Chinese automaker Zotye has not advanced joint venture (JV) negotiations that began two years ago with Ford China in a deal that has come to the forefront amid media reports last week that it is on the brink of bankruptcy.
Why it matters: The country’s first government-approved EV maker, Zotye is facing possible insolvency. If bankrupt, it will be a stark reminder that one of China’s most strategically important industries is in the midst of a prolonged slump.
- Reports that Zotye and other three domestic OEMs set to file bankruptcy by year-end were circulating widely last week.
- An internal notice from Pingan was leaked to Chinese media, sparking rumors that four companies including Zotye were going bankrupt. Pingan later responded to media, verifying the document but saying that the investigations were routine.
- Zotye in a statement on October 10 challenged reports of its impending demise, saying it currently held RMB 30.5 billion ($4.3 billion) in total assets, greater than its debt of RMB 13.2 billion as of June. It did not specify whether its assets covered debt obligations to date.
Detail: In response to a query about whether respite in the form of a joint project with Ford was underway, Zotye responded (in Chinese) that there was no new development in the negotiations, according to an investor website run by the Shenzhen Stock Exchange on Thursday.
- Ford and Zotye in late 2017 announced a plan to form a RMB 5 billion JV focusing on entry-level electric vehicles and mobility services. Production capacity was expected to reach 100,000 units a year.
- The project has not progressed since then, and the JV has not been established.
- Zotye was in August sued by Bak Power, a Chinese lithium battery supplier, over unpaid bills totaling RMB 621 million.
- The battery maker had asked Chinese courts to freeze RMB 40 million in assets in a previous lawsuit against Zotye from May. The EV maker said Thursday that it has repaid some of the debts.
- The Zhejiang-headquartered OEM was among China’s top 15 car manufacturers in terms of unit sales for the first eight months of the year. Sales figures fell 32% year on year to 125,000 units sold from January through August.
- It became the first manufacturer to win approval from the Ministry of Industry and Information Technology in 2008 for the production and sales of electric vehicles, and was the country’s third-largest EV maker in 2016, after BYD and BAIC.
- Zotye could not be reached for comment after calls to multiple phone numbers listed for the company.
“The Ford Zotye BEV JV has not been established. Ford is working with Zotye to evaluate and track cooperation options given the changes in China’s automotive industry. The detail of the progress is confidential and is subject to external announcement.”
—A Ford spokeswoman to TechNode on Thursday
Context: China’s new energy vehicle sales fell for the third consecutive month, sinking 34.2% in September after declining 15.8% year on year in August, according to figures from the China Association of Automobile Manufacturers (CAAM).
- Chinese automakers remain under mounting pressure as the economy slows amid the China-US trade war and weakened consumer confidence, CAAM said earlier this week at a press briefing in Beijing.