Zero-run car IPO, founder Zhu Jiangming is just "two masters"

Text/Leju Finance Jin Wenyu

Since 2021, with the overall sales of new energy rising, the sales of zero-run cars have once again risen. In February this year, zero-run cars achieved sales of 3,435 units, an increase of 447% year-on-year. From January to February 2022, zero-run cars sold 11,520 units, and monthly sales achieved a growth rate of more than 200% for 11 consecutive months year-on-year, ranking in the second-line camp of new car-making forces.

At the same time as the sales volume increased significantly, the listing plan of zero-run cars was also put on the agenda. On the evening of March 17, ZeroCar submitted a listing application to the Hong Kong Stock Exchange and prepared to go to Hong Kong for listing.

In fact, as early as last October, Reuters quoted people familiar with the matter as saying that Zero-Run was considering an initial public offering (IPO) in Hong Kong to raise at least $1 billion. At the same time, people familiar with the matter revealed that Zero Run Has Conducted Preliminary Discussions with Consultants on the IPO and is expected to be listed as early as 2022. At that time, in response to this news, zero-run cars officially said: "The news is not true. ”

In January this year, the CSRC's website publicity has officially received the approval materials of Zhejiang Zero Run Technology Co., Ltd. for the "Overseas Initial Public Offering of Shares (Including Ordinary Shares, Preferred Shares and Other Stocks and Derivative Forms of Stocks)", which completely "confirmed" the rumors that Zero Run Cars will be listed in Hong Kong.

Prior to this, Xiaopeng Automobile, Ideal Automobile and Weilai Automobile have been listed in Hong Kong one after another, and once zero-run car successfully IPO, it will become the fourth new domestic car-making force to go public in Hong Kong.

According to the prospectus, 40% of the IPO will be used to expand the smart electric vehicle category, expand the team and intelligent technology such as autonomous driving research and development investment, and the rest will be used to enhance production capacity and enhance brand awareness.

A feast for riches

Founded in 2015, CEO Zhu Jiangming is one of the founders of security giant 002236.SZ, and also a technology research and development background, he has nearly 30 years of experience in the field of electronics and artificial intelligence technology.

Similar to Weilai, LeTV and Weima, Dahua shares also belong to the category of cross-border car manufacturing. After seeing the wave of electric vehicles, Zhu Jiangming, with the support of Dahua, broke into the new energy automobile industry across borders and founded Zhejiang Zero Run Technology Co., Ltd., which poured into the tide of new cars.

Under the leadership of Zhu Jiangming, relying on the adherence to the global self-research technology route, zero-run car has become an enterprise that truly has a complete industrial chain of intelligent automobile self-research, self-production, sales and service integration, and is also one of the very few new energy vehicle manufacturers in China with complete independent research and development capabilities of intelligent electric vehicles.

At present, Zero Run Technology has carried out 7 rounds of financing, and the disclosed financing amount has exceeded 12 billion yuan. In 2021 alone, Zero Run Technology completed three rounds of financing, and the most recent round of Pre-IPO financing of 4.5 billion yuan was announced on August 18, 2021. The Pre-IPO round of financing was led by CICC Capital, followed by Hangzhou State-owned Assets and CITIC Construction Investment.

Prior to the IPO, ZeroCar had 59 shareholders. Among them, Chairman and CEO Zhu Jiangming holds 9.15% of the shares, Fu Liquan, the actual controller of Dahua Shares, holds 9.01% of the shares, and Dahua shares holds 8.89%, the latter of which Fu Liquan, Zhu Jiangming and Chen Ailing (Fu Liquan's spouse) hold 34.18%, 5.36% and 2.38% respectively.

The remaining 56 shareholders, each holding less than 6% of the shares, can be roughly divided into three categories.

The first category is employee stock ownership, such as employee stock ownership plan manager Guosen Securities (002736. SZ) holds 5.7%; ningbo Jinghang, an employee shareholding platform, holds 1.27%; Jinghua, senior vice president and secretary of the board, holds 0.71%; and so on.

The second type of shareholder is the investor, and the lineup includes dozens of VCs, PE, industrial capital, etc., such as Shanghai Electric (601727. SH), a wholly-owned subsidiary of Shanghai Electric Hong Kong, holds 4.03% of the shares; Sequoia Zhisheng and Sequoia Jesun, controlled by Sequoia Capital China Fund partner Zhou Kui, hold a total of 4.1%; etc.

The third type of shareholders are industry chain related enterprises, dealers, etc., such as Wang Mingwang, the founder of Sunwoda, holding 0.54% of the shares, the company is a lithium-ion battery module solution and product provider; natural person shareholder Geng Yongping holds 0.36%, he is Hangzhou Lingtong Lexus Automobile Sales Service Co., Ltd., Hangzhou Fuyuan Automobile Sales Service Co., Ltd. and other companies legal persons and executives.

As early as the beginning of its establishment in 2015, Zero-Run Automobile was 33% owned by Dahua Shares, Fu Liquan 32%, Zhu Jiangming 20%, and the three held about 85% of the shares. After multiple rounds of financing, nearly half of the equity has become a chip for investors to create wealth.

In order to consolidate control, Zhu Jiangming, Fu Liquan, Liu Yunzhen (Zhu Jiangming's spouse) and Chen Ailing (Fu Liquan's spouse) formed a concerted action, holding a total of about 31.01% of the interest in zero-running cars, making it the largest single shareholder group of the company. This includes 11.89% of the interests controlled directly and indirectly by Zhu Jiangming through Hangzhou Xintu, Ningbo Jinghang and Wan Zai Mingzhao, 13.53% controlled by Fu Liquan directly and indirectly through Ningbo Huaxuan and Ningbo Gu Lin, and 5.59% controlled indirectly by Chen Ailing through Ningbo Huaya.

From inception to IPO, Zhu Fu's shareholding dropped from 52% to 31%. Cutting the "cake" for the purpose of leading the war is the experience of the new car-making forces that burn money. At present, the "Wei Xiaoli" listed in Hong Kong, the founder's shareholding ratio is not high. As of the end of August last year, Li wanted to hold 22.63% of Ideal Automobile, and He Xiaopeng held 20.38% of Xiaopeng Automobile. While Weilai, which has recently been listed, Li Bin holds only 10.6% of the shares.

It is worth noting that Zhu Jiangming, as the founder, chairman and CEO of Zero Run Car, has an 11.89% interest, while Fu Liquan and his wife Chen Ailing have a total of 19.12% equity, which is the real "big boss" of Zero Run Car.

3 years loss of 4.8 billion

In Zhu Jiangming's view, car building is equivalent to integrating power, control, network connection, battery, etc. into an overall solution, which is a long-distance running sport, so zero running has always adhered to self-research and self-manufacturing. Zero-run cars mainly focus on China's mid-to-high-end mainstream new energy vehicle market with prices ranging from 150,000 yuan to 300,000 yuan.

Zero Run has delivered three models in the past three years, namely the smart pure electric coupe S01, the smart pure electric mini car T03, and the medium-sized smart pure electric SUV C11. According to the plan, zero-run cars will deliver the C01, a smart all-electric medium- and large-sized sedan, in the third quarter of this year, while the eight new models launched by 2025 are expected to cover sedans, SUVs and MPVs of various sizes from compact to medium-sized.

According to the disclosure, the delivery volume of zero-running cars for the whole year of 2021 was 43748 units, including 634 S01, 39149 T03 and 3964 C11.

It can be seen from the delivery data that among all the models currently on sale of zero-run cars, the zero-run T03 is still the main force supporting sales. Starting with the delivery of the Zero-Run T03 in May 2020, by December 31, 2021, the vehicle delivered a total of 46,162 units, and since the third quarter of last year, the quarterly deliveries have exceeded 10,000 units consecutively.

The zero-run C11, known as the "half-price Model Y", also began delivery in October 2021. As of December 31, 2021, zero-run C11 has received 22,536 orders and has completed the delivery of 3,965 units.

However, similar to most new energy vehicle companies, zero-run cars have not been profitable since their establishment and are still in the investment period. According to the prospectus, from 2019 to 2021, the total revenue of zero-run cars was 117 million yuan, 631 million yuan and 3.132 billion yuan, the net loss was 901 million yuan, 1.1 billion yuan and 2.845 billion yuan, and the gross loss was 112 million yuan, 319 million yuan and 1.387 billion yuan, respectively.

It is worth noting that in terms of R&D expenditure, the R&D expenditure of Zero Run Technology is also on the rise year by year, with R&D expenditure of zero run vehicles in 2019, 2020 and 2021 being about 358 million yuan, 289 million yuan and 740 million yuan respectively. Large-scale investment in R&D costs has also made Zero Run Technology also face the risk that R&D work may produce unanticipated results.

Complaints of problems are constant

There are only three models, but the sales volume can still be ranked in the second line, and the development of zero-run cars is a smooth sailing. However, along with the sales of zero-run cars, there are also complaints about the difficulty of delivering zero-run cars.

According to Leju Finance, since the end of November 2021, complaints about zero-run T03 "can't pick up the car" have begun to appear, and to this day, the problem of delivery difficulties that lasted for more than three months has not improved.

According to the third-party car complaint platform Car Quality Network, since 2022, the complaints about zero-run cars "can't pick up the car" have reached more than 60. Many car owners have reported that they have booked cars since November last year, and the contract stipulates that the maximum delivery period is three months, but there is no news after 4 months now.

There are even car owners who have encountered overlord clauses. Some consumers reported that in November last year, they purchased the zero-run T03 deluxe version from the official zero-run APP, which is equipped with a ternary lithium battery. However, due to the current shortage of raw materials, the ternary lithium battery version of the zero-run T03 cannot be delivered on time.

Zero-run said that if consumers insist on using the ternary lithium battery at the time of purchase, it may have to be delivered in April-May. It can be exchanged for lithium iron phosphate batteries, but it is not refunded according to the difference between the two batteries at the time of purchase. If the consumer returns the car, he cannot pay 2 times the liquidated damages according to the contract. According to the manufacturer's personnel, only the replacement of the battery can be accepted or there is no fixed period of delay in delivery.

It is understood that although the price increase of some models and the delay in the delivery of new energy models due to the rise in raw material prices are common, the phenomenon that the actual delivery time of zero-running cars takes half a year is rare. This proves from one side that the zero-run car has problems in the supply chain, and the most chilling thing for consumers is the attitude of zero-running in dealing with the problem.

In addition to complaints about not being able to mention the car, many car owners have reported that there are also some problems in the quality of zero-running cars. On the car quality network, a zero-run T03 owner reported that on the day of pick-up, the vehicle was seriously deviated, and after the 4S shop re-positioned the four wheels, the situation was slightly alleviated, but the situation of deviation still exists, and at the same time there was a serious bumpy road chassis noise, and the car stepped on the brakes in a static state, and the brake pedals would jump upwards.

In addition, there are also car owners who reflect the existence of zero-run cars such as endurance discounts, brake system failures, power system failures, control system failures, door noises and other issues, making consumers quite irritable.

Judging from the current sales data, the sales of zero-run cars are in an upward stage. But even with good sales and development prospects, zero-run cars have repeatedly missed appointments in front of the most important consumers and triggered a crisis of trust. If these problems are not effectively solved, and they continue to accumulate and explode, they may cause a lot of blows to zero-run cars.