"There's pressure, but the industry's analysis of us is a bit too grim."

NIOZ Automobile is facing another new challenge since its market entry. So far, most reports about NIOZ Automobile have focused on burning through billions of yuan in financing, large-scale layoffs, unpaid wages, demands from suppliers for payment, etc., interpreting the company as being on the brink of survival.

At the same time, some media outlets have visited NIOZ Automobile-related factories to understand specific manifestations such as salary payments and layoffs.

However, overall, contrary to appearances, NIOZ Automobile is still brewing a comeback.

Where is the confidence in the American-style presentation at the Guangzhou Auto Show?

"If it were really in trouble, how could it participate in the Guangzhou Auto Show?" Unlike most companies labeled as failing, many people still have confidence in NIOZ Automobile and have dispelled many doubts after seeing its sizable exhibition booth at the 2024 Guangzhou Auto Show.

NIOZ also played on homophones at the booth, serving American coffee at the NIOZ booth, with 'NIOZ Americano' equating to 'NIOZ is fine'.

Regarding the various current situations, the root causes of NIOZ Automobile's problems lie in two points: one is bank loan recalls, and the other is the increasing number of component suppliers contracting and tightening payment terms amidst the ongoing automotive price war and internal competition.

The so-called loan recall refers to the bank's decision to recover loans early for some reason before the maturity date specified in the loan agreement. Specifically, when the loan is not yet due, the bank will require the enterprise to repay the principal and interest in advance. For enterprises temporarily facing operational difficulties, especially small, medium, and micro-enterprises, when the enterprise involves multiple bank credit lines, often one bank's loan recall will be quickly followed by others, worsening the enterprise's situation.

In a recent article in the Economic Daily, this behavior was attributed to the bank's judgment that the enterprise's operational risks had increased, its credit rating had declined, and its repayment ability and willingness were insufficient; however, the underlying causes were complex, including both the enterprise's own risk issues and some banks' 'scale-chasing' and indiscriminate lending, as well as inadequate risk control capabilities.

After entering October, the Financial Stability and Development Commission held the 10th special meeting on preventing and resolving financial risks, proposing to focus on solving the financing difficulties of small, medium, and micro-enterprises and private enterprises. For enterprises temporarily facing operational difficulties but with marketable products, promising projects, and technologically competitive products, banks should not blindly stop, reduce, recall, or cut off loans.

In addition, the price war brought about by deep internal competition has prompted component suppliers to initiate cost savings and revenue enhancement measures, contracting and tightening their scale and business models. Since May this year, multiple automakers have been reported to have delayed payments to suppliers due to pressure from slowing sales and price reductions. In 2021, several automakers had payment cycles to component suppliers of less than 200 days, but after entering 2023, these cycles have been extended to over 220 days. Since then, more and more component suppliers have begun to negotiate and implement shortened or closed account periods with automakers to ensure their own liquidity, sufficient cash flow for purchasing raw materials, normal production and delivery, and smooth operations.

Therefore, enterprises, including NIOZ Automobile, face essentially the same problems. Continuous capital injection would easily overcome this challenge.

In fact, judging from its specific actions, NIOZ Automobile's IPO journey made significant progress on June 26, 2024. NIOZ Automobile's parent company, Hozon New Energy Auto Co., Ltd., officially submitted a listing application to the Hong Kong Stock Exchange, with CICC, Morgan Stanley, CITIC Securities, ABC International, and CMB International as joint sponsors. On July 10, the China Securities Regulatory Commission received the listing filing application. On August 3, the International Department of the China Securities Regulatory Commission requested supplementary materials.

Brewing a comeback: Where should NIOZ start?

Therefore, with the current capital injection, NIOZ Automobile has also received many good news. On November 14, Nanning Industrial Investment Group officially announced a strategic cooperation with NIOZ Automobile to provide supply chain financial support. On November 18, the Nanning Industrial Investment Automobile Industry Group Supplier Conference was held in Nanning, mainly to promote the resumption of production and operation at NIOZ Automobile's Nanning factory and ensure the continuous business of NIOZ AYA and X export models.

Currently, factories are gradually resuming production, and NIOZ is returning.

Moreover, from a fundamental perspective, NIOZ Automobile's value is not as bleak as perceived by the outside world.

In terms of order performance, in October 2024, NIOZ Automobile's domestic private orders exceeded 10,000 units. Including corporate customers and overseas orders, orders in October are expected to reach 20,000 units. In the first 20 days of November, amid public uproar, there were nearly 5,000 orders, and many customers hesitated to sign sales contracts due to uncertainties about the supply cycle. Additionally, at the Guangzhou Auto Show, there were over 60 orders, not including nearly 120 orders that were not accepted due to supply cycle concerns.

In terms of other fundamental performances, at the dealer level, before the supply disruption, NIOZ Automobile dealers generally maintained high confidence in the brand, mainly due to its high product quality, competitive cost-effectiveness, and stable earnings. At the user level, among the nearly 500,000 vehicles in circulation, there are a large number of repeat customers.

The launch of new models basically met expectations: This year, NIOZ Automobile successively launched the NIOZ L, new NIOZ X, and NIOZ S Shooting Brake. The first two models have initially met the monthly sales expectation of over 5,000 units, maintaining a certain level of competitiveness in their respective market segments. Dealers believe that if the manufacturer can keep up with the supply schedule, both models have the potential to achieve monthly sales of 8,000 or even over 10,000 units.

At the same time, if comparing with similar brands, NIOZ Automobile's operational quality is in the upper-middle range. NIOZ Automobile executives have previously openly joked that they come from humble beginnings, and the company has always maintained low-cost operations. According to the listing materials submitted by NIOZ Automobile, although the company has been in a state of loss over the years, compared to other new energy vehicle brands, NIOZ Automobile's losses are relatively small.

In 2024, NIOZ Automobile made significant adjustments to the profitability of its new models, with several main sales versions able to maintain break-even or even slight profitability. Including overseas exports, over time, the company could turn losses into profits.

Final Thoughts

Overall, many participants in China's automotive industry have concluded that the next 2-3 years will be the most competitive period.

To stay in the game, it is necessary to increase revenue and reduce expenses, improve operational efficiency, and carefully spend every penny on research and development and marketing. Therefore, the layoffs, streamlining, and introduction of new incentive models currently faced by NIOZ Automobile are basic operations in the automotive industry.

Therefore, the upcoming IPO will be of utmost importance, and NIOZ Automobile's value remains.