Radar Finance by Hongtu | Author: Meng Shuai | Editor: Deep Sea

Nezha Auto, which just celebrated its 10th birthday on October 16, had its joy dampened by rumors of unpaid wages.

Recently, a verified Nezha Auto employee posted on social media, claiming that "Nezha Auto cannot pay salaries and owes a lot of money to suppliers." This sparked heated discussions about Nezha Auto's unpaid wages.

Since the beginning of the year, this is the second time Nezha Auto has been plagued by rumors of unpaid wages. When the rumors of delayed salary payments first emerged, Nezha Auto CEO Zhang Yong even lamented, "Last year was so difficult, but we never considered cutting salaries or layoffs. Maybe a few of our employees are not used to tough times. It seems necessary to spread the chill to everyone."

Regarding the latest rumors of unpaid wages, Nezha Auto stated that the new salary structure adjustment and performance appraisal system optimization plan have been finalized and are undergoing step-by-step approval according to established procedures. During this process, frontline sales staff and factory employees have been paid salaries on time, while the remaining employees will first receive 50% of their salaries, with the remainder to be paid once the plan is approved.

Behind the rumors of unpaid wages lies Nezha Auto's sluggish delivery performance. As a former dark horse among new energy vehicle manufacturers, Nezha Auto's deliveries declined by 16.2% year-on-year last year, achieving only about 50% of its annual target. In 2024, its delivery performance has not improved, with September deliveries down 23.4% year-on-year. In the first three quarters, Nezha Auto's cumulative deliveries declined by 12.1% year-on-year, achieving only 28.6% of its annual target.

To improve its situation, Nezha Auto is turning its attention to overseas markets, focusing on Southeast Asia while vigorously developing Latin America, the Middle East, and Africa, and expanding into Europe at an appropriate time, in an attempt to find new growth opportunities.

Amid these challenges, Nezha Auto is also striving to achieve a breakthrough through listing. However, since submitting its prospectus to the Hong Kong Stock Exchange in June, Nezha Auto has not yet successfully entered the market.

The prospectus shows that Nezha Auto's revenue growth has slowed significantly, and the company faces huge losses, with cumulative losses exceeding RMB 18.3 billion over three years, and its gross margin remains negative. Meanwhile, Nezha Auto's "wallet" is also becoming increasingly strained. As of the end of 2023, Nezha Auto's cash and cash equivalents were RMB 2.837 billion, while its short-term borrowings reached RMB 4.317 billion.

Fortunately, in September, Nezha Auto signed a strategic cooperation agreement with BTG Pactual and Sertrading, a Brazilian import trader, securing financial support equivalent to approximately RMB 1.3 billion, which has given Nezha Auto more time and opportunities.

Delayed salaries, worried workers

Recently, a verified Nezha Auto employee posted on the professional networking platform LinkedIn, claiming that Nezha Auto cannot pay salaries and owes a lot of money to suppliers, urging everyone to be cautious when purchasing Nezha vehicles.

This post sparked heated discussions in the comments section, with some netizens joking that the poster was being unsportsmanlike and spreading negative news about his own company. The poster responded, "They owe me hundreds of thousands. Wouldn't you be worried if it were you? Don't you fear they'll run away with the money?" He also added, "They owe suppliers billions. How can they afford to pay salaries?"

It is understood that Nezha Auto usually pays salaries on the 15th of each month for the previous month's work. After the aforementioned post sparked heated discussions, rumors of unpaid wages at Nezha Auto began to spread online.

Regarding the rumors of unpaid employee salaries, Nezha Auto officials told the media that the company is undergoing a series of internal management reforms, including salary structure adjustments and performance appraisal system optimizations, to promote its long-term development.

The officials also stated that the current plan has been finalized and is undergoing step-by-step approval according to established procedures. During this process, frontline sales staff and factory employees have been paid salaries on time, while the remaining employees will first receive 50% of their salaries, with the remainder to be paid once the plan is approved.

It is worth mentioning that, according to The Paper, insiders at Nezha Auto stated that the company has already paid salaries to frontline employees, while middle managers and executives are undergoing equity optimization and salary structure adjustments in preparation for the IPO. Therefore, some salary payments may be delayed.

However, Nezha Auto's response did not completely quell public opinion. In response to the company's statement, a verified employee of Hopin New Energy Automobile Company joked on social media, "I accidentally became a middle manager and executive of the company." "The company didn't invite us to participate in decisions, and now engineers have become middle managers because salaries can't be paid on time," he added sarcastically.

Radar Finance's review found that this is not the first time Nezha Auto has been plagued by rumors of unpaid wages. As early as February this year, rumors emerged that Nezha Auto had delayed the payment of year-end bonuses, housing provident funds, and salaries.

At that time, Zhang Yong, CEO of Nezha Auto, responded on Weibo. He explained that the housing provident fund is deducted and collected by the government's housing provident fund center, and the collection time was delayed due to the Spring Festival holiday. The payment would be collected and deducted by the government's housing provident fund center on February 26 (some cities had already collected and credited the funds to individual accounts before February 23).

Zhang Yong revealed that the January salaries, which were originally scheduled to be paid on February 15, had been advanced and credited to employees' personal accounts before February 7, considering the Spring Festival holiday. Regarding the 2023 bonuses, Zhang Yong stated that they are related to employees' performance evaluations, and the annual performance distribution coefficients and amounts are under final review and approval, with payments expected to be completed in March.

At the same time, Zhang Yong firmly emphasized that since 2016, Nezha Auto employees have never missed a day's salary, bonus, or social security payments. At the end of the Weibo post, Zhang Yong even lamented, "Last year was so difficult, but we never considered cutting salaries or layoffs. Maybe a few of our employees are not used to tough times. It seems necessary to spread the chill to everyone."

It is worth noting that in the comments section of this Weibo post, some netizens pointed out that Nezha Auto's management staff is somewhat bloated, with some employees being inefficient or giving improper instructions, which affects the efficiency and results of grassroots work and Occupying company resources . Therefore, netizens suggested that Zhang Yong streamline the organizational structure and management staffing. In response, Zhang Yong replied, "It's time to start rectify and streamline the organization and personnel!"

Former sales champion sees declining deliveries, turning to overseas markets for new hope

In recent years, as the new energy vehicle industry has undergone continuous restructuring, more and more players in the new energy vehicle market have faded away. After HiPhi's financial crisis this year, who will be the next contestant on the brink of collapse has become a focus of attention. As a former dark horse in the new energy vehicle market, Nezha Auto's performance in recent years has indeed raised concerns.

Looking back at 2022, Nezha Auto topped the sales rankings of new energy vehicle manufacturers with 152,073 deliveries for the year. However, in 2023, Nezha Auto's delivery ranking plummeted, with annual deliveries reaching only 127,496 units, a year-on-year decline of 16.2%, achieving only about half of its annual sales target of 250,000 units.

Regarding Nezha Auto's performance in 2023, CEO Zhang Yong reflected on Weibo that there were many reasons for the company's shortcomings last year, including poor coordination during the transition between old and new products, chaotic production schedules, overpriced new product launches, a significant reduction in production of unprofitable product lines, outdated communication methods, and weak centralized management at the marketing headquarters.

Entering 2024, Nezha Auto's delivery performance has not improved significantly. According to Nezha Auto's latest delivery data disclosed in October, the company delivered 10,118 vehicles in September, a decrease of 23.4% year-on-year.

Compared to other players in the new energy vehicle market, Nezha Auto's delivery performance is somewhat unimpressive. According to Radar Finance's statistics, in September this year, NIO delivered 53,709 vehicles, topping the sales rankings with a significant advantage. During the same period, AITO and Leapmotor both delivered over 30,000 vehicles. Even Xpeng Motors, ZEEKR, and NIO, which ranked lower in deliveries, delivered over 20,000 vehicles in September.

If the statistical scope is further broadened, Nezha Auto's performance is similarly unimpressive. In the first three quarters of this year, Nezha Auto delivered a cumulative total of 85,908 vehicles, a year-on-year decline of 12.1%, with an average monthly delivery volume of less than 10,000 units. Among the many new energy vehicle manufacturers, Nezha Auto's performance ranks relatively low, and this delivery performance represents only 28.6% of its annual delivery target of 300,000 units.

Industry insiders point out that in the increasingly competitive new energy vehicle industry, achieving economies of scale is key to spreading costs and increasing profits. Only in this way can automakers quickly "recover" financially. Nezha Auto's current sluggish delivery performance Obviously, it is difficult to support its achievement of this goal 。

Radar Finance notes that to improve its sluggish delivery performance, Nezha Auto is turning its attention to overseas markets, hoping to find new growth points through internationalization strategies. In its previously disclosed prospectus, Nezha Auto wrote that it is deeply rooted in the Southeast Asian market and will continue to vigorously develop Latin America, the Middle East, and Africa, with timely expansion into European markets.

According to the prospectus, Nezha Auto exported a total of 17,019 new vehicles in 2023, accounting for 13.7% of its total sales for the year and contributing 12% of its sales revenue. Nezha Auto firmly believes that its overseas market The layout will help it further diversify its sources of income ， Strengthen economies of scale ， Enhance profitability 。

Radar Finance understands that Southeast Asia is one of Nezha Auto's key overseas markets. As early as 2021, Nezha Auto began developing right-hand drive models to prepare for expansion in Thailand and the entire Southeast Asian market. In 2022, Nezha Auto became the first new energy vehicle manufacturer among China's new forces to launch right-hand drive models, demonstrating its commitment to overseas market layout .

In its prospectus, Nezha Auto also disclosed its specific progress in overseas markets: its factories in Thailand and Indonesia went into operation in March and May of this year, respectively, and its factory in Malaysia also commenced construction in January 2024. In addition, the Nezha X series is scheduled to enter the Thai and Indonesian markets in July this year, the Hong Kong market in August, and the South American market in the fourth quarter.

When announcing its September delivery data, Nezha Auto also announced the rollout of its first Nezha X from its Indonesian factory and the delivery of the first 500 vehicles to customers in Indonesia. Additionally, Nezha Auto delivered a large batch of vehicles in Hong Kong, China.

"Wallet" becoming increasingly strained, IPO prospects remain unclear

Amidst these challenges, Nezha Auto hopes to "stay alive" through an IPO. In June this year, Hopin New Energy Automobile Co., Ltd., the entity behind Nezha Auto, submitted an IPO application to the Hong Kong Stock Exchange. If this IPO is successfully completed, Nezha Auto will become the fifth new energy vehicle manufacturer to list on the Hong Kong Stock Exchange.

However, nearly four months have passed since Nezha Auto submitted its prospectus, but the company has not yet successfully entered the Hong Kong Stock Exchange. According to the prospectus disclosed by Nezha Auto, although the company's revenue increased from 2021 to 2023, its growth rate slowed significantly during this period. During this time, Nezha Auto recorded revenues of RMB 5.087 billion, RMB 13.05 billion, and RMB 13.555 billion, respectively, but its revenue growth rate declined from 156.5% in 2022 to 3.9% last year.

Compared to its peers, Nezha Auto's revenue scale also lags behind. Taking the four new energy vehicle manufacturers that have already listed on the Hong Kong Stock Exchange as examples, NIO, XPeng, Li Auto, and Leapmotor recorded revenues of RMB 55.618 billion, RMB 30.676 billion, RMB 123.851 billion, and RMB 16.747 billion last year, respectively, all exceeding Nezha Auto's revenue.

In terms of profitability, Nezha Auto also faces severe challenges. Like most new energy vehicle manufacturers, Nezha Auto has been in a state of chronic loss for years. From 2021 to 2023, Nezha Auto recorded annual losses of RMB 4.84 billion, RMB 6.666 billion, and RMB 6.867 billion, respectively, with cumulative losses exceeding RMB 18.3 billion over the three-year period.

Regarding gross margin, Nezha Auto's performance in this indicator has improved somewhat over the past three years. The prospectus shows that from 2021 to 2023, Nezha Auto's gross margins were -34.4%, -22.5%, and -14.9%, respectively, but the company still faces the severe challenge of not yet turning its gross margin positive.

Last October, when discussing the progress of the IPO, Zhang Yong, CEO of Nezha Auto, stated that the company had raised RMB 10 billion in financing last year and several billion yuan in 2023, with over RMB 10 billion in cash on hand. Therefore, the company was not in a hurry to pursue an IPO.

However, as revenue growth slows and losses mount year after year, Nezha Auto's financial situation is becoming increasingly strained. In June this year, Nezha Auto launched an IPO sprint on the Hong Kong Stock Exchange, attempting to broaden its funding channels through listing.

According to the prospectus, Nezha Auto's net cash proceeds from financing activities in 2023 were RMB 2.327 billion, compared to RMB 10.755 billion in the previous year. As of the end of 2023, Nezha Auto's cash and cash equivalents were RMB 2.837 billion, while its short-term borrowings reached RMB 4.317 billion. By April 30 this year, Nezha Auto's cash and cash equivalents had plummeted to RMB 403 million (unaudited).

It is worth mentioning that in September, it was reported that Chen Rui, CFO of Nezha Auto, had recently resigned, and he was replaced by Peng Deng, former Managing Director of Goldman Sachs (Asia), who will be responsible for the company's financial affairs. This personnel adjustment was seen by the outside world as a signal that Nezha Auto is accelerating its IPO process.

With the future of its Hong Kong IPO uncertain, Nezha Auto has had to seek alternative ways to obtain external financial support. On September 20, Nezha Auto officially announced a strategic cooperation with BTG Pactual, Latin America's largest investment bank, and Sertrading, a Brazilian importer and trader. Under the agreement, BTG Pactual will work with Sertrading to provide Nezha Auto with R$1 billion (approximately RMB 1.3 billion) in financial support for the Brazilian market, to be used for import services, charging infrastructure construction, and other purposes, to help popularize new energy vehicles in Brazil. It is understood that Nezha Auto has established a subsidiary in São Paulo, Brazil, and plans to expand its dealer network to 30 dealerships by the end of the year and promote the construction of a KD assembly plant.

Will Nezha Auto, which is feeling the chill, be able to stage a comeback? Radar Finance will continue to follow the story closely.