicles and an annual output value of 60 billion yuan in 2015. In fact, not only the Ordos project, but also several major bases of Huatai have failed to meet their stated expectations. Most of them have been in a state of shutdown and bear huge financial pressure.

Zhongtai, Lifan, etc. are also in the same predicament. Sales are blocked and capital pressure makes these low-level car companies suffer from enemies. Production suspension and layoffs become their means of self-help. In such a dilemma, a large number of idle production bases, which used to consume a large amount of capital for construction, have become a heavy drag.

In the past, both sides (car companies and local governments) may wish to achieve their dreams for each other - local governments want enterprises to come in to help stimulate the economy, and enterprises hope to expand rapidly with preferential policies, or even get some extra benefits. But when difficulties arise, they will all face the torture and test of truthfulness. A former local official in charge of investment promotion in Hunan commented.