Layoffs in Shanghai office

Author｜Wang Lei, Liu Yajie

Last year, Hozon Auto, bringing its new MPV model Hozon V09, participated enthusiastically in the Guangzhou Auto Show. Now, a year later, the bustling Guangzhou Auto Show fails to see the presence of this local Guangzhou brand.

The latest news is that Hozon Auto has laid off all employees in its Shanghai branch and owes compensation to the laid-off employees.

This forms a stark contrast with the booming Guangzhou Auto Show currently underway.

In fact, most news about Hozon Auto this year has been negative, such as poor sales, large-scale layoffs, and employees protesting with banners.

Looking back at the brand's development, NIO first exited, followed by the entry of Zhujiang Investment Management. Hozon Auto once aimed to leverage real estate and entertainment IPs for momentum, but the process was fraught with twists and turns. Can it now rebound from the bottom?

01 Shortage of funds, arrears, and unpaid wages

According to China Business News, Hozon Auto has laid off all employees in its Shanghai branch and owes compensation to the laid-off employees. A social media platform shows that the official account of Hozon Auto's Shanghai direct store stopped updating in May.

As early as June this year, multiple car owners reported that almost all sales channels of Hozon Auto in Shanghai had ceased operations, and the phones at its shopping mall experience centers and branches were unanswered.

On September 10, the Shanghai Market Supervision and Regulation Bureau listed Hozon Auto's Shanghai branch in the directory of enterprises with abnormal operations due to the inability to contact them through their registered residence or business premises.

China Business News reported that multiple laid-off employees stated that only about 50 people remained at Hozon Auto's Guangzhou headquarters to maintain the company's basic operations and functioning. Incumbent employees would move to Nansha District for work, and the company might plan a reorganization.

'We originally agreed with the company to pay N+1 compensation by October 31, but it's now half a month overdue without payment. It's just being dragged out.'

This is not the first time layoffs have been rumored at Hozon this year. In April, it was rumored that Hozon had already completed 50% of its layoffs. In July, Hozon still had about 600 employees, but the factory was shut down, and the company's production and sales plans were also suspended. At that time, outside observers believed that Hozon Auto might adopt an asset-light model in the future or choose contract manufacturing.

A former Hozon Auto employee revealed that the company also conducted a large-scale layoff at the end of July, leaving only a few dozen people to maintain basic operations.

The crux of the problem lies in the shortage of funds. To boost sales and earn more money, Hozon even forced employees to sell cars.

In March this year, Hozon issued the 'Stationed Assistance Plan' for all employees, and almost all employees were assigned to dealer stores to sell cars. If they failed to complete the KPI of selling one car a year, their salaries would be deducted, but there would be corresponding rewards for completion. This plan was widely criticized online at the time and denounced by most employees as a 'disguised pay cut and layoff.'

In April, a Hozon employee revealed that due to financial constraints, only basic salaries were paid in March without any communication or explanation. Someone contacted management for an explanation, but executives avoided the matter.

In early June, a Hozon executive was reported to have internally stated that only basic salaries would be paid for the May salary distributed in June, and that social security contributions would be guaranteed, but the next month's salary was not guaranteed, leaving employees to 'find their own way.'

In addition to salaries, Hozon also owes employees over 100 million yuan in co-investment funds.

From 2018 to 2021, Hozon Auto implemented a batch-based employee stock ownership plan, with over 50 co-investors and a cumulative amount exceeding 100 million yuan.

When layoffs began in July 2023, Hozon Auto promised employees that as long as they agreed to resign, they could immediately proceed with the procedures for share withdrawal and refund. However, after employees submitted share withdrawal agreement applications according to the company's process, there was no further action.

In June this year, three former Hozon Auto employees, unable to withstand the pressure, pulled banners at Hozon Auto's Guangzhou headquarters to demand the refund of co-investment funds.

Of course, it's not just employees' money that's owed; even suppliers' payments are unpaid.

In 2024, there have been over a hundred cases in which Hozon Auto was the defendant, with lawsuits scheduled until February 2025. Over 15 suppliers and service providers have filed lawsuits with the Nansha District People's Court in Guangzhou regarding contractual disputes.

To date, over 131 million yuan worth of equity held by Hozon Auto in Guangzhou Hozon Automobile Sales and Service Co., Ltd., has also been frozen.

In summary, the issue is a lack of funds.

02 Sluggish sales and executive turmoil

Hozon Auto's current situation is not surprising.

Compared to the name Hozon, GAC NIO is more well-known. Its predecessor was GAC NIO, a joint venture between GAC Group and NIO.

At the end of 2017, GAC and NIO held a signing ceremony to jointly invest 1.28 billion yuan to establish GAC NIO. In terms of shareholding structure, GAC Group and NIO each held 45% of the shares, with the remaining 10% belonging to management. Among them, GAC Group was primarily responsible for vehicle R&D and production, while NIO provided intelligent connected vehicle technology and energy support systems, and GAC NIO was responsible for expanding its sales channels.

At that time, the collaboration between traditional automakers and new forces was rare, bringing considerable fame to GAC NIO. Even to accelerate the new company's growth, GAC brought in Liao Bing, a veteran of the automotive industry with over 25 years of experience, to serve as CEO.

However, soon after GAC NIO's establishment, the industry turmoil of 2019 arrived. GAC Group's annual performance plummeted in 2019, while NIO was still losing billions at that time.

Since both GAC and NIO had their own core businesses, neither focused on GAC NIO. After a year-long stagnation, in April 2019, they announced through their official WeChat account that they would launch a new brand: 'HYCAN Hozon.'

Its first model launched was the Hozon 007, based on GAC's AION LX platform, priced at 259,800-303,000 yuan, similar to the AION LX. GAC had high expectations for the Hozon 007, planning to sell 15,000 units in 2020, but the actual monthly average was only over 100 units.

This was just a prelude to the dilemma . Turmoil began in 2021 when GAC NIO CEO Liao Bing resigned, and NIO withdrew, reducing its shareholding. Li Bin stepped down as the company's legal representative, and Gu Huinan, general manager of GAC AION, Wu Jian, president of GAC Research Institute, and others also withdrew from GAC NIO.

When everyone thought GAC NIO's 'short life' was about to end, Zhujiang Investment Management, a subsidiary of Hopson Development Holdings, increased its capital by 1.923 billion yuan, holding 68.55% of the shares and becoming the largest shareholder.

In February 2021, GAC NIO announced its capital increase and share expansion. Zhujiang Investment Management Group's wholly-owned subsidiary, Guangdong Zhutou, invested approximately 1.923 billion yuan as a strategic investor, becoming the largest shareholder with a 68.56% shareholding. GAC Group increased its investment by approximately 482 million yuan, and together with GAC AION, their total shareholding was 25%.

After the change in shareholding, GAC NIO also changed its name to Hozon Auto.

After a round of financing, NIO's shareholding was diluted to 4.46%, paving the way for its complete withdrawal. In August 2022, NIO completely withdrew from Hozon Auto, with its shareholding taken over by the new shareholder Yaoyu Investment Holding Co., Ltd.

Currently, Hozon Auto is jointly held by Guangdong Zhutou Intelligent Technology Investment Co., Ltd., GAC AION New Energy Automobile Co., Ltd., Guangzhou Automobile Group Co., Ltd., Yaoyu Investment Holding Co., Ltd., and Guangzhou Kaichuang Gongjin Investment Partnership.

Crucially, GAC Group, which nurtured it from the beginning, is unlikely to 'guarantee' Hozon. In a previous GAC Group performance meeting, a group director stated that caution should be exercised in investing in Hozon Auto.

Despite subsequent support from real estate giants, Hozon Auto has not changed its marginalized position among new EV makers.

Although its product line covers sedans, SUVs, and MPVs, ranging from 100,000 to 400,000 yuan, sales have not been good.

In 2021, Hozon Auto sold 2,907 vehicles, 18,941 vehicles in 2022, and 18,559 vehicles in 2023. In October this year, Hozon Auto sold fewer than 110 vehicles, a year-on-year decrease of 82.37%. From January to October this year, Hozon Auto's cumulative sales were fewer than 4,388 vehicles, a year-on-year decrease of 83.32%.

In addition to sluggish product sales, management team issues have become a critical factor restricting Hozon's development. Since its inception, Hozon Auto's management has been in turmoil. The first batch of veterans successively withdrew, and since 2023, former iFLYTEK Vice President Du Lan and former Alibaba Auto Business Unit Director Gu Wanguo were hired at high salaries to serve as co-presidents and vice presidents.

However, none of them stayed for a full year before resigning. Someone once counted that Hozon Auto's middle and senior management had changed over 10 times in four years, equivalent to a change of blood in the company's middle and senior management every five months.

Amid poor sales, Hozon Auto has been exposed to after-sales disruptions and user complaints. The collapse of the after-sales system and public court battles between employees and the company have led to a loss of user trust. Each of these incidents is becoming a straw that could break the camel's back for Hozon Auto.

The window of opportunity left for Hozon Auto is truly slim.