Image source: visual China
By Chen Feiya
There seems to be a timetable for Jia Yueting’s return.
On the morning of January 29, Geely Holding Group and Faraday future (hereinafter referred to as “FF”) respectively announced that they had signed a framework cooperation agreement, which also means that the previously rumored Geely FF cooperation was officially finalized.
According to the agreement, the two sides plan to cooperate in the fields of technical support and engineering services, and explore the possibility of OEM services provided by a joint venture between Geely and Foxconn. At the same time, as a financial investor, Geely Holding Group also participated in a small amount of investment in the listing of Faraday future spac.
According to FF’s announcement, the company and the board of directors of PSAC, a special purpose acquisition company, have unanimously approved the proposed business merger. It is expected that the merger and acquisition plan will be completed in the second quarter of this year. After the merger and acquisition, the company will be listed on NASDAQ with the stock code of “ffie”. It is estimated that the equity value after the transaction will be about $3.4 billion. The new company will raise $1 billion (including $775 million of common share pipe) from the merger and will have sufficient funds to support the large-scale production and delivery of ff91.
Spac (Special Purpose Acquisition company) is a kind of fast listing form. In the process, we first set up a spac platform to raise funds, and then merge and acquire entity business companies, so that the latter can be listed.
FF also said that the cornerstone of pipe investors include large institutions in Europe and the United States, China’s top three auto manufacturers and a “first tier city” in China. Among them, the investment in “first tier cities” is 175 million yuan, which is still subject to regulatory approval. FF did not disclose the names of the car manufacturers and cities, but it was shown on the map as a coastal city in South China. According to the investment framework listed by FF, the city will provide about 2000 mu of industrial land to be owned and used by joint ventures.
Jia Yueting is not alone. Now, FF has become a “pawn” of Geely from the leading role. Geely needs FF to earn a place in the trillion yuan new energy market. The listing of FF seems to be a chess game without losers.
Geely is worried
Jia Yueting and even FF have fans. A former staff member of LETV disclosed privately that if Mr. Jia returned to China and recruited people, he would join the new company. “Nothing else, just because I received a reimbursement from LETV two years after leaving.”
In fact, Jia Yueting has always been “the first person to eat crabs” from LETV, online video, LETV, LETV super mobile phone to LETV automobile. Tesla, Weilai and Xiaopeng have realized the original ideas of LETV for new energy vehicles, including automatic driving, lightweight body and cool appearance design. However, due to the serious misjudgment of rhythm and risk control, Jia Yueting did not become the selected person in the era of new energy vehicles.
“I’ve been trying to make FF with regret and guilt. I know that the success of FF is the best return to creditors, shareholders, investors and all employees.” In July 2020, after the bankruptcy plan was confirmed by the court, Jia Yueting apologized and promised never to give up or escape.
This time, Jia Yueting joined Geely Group.
In the industry’s view, Geely’s investment in FF is not surprising. ” It’s a trade where everyone gets what they need. “An investor who has been observing the new energy vehicle market for a long time told interface news.” FF needs landing technology, while Geely needs to borrow FF to block the new energy vehicle market. “
From the overall sales, Geely is the number one in China’s auto industry. But if we only look at new energy vehicles, Geely has not been big brother for many years.
As early as 2015, Geely issued a tough word that the sales of new energy vehicles will account for more than 90% of Geely’s overall sales by 2020, and implemented the plan code named “blue Geely action”. Then in 2018, Li Shufu emphasized this goal. Nevertheless, the pace of Geely’s new energy vehicle development is slow, and the sales volume of new energy vehicles is far less than expected.
In the first 11 months of this year, the sales volume of new energy vehicles reached 1.109 million, while no Geely car has been able to make it into the top 10 of the best-selling list. At present, Geely is selling 13 new energy models including geometry a, geometry C, emgrand EV, emgrand GSE, etc., with an overall sales volume of only 68000, accounting for less than 10% of Geely’s overall sales volume.
In the face of Tesla, Weilai automobile and Xiaopeng automobile, Geely Automobile does not have a big chance of winning in the new energy vehicle. Not only Geely itself, but also the market.
Since 2019, the true and false news of Geely’s investment in new energy vehicles has been constantly on: on February 18, 2020, the media revealed that Geely plans to invest 300 million US dollars in Weilai, which is expected to become the third largest shareholder of Weilai, and then the rumor came to an end. On January 11, 2021, Geely Automobile will join hands with Baidu to enter into new energy vehicles. Baidu automobile company will focus on the whole industrial chain of design and development, production and manufacturing, sales and service of intelligent vehicles, and use Apollo’s leading automatic driving ability to reshape the product form of intelligent vehicles. On January 19, Geely Automobile Group and Tencent signed a strategic cooperation agreement in Hangzhou. The two sides will carry out strategic cooperation in the fields of intelligent cockpit, automatic driving, digital marketing, digital base, digital new business and low-carbon development.
Today, Volvo is the only card left in Geely’s hands. In February 2020, Geely announced a new round of integration plan with Volvo.
Now, the market is not optimistic about the investment of Geely Group. As soon as the news came out, Geely Automobile’s share price fell instead of rising. In the last two trading days, the share price fell by about 15%. Fu Zhikang group (02038), which is seeking OEM, rose more than 8% in the day. Up 5% to HK $1.26 as of press.
Is there enough money?
In terms of the secondary market, Geely Automobile, a subsidiary of Geely holdings, has been booming in the past year.
Since the beginning of 2020, Geely’s amplitude has exceeded 178%, with an increase of nearly 90%. In terms of capital operation, in May 2020, Geely Motor Co., Ltd. subscribed for 600 million allotment shares at the allotment price of HK $10.8 per allotment share. The total amount and net amount of proceeds are estimated to be about HK $6.48 billion respectively. Geely also plans to go public on the science and technology innovation board, raising more than 20 billion yuan. It is estimated that 40% of the funds raised by Geely in the science and Technology Innovation Board will be used for the research and development of new model products, 15% will be invested in forward-looking technologies such as new energy, Internet of vehicles and intelligent driving, 15% will be used for the acquisition of potential factories or related enterprises in the upstream and downstream of the industrial chain, and 30% will be used to supplement working capital.
These two operations alone will raise at least 25 billion yuan in cash for Geely.
Geely Automobile is not “rich to flow oil”, the financial report shows that Geely Automobile’s financial situation is extremely short of liquidity.
As of the mid-term report of 2020, Geely’s notes payable and current liabilities due within one year are as high as 42.2 billion yuan, while the balance of cash and accounts receivable is only 20.1 billion yuan. In the first half of 2020, Geely’s net profit is only 2.297 billion yuan, and its liquidity is limited in extreme cases. In addition, Geely’s liabilities also increased, with long-term loans up 106% year on year.
Geely also needs to spend money. In the cooperation between Geely and Baidu, Geely will make use of sea “vast” intelligent evolution experience architecture, the world’s leading pure electric architecture developed recently, to cooperate with Baidu in the field of intelligent vehicle manufacturing. It is reported that the vast system cost 18 billion yuan.
It is this vast system that makes Geely cooperate with many parties. From Geely’s point of view, more and more enterprises adopt its architecture platform, which means that high development costs can be recovered as much as possible.
In addition, Geely’s current product lines include: Caocao special car and Yaoxing, Taili flying car, yichatong technology, spatiotemporal Daoyu, carbon cycle and other intelligent three-dimensional travel business units; in sharing travel, flying car, Internet of vehicles / on-board chip / operating system, satellite communication, lithium battery echelon utilization, charging and swapping infrastructure, carbon cycle methanol and other innovators Industry model and cutting-edge technology field are also in active layout.
At this point in time, Geely has sufficient financial strength to gamble. However, whether FF can shoulder the burden of Geely’s new energy vehicle market depends on the follow-up specific cooperation content.