Recently, Hengda car first model Hengchi 5 during the May Day holiday quietly open blind subscription rumors caused heated discussion in Weibo, the focus of the discussion is not Hengda car finally fast mass production, but Hengchi 5 10 hours blind order reached 50,000.
These doubts are not without reason, to know that the tank 300 phenomenon-level model blind order broke 20 days, the heat of the Han DM-i 10 hours blind order number is only 12,000 units. And Hengchi 5 in the brand, positioning, design, product strength and other aspects do not have the potential of explosion, 10 hours order breaking 50,000 results is obviously unreasonable, and Hengda official has not yet responded to this rumor.
This is not the first time that netizens have questioned Hengda’s car manufacturing. In the early days, Hengda entered the car manufacturing industry with the rudeness of spending a lot of money and the arrogance of "the world’s first", and was labeled "barbarian car" by netizens. Now, the objective laws of car manufacturing have taught Hengda a good lesson, and the first model has fallen into a difficult situation. In the opinion of Liu Bing, an internal manager of Hengda, the current dilemma of Hengda Automobile is not only the delay in mass production, but the hidden dangers have emerged from the moment Hengda stepped into car manufacturing.
What’s worse is that after the full implementation of the three national red lines, Hengda Group’s core real estate sector suffered a devastating blow due to its high debt ratio. At present, only the car business running on the new track can save Hengda Group. The bumpy Hengchi 5 has become Evergrande Group’s last resort. Can it shoulder this heavy responsibility?
Savage money
"It is said that Evergrande is a barbarian car, which is very apt to describe. Real estate companies make cars, and they don’t respect this industry at all," Liu Bing said. Compared with the self-made Wei Xiaoli, Evergrande, which builds cars from real estate, can be said to be born with a golden key, and the most worry is money. However, in Liu Bing’s view, Evergrande’s money is spent on the back of the knife.
Evergrande’s interest in car manufacturing can be traced back to June 25, 2018. Evergrande acquired 100% of Hong Kong Shiying Company for HK $6.747 billion, thus obtaining 45% of the shares of Smart King Company and becoming the largest shareholder of FF. But the two sides soon tore their faces, so Evergrande decided to go down in person.
In January 2019, Evergrande Health acquired a 51% stake in NEVS National Automobile through the acquisition of MiniMinor Limited. In the following five months, Evergrande continued to increase its shareholding ratio in National Energy until it was fully owned. However, National Energy only has some uncompetitive technologies in its hands, and the most valuable is only the production qualification. "There are many problems with the National Energy 93, the quality is not good, and the cost is high. In the end, I decided not to sell it."
Perhaps it was these two failures that made Evergrande realize that car building is not so simple, and then Evergrande began to build its own car building system including supply chain, factories, personnel, etc. The New Energy Vehicle Strategic Partner Summit held by Evergrande on November 12, 2019, and the official announcement of 6 pure electric new cars a year later, made Evergrande famous. Xu Jiayin put forward the "three must" of car building at the summit: first, the core technology must be world-leading, second, the product quality must be world-class, and third, the cost must be greatly reduced, which is still spreading in the car circle.
Xu Jiayin set the goal: "Ten production bases, each base plans to have a production capacity of 500,000 vehicles, the first phase is 100,000 vehicles, and the production scale is planned to exceed 1 million vehicles within 2-3 years, and the annual production scale will exceed 5 million vehicles within 10 to 15 years." The cumulative sales volume of China’s new energy vehicles in 2019 is 1.20 million units, which means that Evergrande’s first production capacity will almost cover the entire Chinese new energy vehicle market.
Matching this ambitious goal is another equally incredible "spending plan". At the same summit, Xu Jiayin went on to say that Evergrande’s three-year investment budget in new energy vehicles is 45 billion yuan, of which 20 billion will be invested this year, 15 billion will be invested next year, and 10 billion will be invested the year after. How exaggerated is this figure? NIO, the "big money burner" among the new car-making forces, has only invested more than 10 billion yuan in a car.
In fact, Hengda Automobile spent money faster than originally planned last year. According to Hengda Automobile’s 2020 financial report, Hengda Automobile’s cumulative investment has reached 47.40 billion yuan, of which 24.90 billion yuan is used to purchase core technology and R & D investment, and another 22.50 billion yuan is used for the construction of the plant.
"The first batch of Hengchi cars (Hengchi 1-6/7) were designed by top foreign designers, and the follow-up development was done by overseas suppliers. What we need to do in China is to give them some parameters, length, style, height, wheelbase, and battery life. Hengchi 1 is an overseas design company that directly does design and engineering development." Sun Gaojie, an insider of Evergrande Automobile, revealed to the new technology of the new car.
In addition to outsourcing design to foreign suppliers, Evergrande has completed a series of acquisitions. On May 31, 2019, Evergrande Health acquired Protean, a manufacturer of electric vehicle wheel motors, through National Energy, and on July 26, Evergrande acquired battery supplier Canai for 178 million yuan.
Then there are the recruitment. On September 9, 2019, Evergrande New Energy Vehicles launched a global recruitment program, planning to recruit about 8,000 new energy vehicle industry practitioners in nine countries, including China, Sweden, Germany, the United Kingdom, and Austria. Another Evergrande insider, Zhang Ming, told Xinxin New Technology, "Evergrande Automobile Group had about 5,000 people at its peak, but in fact there were less than 8,000 people, but there were also many people, similar to NIO."
While recruiting employees and acquiring companies, Evergrande is also promoting the construction of its "ten production bases". In August 2020, the Shanghai Songjiang and Guangzhou Nansha bases started equipment installation and commissioning. A year later, in November, the two production bases began full-line trial production. With the Tianjin production base, a total of three bases have been completed.
For startups, for start-up car companies, money is indeed important, but it cannot solve all problems. Evergrande, which expanded rapidly, soon encountered problems.
The Tianjin production base was originally owned by Guoneng factory, which is the only one with production qualifications, but it is not favored by Evergrande. "The Tianjin factory Evergrande does not like it, and feels that the final assembly and welding assembly are not good together," Sun Gaojie said. Compared with Tianjin, Evergrande’s Shanghai and Guangzhou bases have invested much more, using more advanced factory equipment and technology, which is expensive, but so far, the Shanghai and Guangzhou bases have not been qualified for production.
Except for these three bases, none of the other bases that were originally planned were built. The battery base in Yangzhou was not built, and the motor base for in-wheel motors was not built. The remaining car base projects were abandoned because there was no funding.
At the Shanghai Auto Show in April last year, Hengda Automobile showed its car-making achievements to the outside world, showing a total of 9 cars, covering all levels of A-D class, as well as cars, coupes, SUVs, MPVs, crossovers and other full series of all models, which attracted much attention. There are relevant media reports titled "Hengda Power is stunning at the Shanghai Auto Show, Hengda car-making is underestimated".
The 9 cars on display at the auto show were actually selected by Xu Jiayin, and the original design was 14 cars. Why did Hengda, the first car builder, come up with 14 models? Zhang Ming revealed that Hengda’s goal was to sell 1 million cars within three years, and then went to investigate how many models needed to be developed to achieve this goal. Hengda investigated Toyota and learned that Toyota had 14-15 models when it completed the 1 million target, so Hengda also set the number of developed models at 14.
Among the nine cars on display during the Shanghai Auto Show, only the Hengchi 5 was a car that could see the chassis and drive. On the afternoon of the auto show, a number of automotive media tested the Hengchi 5 in front of Hengda’s Shanghai base. Except for the Hengchi 5, the others were all model cars, and the models that had been finalized by Xu Jiayin were different in the later stage of mass production.
"Some cars were found to be impossible to do from concept to engineering. For example, the rear row of the Hengchi 2 was designed to be very small, and the Hengchi MPV was proven to be impossible. Nine cars eventually became five cars." Zhang Ming told the new car technology.
Due to the shortage of funds of Hengda Automobile, these 5 cars have not been fully preserved. At present, the company is fully committed to maintaining Hengchi 5. Among the 9 models, the appearance of Hengchi 5 is relatively average and relatively low-end, but at this time, Hengchi 5 is the car closest to mass production.
In the model car stage, Hengda still had a sum of money to spend on building 36 brand display centers, all located in the core areas of core cities. Later, they closed their stores one after another, retaining only five.
It is worth mentioning that Zhang Ming revealed that because the Hengchi 1 was found to be a model car by the media, it cannot be placed in the exhibition hall, but the exhibition center is already under construction, and model car orders are also being placed. The sales of the Hengchi 1 with millions of units account for half of the annual model car orders in China. The door can be opened, the interior and even the power system are also available, but Hengda’s car can only be driven for about 20 yards and half an hour.
Two years spent 47.40 billion, Hengda has not yet built a real sense of the car.
From the beginning of "buy buy buy" to the later "provinces and provinces", no one can count how much trial and error costs Hengda has along the way. After the mountains and rivers were exhausted, ensuring the listing of Hengchi 5 became Hengda Automobile’s last gamble.
In a car company, it’s the Autobots who don’t count
"I can feel that the corporate strategy, brand strategy and product strategy are not played according to the rules." Wang Qingze, an internal employee who has been with Evergrande for more than a year, talked about his greatest feelings about the company.
At Evergrande, Wang Qingze is not the only employee who has doubts about the company’s strategy. Before coming to Evergrande, they had worked in other positions in the automotive industry and had a deep understanding of the industry. But after coming to this automotive start-up led by real estate company personnel, they often questioned the practices of their superiors.
They gradually discovered that in such a car company, the Autobots did not count.
In the middle and senior personnel structure of Evergrande Automobile, most of the core leaders are from real estate companies, and the middle management is mainly professional automakers. Take Evergrande Research Institute as an example, the dean and middle management are professional R & D personnel, and the leader in charge of Liu Yongzhuo is from real estate companies. Such a leadership structure undoubtedly breaks the balance that has the voice over the car company.
Real estate leaders bring a real estate-style car-making style. "Evergrande feels that it is the world’s top 500, and it feels that it is not short of money. It is not good at throttling, and it is not good at cost control," Sun Gaojie said. Except for Evergrande Automobile, no other auto company spends so much money. Strict cost control is the consensus of auto companies in order to capture more market share and improve corporate efficiency. It is also an important indicator to measure the internal operating efficiency of enterprises. On the fiercely competitive new energy track, other new car-making forces have not yet made profits, and cost control is still their main issue.
Xu Jiayin spoke at an internal meeting: "If you sell a car, if you lose 50,000, 1 million will lose 50 billion yuan, and you will lose a year’s profit at most." Behind the easy speech is the logic of the inherent high turnover model of real estate people.
High turnover is a business term commonly used in the real estate industry, referring to the circular process of funds from capital form to goods form, and then back to capital form. The less time it takes for a cycle, the higher the turnover efficiency. Country Garden’s "456 model: land acquisition opens in 4 months, capital withdrawal in 5 months, and capital turnover in 6 months is the logic behind high turnover. This model brings higher capital efficiency and profits, and can quickly start sales and collect money in a short period of time.
"Evergrande’s real estate executives have deeply enjoyed the" short-term and fast "dividends of the real estate economy. They are used to pursuing short-term results and do not give enough respect to the market, which often leads to a large gap between the development results and expectations." Industry insiders commented.
According to Hengda insiders, in Hengda Automobile to do things very efficiently, normally take 5 months to do things, the company will ask 2 months can be done, but also because the pursuit of speed ignore the process, no time to do due diligence, Hengda in the acquisition stage often make mistakes.
Evergrande’s development direction still depends on the upper-level leaders’ understanding of the car, because most of the leaders come from real estate and have done a lot of "layman" behavior. At the Shanghai Auto Show, Evergrande exposed all the styling effects of Hengchi cars, which is different from other car companies. Usually, new car exteriors are kept secret by sticking zebra patterns and camouflage to ensure that the mysterious structure of the new car body and the body design are not plagiarized, but Evergrande did not carefully consider this.
In the face of a series of anti-industry laws of Evergrande Automobile, the internal professional automakers expressed helplessness. Zhang Ming believes: "It is difficult for professional automakers to do in real estate companies. At first, they will mention it, but later they will not mention it. You can do whatever you say. There is a popular saying in the interior that Evergrande Automobile is running all the way on the wrong road and doing things that violate the basic rules. Only the bosses can’t be high all day long."
Evergrande car has the voice over the car, began to leave.
From June 2020, Hengda Automobile executives have left one after another. The former chairperson of Hengda Faraday Future Intelligent Automobile (China) Group, Peng Jianjun, resigned because of multiple failed acquisitions of parts companies, and was succeeded by Sean, chairperson of Hengda Tourism Group; Jiang Dalong, the founder and chairperson of the former National Electric Vehicle, left after one year in Hengda, and people familiar with the matter said that the reason for leaving was "because there is no decision-making power, leave to do your own thing"; Huang Xiangdong, the former president of GAC Research Institute, left after less than one year as the president of Hengda New Energy Vehicle Research Institute, and the reason for leaving was retirement. The theory is questionable, so Huang Xiangdong also retired from GAC Group in 2016 and joined Hengda Automobile two years later. The second retirement is speculative.
Under such a wave of departures, Dai Lei, founder of Byton, joined Evergrande as executive vice-president before the Shanghai Auto Show last year, but Zhang Ming said: "Dai Lei was very strange to recruit. He did not come to manage marketing, but to manage the product planning center. After he came, he did not play any role."
Perhaps as Evergrande’s internal staff said: "Hengda makes cars, just like a rich man. He wants to play with cars on a whim, but he is afraid of being deceived by others, so he uses real estate. It is also expected that people will stumble on this road."
The three lines did not stumble Evergrande, but they stumped countless employees
Hengda Automobile needs to rely on Hengda Real Estate’s funds to maintain normal operations, but after the full implementation of the country’s three red lines, this capital chain is facing a break. Perhaps Hengda never imagined that these three red lines would have such a big impact on it.
In August 2020, the People’s Bank of China and the Ministry of Housing and Urban-Rural Development planned three red lines for real estate companies, specifically: 1. The asset-liability ratio after excluding advance receipts is greater than 70; 2. The net debt ratio is greater than 100%; 3. The cash-to-short-debt ratio is less than 1 times. These three red lines have been touched, and Evergrande Real Estate is therefore facing financing difficulties and a broken capital chain. It needs to introduce
Strategic investments, asset spin-offs, etc. to reduce debt levels.
Evergrande Group began to take a series of actions to reduce its debt ratio. In September 2020, Evergrande Motor raised about 4 billion Hong Kong dollars and announced that it would be listed on the Shanghai Stock Exchange’s Science and Technology Innovation Board; at the end of 2020, Evergrande Group renamed its Hengfangtong RV Bao, and united 152 intermediaries across the country to restructure and establish RV Bao Group, entering the real estate intermediary market; In September 2021, China Evergrande announced that it had negotiated with strategic investors 130 billion RMB, among which 86.30 billion have realized debt-to-equity swaps, and Evergrande will "erase" hundreds of billions of debts through this operation. At the most difficult time, Hengda Auto has been disposing of overseas companies it has previously acquired in order to increase revenue and cut costs.
The difficulty is not only Hengda Automobile, but also the employees under Hengda are going through troughs with the company. According to public information, Hengda’s core management took the initiative to suspend salary collection, and the employees’ office buildings were moved to the factory, and they started their "side business" in Hengda Automobile.
"Evergrande does full-staff marketing several times a year. Every May Day and National Day, employees are asked to sell their houses," Sun Gaojie told Xinxin New Technology. In the car company, Hengda’s employees are very special.
"Side business" selling houses also has assessment goals. "Generally, the assessment goals are at the top of the department, and those who rank at the bottom will be fined. The employees at the bottom have no assessment pressure, but the leaders will put pressure on each employee, and the relatives around them have recommended it all." Sun Gaojie said.
Zhang Ming, who was also arranged to sell houses as a "sideline", said that after he joined Evergrande Automobile, he caught up with the longest full-staff marketing, which probably sold tens of millions of houses, with hundreds of units. The original R & D personnel had R & D tasks, so they were not arranged to participate in the sale of houses, but during the 11th period, the company also arranged certain tasks for R & D personnel to sell houses.
At that time, how many employees in Hengda Automobile were asked to sell houses? Li Sihang, an employee who worked at Hengda RV Treasure, shared his experience on the Internet that Hengda Group transferred about 30% of its employees from each department to RV Treasure, from the bottom to the top, including property security, engineering supervision, and employees working in the automotive, marketing, cinema, amusement park, property and other departments. The data shows that there are not a few employees who have started a "side business" in Hengda Automobile to sell houses.
However, Sun Gaojie believes that selling houses as a "side business" is accepted by most employees. Selling houses can earn commissions. At the same time, this can also be a means of increasing income and reducing expenses in the early stage of a new company.
Compared with Sun Gaojie’s more optimistic and positive attitude towards his employees’ "side business" of selling houses, another internal employee of Evergrande did not agree. In order to complete a house selling task, he bought a small apartment in a third-tier city in the south. After buying it, the house price was sideways for a long time, and the house was located in a remote location that was not suitable for living.
The financial problems caused by the country’s three redlinings did not stumble Evergrande, but stumped the employees who took up the "side business" of selling houses and cars.
In the second half of last year, the turnover rate of Hengda Automobile employees increased. Zhang Ming described in detail: "In August, the salary of the middle-level employees of Hengda Research Institute was delayed, and the labor income was reduced, delayed, and in arrears. The number of employees leaving Hengda Automobile has increased greatly compared with the previous few months. In my department, 5% -10% of people were lost in three months, and 20% of people were lost in one year. Concentrated in the lower level."
In the period from March to May last year, Hengda Motor was still hiring one after another, but in July and August, Hengda Auto employees were only in and out, and recruitment stopped. How can employees and business teams who have been centrifuged support Hengda Motor to fulfill his automotive dream?
Can Hengchi 5 save Evergrande?
Even in difficult times, Xu Jiayin still said at the trade union that he must unswervingly transition to new energy vehicles, "This transformation direction is very correct, I continue to be optimistic about new energy vehicles, and everyone can use the simplest way to observe the new energy vehicle market. You can conclude that there are more and more green license plate cars on the street, doesn’t that explain everything?"
Hengchi 5, as a key node in Hengda’s transformation to the new energy automobile industry, can successfully complete the listing in the second quarter after passing the one-month publicity period of MIIT’s new car and having the sales qualification.
Zhang Ming believed that if the funds were in place, there would be no problem in building the Hengchi 5. Regarding the funds that needed to be in place, there were rumors on the Internet that Xu Jiayin paid for some of them out of his own pocket to support the production of the Hengchi 5, and the source of the remaining funds was still unclear.
As for Hengda’s future, Zhang Ming said: "I have learned a lot during my two years in office. For such a start-up company from 0 to 1, the integration is not good at first, but the process specification of the enterprise is gradually being established, and it is also slowly moving from an extensive real estate company to a lean car company, and starting to do some compliance things."
Judging from Evergrande’s recent actions, the mass production of Hengchi 5 is accelerating, and Xu Jiayin is still insisting on car manufacturing. On March 22 this year, Xu Jiayin put forward a request at the mass production mobilization meeting of Hengchi 5: "The automobile group must fight day and night, work hard, and work hard for three months. On June 22, we must achieve mass production of Hengchi 5, and lay a solid foundation for the healthy and sustainable development of Hengda Automobile." In many eyes, this is another slogan of Evergrande, but it is still a big challenge for Evergrande.
At the same time, in the future, Hengda Automobile will be continuously scrutinized by everyone and will not only be listed on Hengchi 5. What will be the blind and pre-sale results of Hengchi 5? What kind of selling points can Hengchi 5, which threatens to benchmark BMW X1 and Audi Q3, come up with? Will the car be sold directly or as a franchise in the future? Epidemics, lack of cores, price increases and other black swan events have taken turns to impact the automotive industry. Is Hengda Automobile, which is still in the running-in period, systematically capable of responding to these crises?
How Evergrande will answer these unanswered questions in the future remains to be seen.
