AutoBeta(AutoBeta.net)10/21 Report--

Affected by the COVID-19 epidemic this year, many domestic dealers have suffered an unprecedented impact. In the first half of the year, nearly 70% of the dealer groups experienced a year-on-year decline in revenue and net profit. Among them, Zhengtong Automobile Group, as one of the giant car dealers in China and one of the core dealers of luxury brands, is frequently exposed to the difficulty of lifting cars due to the problem of capital chain, and will be rescued by new financiers.

喜悦 Capital Holdings Limited and Wang Muqing, the company's controlling shareholders, have signed an agreement with Xiamen Xinda to acquire 29.9% of the shares held by Zhengtong Motor's controlling shareholders with the right to vote, and will become the single largest major shareholder of Zhengtong Motor, with a total transfer consideration tentatively set at about HK $1.403 billion, Zhengtong Motors announced on October 20.

According to the announcement, Xiamen Cinda said that after the signing of the share transfer Agreement, all parties will jointly seek a plan to gradually improve and solve the liquidity problem of Zhengtong Motor. However, relevant sources have revealed that the Zhengtong auto equity acquisition still needs some time to promote the relevant work, and there is uncertainty whether it can be successfully completed.

Since entering the third quarter, Zhengtong Motor has been exposed that some of its dealers have been paralyzed in a large area, unable to deliver vehicles on schedule, and consumer complaints about rights protection have occurred frequently. The underlying reason is that the company has a capital chain problem, affected by this, the vehicle certificate is pledged in the bank can not be redeemed, the consumer pick-up date has been extended many times.

According to the latest results released by Zhengtong Motors, operating income fell 64.2% to 3.131 billion yuan in the first quarter from a year earlier, while net profit turned into a loss of 54 million yuan, compared with a profit of 200 million yuan in the same period last year. In the first half of the year, the company realized income of 9.24 billion yuan, down 47.0% from the same period last year; shareholders accounted for a loss of 1.365 billion yuan, compared with a net profit of 470 million yuan in the same period last year; and a basic loss of 55.7 cents per share.

The performance loss further exacerbated Zhengtong's funding problems, resulting in non-repayment of maturing debt. In mid-July, Zhengtong Motor was found to have defaulted on outstanding installments owed to the principal of $380 million in term loan financing. Zhengtong Motor announced that it had repaid 30% of the principal and accrued interest in two installments, and that the repayment of the amortized loan had been extended to January 2021 with the consent of the lending institution.

On July 31, Zhengtong announced again that it was solving its financial problems by selling its stake. According to the current news, the acquisition of Xiamen Cinda means that the financial problem of Zhengtong Motor may be solved.

Data show that Xiamen Cinda has the background of local state-owned assets, and its largest shareholder is Xiamen International Trade holding Group Co., Ltd., accounting for 29.18%, while the company is 100% owned by Xiamen SASAC. Although the company has been involved in the automobile distribution industry, the company has been selected as one of the top 100 car dealers in China, but at present, the company's main core business is focused on optoelectronic, Internet of things and so on.

For the transaction between the two sides, Cui Dongshu, secretary general of the all-China Federation of passengers, also made an analysis. Xiamen Xinda has a state-owned capital background, and it is of great help to solve its financial problems for Zhengtong Motor. And Zhengtong Automobile mainly engaged in luxury car business, car sales development is good, this time to buy shares, for Xiamen Xinda is a very good time.

In fact, the current plight of Zhengtong Motor is actually a microcosm of the entire domestic automobile distribution industry. Affected by the epidemic, Zhengtong Motor is not the only one exposed with financial difficulties, and there are still cash-strapped companies such as Zhengtong Motor that have not yet come out of the predicament.

An industry analyst said, "for car dealers, the shortage of funds is the norm, a large amount of inventory requires a lot of cash investment, once financing difficulties, the capital chain is easy to break." At present, with the intensification of competition in the automobile sales market, various dealers are fighting a price war in order to seize the market, at the expense of profits, and the problem of price upside down is serious, which undoubtedly further leads to the emergence of business problems. The successive problems of several car dealer groups may also mean that the industry will usher in a change.

It is understood that by the end of 2019, Zhengtong has 135 distribution outlets across the country, acting for luxury and ultra-luxury brands, including Porsche, Mercedes-Benz, BMW, Audi, Jaguar Land Rover, Volvo, Cadillac, Infiniti and so on. At the same time, it also operates dealerships of FAW-Volkswagen, Buick, Nissan, Toyota, Honda, Hyundai and other mid-market brands.

Zhengtong, which focuses on luxury brand operation, has encountered a financial crisis at a time when luxury car sales continue to grow, which undoubtedly has an impact on the follow-up development. After all, under the impact of this year's market downturn and the epidemic, the luxury market has maintained strong growth, helping to increase some dealer groups with more adequate funding chains and more focused on luxury brands.

It is worth mentioning that Volvo and Audi have recently been exposed to cancel some of the distribution rights of Zhengtong's 4S stores, which is undoubtedly another bad news for Zhengtong, which is mainly engaged in the luxury car business.

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