The Hong Kong Stock Exchange will usher in a fourth new car-making force.
Source | Daily business reports
Author | Xie Dongdong
Source/Official Account
On March 17, Zhejiang Zero Run Technology Co., Ltd. (Zero Run Technology) submitted a listing application to the Hong Kong Stock Exchange, with CICC, Citi, JPMorgan Chase and CCB International as the co-sponsors of the IPO.
According to Frost & Sullivan, ZeroCar delivered a total of 43,748 vehicles in 2021, up 443.5% from 8,050 vehicles delivered in 2020, making ZeroCar the fastest growing company among Emerging Electric Vehicle Companies in China in terms of delivery growth.
With the continuous increase in the company's delivery volume, zero-running technology has seen a rapid increase in revenue from 2019 to 2021, with the company's revenue of 116.9 million yuan, 631.3 million yuan and 3.132 billion yuan in each reporting period, respectively. From 2019 to 2021, the operating losses of zero-run cars reached 731 million yuan, 870 million yuan and 2.868 billion yuan, respectively; the gross profit margin was -95.7%, -50.6% and -44.3%, respectively.
The purchase volume of related parties is not small
According to the prospectus, on December 24, 2015, Zero Run Technology was established with a registered capital of 100 million yuan, and in April 2021, it was restructured from a limited liability company to a joint-stock limited company. Founder and chairman Zhu Jiangming, 54 years old, co-founded Dahua Technology in 1993 (002236. SZ), and from 2010 to December 2021, served as a director of Dahua and currently holds a 5.36% stake in Dahua Technologies.
The Daily Business Report noted that Fu Liquan, the actual controller of Dahua Technology, is also a shareholder of Zero Run Technology, and before the IPO, Zhu Jiangming and Fu Liquan and his wife acted in concert, holding a total of 31.01% of the shares of Zero Run Automobile, which is the largest shareholder of the company.
In addition, UOB Technology currently holds an 8.89% stake in Zero Run. During the Reporting Period, Zero Run Technology signed a number of leasing, procurement, supply and sales contracts with Dahua Technology and its subsidiaries.
For example, on 1 January 2021, Zero Run Technology entered into a lease agreement with Zhejiang Dahua Zhilian Co., Ltd., a subsidiary of Dahua Technology, to lease certain properties to it as the Group's test centre, and on 10 February 2022, Zero Run Technology leased certain properties to UOB Technology as the Group's laboratories. According to the prospectus, the rents of each property are determined by the parties to the contract, after fair consultation with reference to the prevailing market price of the relevant property, as well as the location, quality and size of the property.
According to the prospectus, Zero Run Technology also signed a framework agreement with Dahua Technology, a subsidiary of Dahua Technology, for procurement and processing services. Accordingly, ZeroCar Technology can outsource the processing of various objects (including circuit boards) used to manufacture electric vehicles to Dahua Technology. As part of the OEM processing service, ZeroCar Technology will procure parts and raw materials on its own, while Dahua Technology will coordinate the parts and use automatic and manual welding processes to process the parts.
In this regard, Zero Run Technology believes that it is costly to maintain assembly lines for certain raw materials (such as circuit boards) and it will be more efficient to outsource the assembly lines to manufacturers who have the ability, economies of scale and experience in assembling relevant materials that meet the needs of the Group. Dahua Technology has economies of scale, with relevant assembly lines and related plants, providing relevant OEM services at a lower cost. At the same time, Dahua Technology's plant is close to Hangzhou City and close to the zero-run electric vehicle production line, so it has a great advantage in reducing transportation costs and avoiding any delays caused by logistics problems.
The prospectus indicates that the charging standard for purchasing the oem processing service from Dahua Technology is fairly determined after zero-running car compares the quotations of various suppliers. From 2019 to 2021, zero-run automobile purchased OEM processing services from Dahua Technology for 6.355 million yuan, 6.38 million yuan and 23.591 million yuan respectively.
In addition, Zero Run Auto has signed a framework agreement with Sinojet Technologies, a holding subsidiary of UOB Technologies, for the supply of auto parts and systems, and has procured certain types of electric vehicle sensors and systems, including radar and camera systems, from Sinojet Technologies. Sinojet Technologies was established in 2020 to develop and manufacture equipment and auxiliary systems for automobiles, such as radar and cameras.
In 2020 and 2021, the purchase amount of Zero-run Automobile to Sinovel Technology was 5.746 million yuan and 64.895 million yuan, respectively. According to the prospectus, from 2022 to 2024, Zero Run Automobile will purchase parts and systems from Sinoger Technology, and the maximum annual total amount shall not exceed 130 million yuan, 260 million yuan and 520 million yuan.
There is a difference between the main sales force and the positioning
Zero-run cars have currently launched three models, including the S01 launched in 2019, the T03 launched in 2020 and the C11 launched in 2021.
Among the main business income, in July 2019, Zero Run began to deliver the first smart electric vehicle model S01, and the sales of smart electric vehicles and components became the company's main source of revenue. During the Prospectus Reporting Period, the sales revenue of this segment was $117 million, $616 million and $3,059 million, representing 100%, 97.5% and 97.7% of the total revenue, respectively.
In addition to selling cars, the revenue from zero running also comes from the sales and service revenue of automobile regulatory points. Chinese enterprises can obtain automotive regulatory points by producing or importing new energy vehicles, and any positive point balance can be freely traded in the points management system set up by the Ministry of Industry and Information Technology. Since 2020, auto regulatory credit sales have formed part of the revenue of zero-run cars. In 2020 and 2021, Zero Run received $15.478 million and $71.934 million through the sale of auto regulatory points, accounting for 2.5% and 2.3% of the total revenue.
Service revenue includes a one-year extended warranty or lifetime warranty, connected car services, OTA firmware upgrades, and lifetime free roadside assistance. With the launch of C11 in 2021, the provision of embedded services began to form part of the zero-run revenue. In 2021, the revenue of this segment was 1.307 million yuan.
According to the prospectus, Zero Run is committed to providing smart electric vehicles with rich functions and excellent performance in the mid-to-high-end mainstream market, with prices ranging from RMB150,000 to RMB300,000.
However, the sales organization of zero-running cars is different from the company's own expectations, and the current zero-running model on the market is the company's second mass-produced intelligent electric vehicle T03, accounting for more than 90% of the company's total sales of three models, while the price of T03 subsidies is between 68,900 yuan and 84,900 yuan, which belongs to the low-end car team.
The S01, which marks zero-run entry into the electric vehicle market, has a subsidized price of between RMB129,900 and RMB149,900, but its sales have been unsatisfactory.
In October 2021, Zero-Run Auto began delivering its third mass-produced smart electric vehicle, the C11, a medium-sized smart pure electric SUV with a subsidized price between RMB159,800 and RMB199,800, for China's mid-to-high-end mainstream new energy vehicle market. As of December 31, 2021, the C11 deliveries totaled 3,965 units, still less than a fraction of the T03 deliveries in the same period, but C11 has been delivered since the third quarter of last year, and the future sales potential is not easy to judge.
According to Frost & Sullivan, from 2020 to 2026, the sales of new energy vehicles in China's mid- and high-end mainstream markets are expected to grow at a compound annual growth rate of 48.6%, and the proportion of this segment in the total sales of new energy vehicles will increase from 38.9% to 49.1% in the same period.
According to reports, zero-run cars will launch a smart pure electric medium and large sedan C01 in the second quarter of 2022, and will start delivery in the third quarter of this year. The C01 is based on the same platform as the C11 and is over five meters long. Zero-run cars said that they will speed up the pace and launch eight new models by the end of 2025 at a rate of one to three models per year, further penetrating into the mid-to-high-end mainstream new energy vehicle market.
If copyright is involved, please inform us of deletion, and we will keep the views in this article neutral
The article looks good here