Why GREE Leader Dong Mingzhu Is “Copying” From Auto Maker Xiali?
摘要： After investing in Zhuhai Yinlong, GREE’s leader, Dong Mingzhu, is making another move for her auto-making journey.
After investing in Zhuhai Yinlong, GREE’s leader, Dong Mingzhu, is making another move for her auto-making journey.
According to Securities Daily’s coverage, Dong Mingzhu appeared at Tianjin FAW Xiali with her team from GREE and visited Tianjin FAW’s factory. Subsequently, rumors about GREE attempting to acquire FAW Xiali started to spread. At present, GREE’s team is stationed at Tianjin FAW Xiali, Securities Daily reported. FAW Xiali might announce new updates on the stock rights acquisition matter as early as next week, the financial media added.
At the same time, the second largest shareholder of Xiali, Tianjin Baili Mechanical Equipment Group, would exit from the company. After GREE invests in Xiali, the auto company might shift its focus towards the production of new energy vehicles instead of manufacturing traditional fossil-fuel-powered cars. Previously, GREE tried to invest in Zhuhai Yinlong, and the plan was eventually aborted. Dong Mingzhu refused to give up her auto dream and invested ￥15 billion personally for Yinlong to build a new energy vehicle production powerhouse in Luoyang, Henan province. Many have suspected that the acquisition of Xiali might also be Dong’s personal investment as it adds up to her previous move.
On September 18th, Shenzhen Stock Exchange released a bulletin stating that GREE’s share has been suspended due to the media coverage, and that the share would be resumed after the company releases relevant statement to address the acquisition rumors.
Dong Mingzhu’s bumpy car-making journey
Without a doubt, Dong Mingzhu herself is pretty much an attention getter already without any of the acquisition rumors. Whether it’s her achievements at GREE, her idea of making GREE enter the smartphone and auto sector, or the GREE commercials that feature herself, all these rather absurd personal presentations have made her an Internet celebrity in China.
GREE’s AC business is still a leading force in its very own realm. GREE’s 2016 annual report shows that the company’s AC business has been the top runner since 1995 for 22 consecutive years. In 2005, GREE’s AC business became a forerunner in the global market, and it has stayed on top even to today. ChinaIOL’s data show GREE’s AC products accounted for 42.73% of the market share in China in the home AC sector. HVAC’s statistics on another hand show that GREE’s AC products for commercial use enjoy 16.2% of the market share, and it has been the top player in this arena for five consecutive years.
Despite its success in the AC industry, GREE has been constantly criticized for its overly simple business structure. Therefore, GREE is naturally driven to diversify its business structure. And looking from GREE’s development in the recent two years, it’s easy to tell that GREE has been dedicating to the development of a diverse business structure. It’s reported that GREE had entered the refrigerator sector, air purifier sector, water purifier sector, rice cooker sector, humidifier sector and smartphone sector etc. last year.
As for the auto sector, it’s also one of the many fields targeted by GREE currently. In fact, GREE had made the endeavors to enter this sector before, which eventually turned into Dong Mingzhu’s personal efforts. In April last year, GREE announced in a public statement that the company was planning to issue shares to purchase properties, a move that targeted Zhuhai Yinlong. In August, GREE officially released a detailed plan on the acquisition of Zhuhai Yinlong, which states that GREE would issue shares to all shareholders at Zhuhai Yinlong and acquire 100% of the share rights valued at around ￥13 billion.
However, the acquisition plan was aborted as the relevant fundraising plan failed to gain approval. On November 16th, 2016, GREE announced in an official statement that the company had decided to abort the acquisition plan entirely.
Despite the sudden brake on the acquisition plan, Dong Mingzhu refused to let her auto dream slip away. At the end of 2016, Dong Mingzhu personally teamed up with Wanda Group, CIMC, Beijing Yanzhaohuijin International Investment Company, and Jiangsu JD Bangneng Investment Management Company to sign a capital increment agreement with Zhuhai Yinlong. The idea was to pour in￥3 billion and acquire 22.388% of Yinlong’s shares.
Recently, GREE has made another move in the auto sector for expansion. After investing￥15 billion with Yinlong in Luoyang this year in August, Dong poured in another ￥15 billion to make robots in Luoyang as well. It’s said that Dong would also invest in Luoyang LYC Bearing to participate in the state-run company reform.
Cooperating with Luoyang to build an independent innovative smart manufacturing powerhouse is the third major investment GREE has made in Henan province. The project includes a land use of 5000 mu, backed by a total investment of ￥15 billion. The project will be implemented in different phases. After the construction is completed, the project is expected to generate an annual value of ￥30 billion.
Favored by the capital, is FAW Xiali undergoing a transition?
In the past few years, Xiali’s performance in the market has been declining. This time the capital is eyeing this Chinese auto company in danger of going out of business, giving it an opportunity to make a transition and turn the tide.
According to FAW Xiali’s 2017 First Half Year Report, the company had a car sale of 11,500, a year-on-year slump of 39.4%. The report also says Sialia's revenue plunged by 37.9% to ￥623 million. This resulted in the net loss of ￥868 million for the shareholders at the holding company. FAW failed to achieve a decent market performance due to the failure to set a clear positioning for the brand after product R&D.
Beijing Business Today reported that in August this year Xu Liuping was officially appointed as the board chair and party secretary of FAW Group. After that, rumors have it that FAW Group would readjust its core businesses and modify its independent units. It’s said that Xiali would be the core independent unit that Xu would deal with.
Industry insiders believe that for FAW Group’s independent brands, one of the shortcuts towards turning the tide is the new energy car sector. FAW Xiali also mentioned in its report of the first half of 2017, which was released on August 30th, that: “The company is implementing the plan for new products. And the company would enhance its products in the aspects of product structure and new energy etc. The average price would be raised.”
On September 8th, FAW Xiali announced that its share on the stock market would be suspended due to major events. The company announced in its bulletin that it has received a notice from the company’s holding group, FAW Group, which states that FAW is planning on major changes that would have a profound impact on the company. “And therefore, Xiali’s share will be suspended on September 8th. However, FAW’s share won’t be affected on the stock market,” the notice wrote. The media world suspected that Tianjin FAW would have major moves involving share acquisition. All these speculations are caused by the disappointing market performance Xiali has been having recently in some way.
However, Dong Mingzhu’s investment plan for FAW Xiali is not going entirely smooth. Insider at Tianjin FAW familiar with this matter revealed that after the suspension notice came out, Tianjin FAW issued a statement that to date the major changes are still undergoing discussion and survey and that the suspension will continue to ensure fair and transparent communication of information and protect investors’ interest as new changes would bring many uncertainties.
During the suspension, the company would fulfill its obligation of keeping the investors and public informed regarding the progress of this matter according to relevant laws and regulations.
Will copying from Xiali help realize the auto dream?
As an essential chain of FAW Group’s independent unit, FAW Xiali hasn’t been having a satisfying market performance in recent years. As a matter of fact, Xiali has been losing money continuously. FAW Xiali attributed the loss to the failure to keep its products up to date with the changing market demand. Xiali has a relatively small production and sales scale. It’s also weak at profiting and utilizing its production capacity. It takes quite the courage for Dong Mingzhu’s team to eye FAW Xiali now.
Yan Jinghui, an expert of the auto market, stated that FAW Xiali’s performance in the market in recent years had been disappointing, however, FAW Xiali has a solid foundation in terms of product and brand. Dong’s investment in Tianjin FAW would bring Xiali abundant funding, advanced management, and a clear market goal, which appears to be quite a good deal.
Investing in FAW Xiali is a major step for Dong Mingzhu’s auto-making journey. Apart from that, Dong Mingzhu has stated openly once that what she saw in Yinlong that drove her to make the investment in that company was its advanced lithium titanate battery technology. But the reality is that Zhuhai Yinlong is very weak at complete car manufacturing and lacks experience. In addition to that, the Zhuhai-based company doesn’t have a mature car production line either.
Xiali, on the other hand, has years of experience in car manufacturing. It has a team of seasoned professional talents in this particular field and mature technologies. With all these advantages, Xiali would help Dong achieve the mass production of new energy cars soon, accelerating Dong’s penetration into the car industry. Industry insiders commented that Dong’s true intention of acquiring FAW Xiali is to utilize Xiali’s existing car manufacturing lines to enter upstream and downstream of the industry so as to achieve the mass production of new energy cars.
At the beginning of 2017, GREE, Yinlong, and the government of Tianjin signed a strategic cooperation framework agreement together. The three sides are planning to build an industrial base that integrates the smart appliance sector, smart equipment sector, and new energy battery sector. However, so far the project is not showing much progress yet as it hasn’t even announced the site selection.
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