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It's time to start "self-rescue."

Produced by | Business Show

Entering 2024, the new energy vehicle market continues to be turbulent, yet Nezha Auto has found itself in a predicament.

Recently, Nezha Auto was once again exposed for failing to pay salaries. On October 16th, according to IT Home, a netizen claiming to be a Nezha Auto employee posted on the professional networking platform Maimai that the company failed to pay salaries on time for the previous month and owed significant sums to suppliers (both the post and user are now unavailable).

On the same day, in response to rumors of unpaid salaries, Nezha Auto told Jiemian News that frontline employees and factory workers were paid on time. Recently, the company's middle management and senior executives have been undergoing salary structure adjustments, resulting in slightly delayed payments for some individuals.

However, this is not the first time Nezha Auto has been rumored to owe salaries. In February of this year, netizens reported that Nezha Auto owed housing provident fund contributions and year-end bonuses. Nezha Auto CEO Zhang Yong publicly responded on social media, explaining the objective reasons behind the delays in housing provident fund contributions and year-end bonuses, denying the allegations of unpaid amounts, and stating, "Perhaps a few employees at the company are not accustomed to living frugally. It seems necessary to convey this austerity to everyone."

In 2022, Nezha Auto became a notable player in the industry with its cost-effective products and proactive market strategies. However, its current predicament has made it struggle to move forward.

In terms of sales, Nezha Auto's older models, which once attracted consumers with affordable prices and practical performance, have gradually lost their edge in the fiercely competitive market. The Nezha S and Nezha GT, which were supposed to be the company's weapons to penetrate the mid-to-high-end market, have struggled in competition.

Compared to competitors, they lack outstanding advantages in key indicators such as intelligent driving, interior quality, and driving range, leading consumers to turn to other brands.

Losses have also plagued Nezha Auto. Facing consecutive years of losses, Nezha Auto urgently needs financing to alleviate financial pressure, but financing amounts have been shrinking annually in recent years, and the IPO journey has been fraught with difficulties.

In terms of innovation, Nezha Auto lags significantly behind new energy vehicle brands such as NIO, XPeng, and Li Auto. Shortcomings in intelligent driving and difficulties in transitioning from a low-cost strategy to the mid-to-high-end market have put Nezha Auto at a disadvantage in market competition.

Although its overseas expansion has achieved initial success, Nezha Auto still faces numerous challenges such as trade barriers, differences in technical standards, and low brand recognition.

The recent rumors of unpaid salaries have directly pointed to Nezha Auto's financial problems. In recent years, Nezha Auto has been trapped in a dilemma of increasing revenue without profitability. From 2021 to 2023, Nezha Auto generated revenues of approximately RMB 5.087 billion, RMB 13.05 billion, and RMB 13.555 billion, respectively, with losses of RMB 4.84 billion, RMB 6.666 billion, and RMB 6.867 billion over these three years, amounting to a cumulative loss of RMB 18.374 billion.

Moreover, Nezha Auto's cash flow situation is also worrying. Public data shows that from 2021 to 2023, its net operating cash flow was -RMB 2.991 billion, -RMB 5.408 billion, and -RMB 4.354 billion, respectively.

Faced with such difficulties, it's time for Nezha Auto to start "self-rescue."

Business Show-01

October 16th marked the 10th anniversary of the founding of Hozon Auto, the parent company of Nezha Auto.

According to public information, Hozon Auto was founded in 2014 and is one of the earliest new energy vehicle companies in China. Since 2017, Hozon Auto has undergone 10 rounds of financing, raising a cumulative total of over RMB 20 billion from investors including 360 Security, CATL, and state-owned capital.

In June 2018, Hozon Auto launched Nezha Auto, positioning the brand as a "cost-effective electric smart car." In July of the same year, the Nezha N01 was launched, gradually gaining prominence in the market.

From 2020 to 2021, Nezha Auto ranked 5th and 4th, respectively, in sales among new energy vehicle startups. In 2022 alone, Nezha Auto emerged as a dark horse, delivering a total of 152,000 vehicles, an increase of 118% year-on-year, securing the top sales position. In comparison, Li Auto delivered 133,000 vehicles, and NIO delivered 122,000 vehicles, ranking second and third, respectively.

However, the highlight was short-lived, and sales soon declined. From September to October 2022, Nezha Auto delivered over 18,000 vehicles each month, but this dropped to 15,000 in November and plummeted to less than 8,000 in December. In contrast, Li Auto delivered over 21,000 vehicles, and NIO delivered approximately 15,800 vehicles in December of that year.

In 2023, Nezha Auto sold 127,500 vehicles, a decrease of 16.16% year-on-year.

In addition to sales difficulties, Nezha Auto has been in a state of loss since its inception. Data shows that cumulative losses from 2021 to 2023 amounted to RMB 18.373 billion. Behind these significant losses lie heavy research and development investments, rising production costs, and high marketing expenses.

Firstly, research and development investments in the new energy vehicle industry are substantial. To remain competitive technologically, Nezha Auto must continuously invest in areas such as battery technology, intelligent driving, and vehicle design.

However, these investments are difficult to convert into tangible economic benefits in the short term. An automotive industry analyst noted, "Nezha Auto's loss problem is not unique; many new energy vehicle companies face similar difficulties. Nevertheless, Nezha Auto must find solutions quickly to avoid greater risks."

Secondly, rising production costs have put significant pressure on Nezha Auto. Fluctuations in raw material prices, increased labor costs, and upgrades to production lines have all contributed to rising production costs.

Furthermore, marketing expenses are also considerable. To enhance brand awareness and product sales, Nezha Auto must invest heavily in advertising and promotional activities.

Facing consecutive years of losses, Nezha Auto is now in urgent need of expanding financing channels to "self-rescue" and alleviate financial pressure through fundraising.

However, in terms of IPO financing, Nezha Auto has been "early to rise but late to catch up." Companies like NIO and Li Auto, which were founded later, have already gone public and experienced capital enthusiasm.

It is understood that as early as the second half of 2020, Nezha Auto announced plans to list on the STAR Market in 2021 but ultimately missed out due to issues related to core technologies.

On June 26th of this year, Hozon Auto, the parent company of Nezha Auto, submitted a listing application to the Hong Kong Stock Exchange, with CICC, Morgan Stanley, CITIC Securities, ABC International, and CMB International serving as joint sponsors.

With approximately two months left before the prospectus expires, there has been no new progress to date. Moreover, financing amounts have been shrinking annually in recent years. The new energy vehicle industry, once favored by capital, has now seen investors become more cautious.

A financial industry analyst believes, "Nezha Auto's current financial situation is not optimistic, and investors will be more cautious when considering investments. Additionally, Nezha Auto's shareholding structure may also influence investors' decisions."

Whether Nezha Auto will succeed in its IPO remains uncertain at this point.

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Once renowned for its cost-effective Nezha V in the A0-class pure electric vehicle market, Nezha Auto's advantage has gradually diminished as competitors have increased. Models like the Wuling Bingguo and Haiou, which are comparable to the Nezha V in terms of pure electric driving range and technology, have gradually eroded Nezha V's market share.

As products aimed at elevating the brand, the Nezha S and Nezha GT face challenges due to a lack of competitiveness. Their high pricing has made them less attractive in the market.

In the past, some older Nezha Auto models attracted numerous consumers with their affordable prices and practical performance. Xiao Li, a car owner, recalls, "I chose Nezha Auto because of its cost-effectiveness, which met my daily travel needs." However, as competitors continued to make strides, the advantages of older Nezha Auto models gradually diminished.

The Nezha S and Nezha GT, which were supposed to be Nezha Auto's weapons to penetrate the mid-to-high-end market, struggled in competition.

At an auto show, Ms. Wang, a consumer, bluntly stated, "The Nezha S and Nezha GT do have attractive exteriors, but in terms of intelligent driving and interior quality, they still lag behind similar models from other brands." Compared to competitors, they lack outstanding advantages in key indicators such as intelligent driving, interior quality, and driving range, leading consumers to turn to other brands.

Li, a sales manager at a 4S store, told Business Show, "The sales pressure this year has been enormous, and the competition is fierce. It's difficult to meet our targets."

On the one hand, the rapid development of the new energy vehicle market has attracted numerous new and established players, making the competitive landscape increasingly complex. Nezha Auto struggles when facing the transformation of traditional automakers and the rise of new energy vehicle startups. On the other hand, the drawbacks of relying excessively on a low-cost strategy have gradually emerged, which is not conducive to brand image enhancement and sustainable corporate development in the long run.

Compared to new energy vehicle brands like NIO, XPeng, and Li Auto, Nezha Auto is perceived to lag significantly in intelligent driving. In an intelligent vehicle evaluation event, professional evaluators found issues with the response speed, accuracy, and stability of Nezha Auto's intelligent driving system.

A car consumer expressed, "Nowadays, consumers have increasingly high demands for intelligent driving. Nezha Auto needs to increase investments in this area and enhance its technological capabilities."

Low research and development expenditures are also a weakness for Nezha Auto in terms of innovation. Compared to other brands, Nezha Auto invests relatively less in research and development, which puts it behind competitors in technological innovation and product upgrades.

Of course, to boost sales, Nezha Auto has actively launched new models, shifting from a low-cost strategy to the mid-to-high-end market. However, the newly launched Nezha X and Nezha S Shooting Brake in August did not significantly boost sales.

Previously, Nezha Auto also launched the Nezha L, touted as the "fastest-charging extended-range model," which enjoyed a brief sales boom, with orders exceeding 30,000 within 35 days of its launch. However, sales momentum waned, and according to Jiemian Auto, sales maintained above 5,000 units in June and July but dropped to 1,489 and 2,600 units in August and September, respectively.

The Nezha S performed poorly during the pre-sale phase, with analysts attributing this mainly to consumers' lingering perception of Nezha Auto as a low-cost brand.

A potential consumer told Business Show, "Nezha Auto has always been perceived as a low-end brand with high cost-effectiveness. Suddenly launching mid-to-high-end models is somewhat difficult for people to accept." Furthermore, the Nezha S failed to fully impress consumers in terms of product strength, lacking obvious advantages over competing models in the same segment in terms of configuration and performance.

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Although Nezha Auto currently faces numerous crises, it is not without opportunities. For instance, it has been actively expanding its overseas market, achieving certain successes in Southeast Asia. Its export volume has gradually increased, and its market share has continued to rise.

A car dealer in Southeast Asia told Business Show, "Nezha Auto offers high cost-effectiveness in the Southeast Asian market and is popular among local consumers."

However, Chinese brands expanding overseas have always faced numerous pressures. Issues such as trade barriers, differences in technical standards, and low brand recognition have posed challenges to Nezha Auto's overseas expansion.

Moreover, competition in overseas markets is fierce, and Nezha Auto must compete with internationally renowned brands, placing higher demands on its product quality, service standards, and brand building.

As the new energy vehicle market continues to develop, Nezha Auto can enhance its competitiveness by increasing research and development investments, improving product quality, and optimizing marketing strategies.

Coupled with the government's increasing support for the new energy vehicle industry, which provides a favorable policy environment for Nezha Auto's development, its overseas expansion is expected to bring new growth opportunities for the company.

However, at present, Nezha Auto still needs to make significant efforts to overcome its financial difficulties. Of course, promptly resolving the issue of unpaid salaries and boosting sales are top priorities.