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A few days ago, the Internet revealed that Chinese independent brand Great Wall Motor was "cheated out of 58.4 million US dollars by Russian dealers" and shocked the industry. The incident attracted attention not long ago after Great Wall invested $500 million to build a four-year Tula plant in Russia, and the Harvard F7 went offline and listed at the Tula plant. What is the whole story of the incident and how did Great Wall Motor respond?

Back in 2008, Great Wall chose the Ilito Group, a local Russian car dealer, as its partner. Great Wall imports and supplies auto parts, which assembles and sells Great Wall-branded cars in Russia. Statistics show that Ilito sold a total of 76000 cars for Great Wall Motor.

However, after 2014, the cooperation between Great Wall and Ilito Group changed, and the two sides went to court, and Ilito even filed for bankruptcy.

A financial blogger suddenly revealed online on July 2, 2019 that Great Wall had been defrauded of $58.4 million by a Russian agent dealer, and Great Wall appealed in Russia because the dealer had gone bankrupt. Russian court dismissed Great Wall Motor's appeal.

The news immediately attracted attention until that evening, Great Wall issued a clarification announcement, officially announcing the cause of the incident and the current progress.

Great Wall Motor said that since the devaluation of the Russian rouble in 2014 due to economic sanctions, Russian dealer Ilito Group has been unable to make payments on time since October 2014, involving $48.44 million (about 332 million yuan). Great Wall filed a lawsuit in October 2015 to demand payment from IMS LLC, a subsidiary of the Ilito Group. After several rounds of trial and arbitration, as IMS Co., Ltd. applied for bankruptcy (bankruptcy proceedings are still in progress), the court decided to reject the company's (part) claim. In July 2018, the company lodged another appeal, but no notice of hearing has been received.

It means that in the past five years and four years of litigation, Great Wall Motor has not had any substantive results in getting its car money back.

Full text of Great Wall Automobile announcement:

Great Wall also said that the dispute with Russian dealer Ilito had no significant impact on the company's current performance and would spare no effort to defend its legitimate rights and interests. Great Wall Motor has set aside about 323 million yuan in bad debts in 2017, accounting for 6.32% of the company's net profit in 2018, which was about 5.247 billion yuan in 2018.

In February 2014, Great Wall established Harvard Automobile Russia Co., Ltd. in Russia, which is responsible for the sales of complete vehicles and auto parts in the local market, as well as after-sales service. Data show that Harvard sold 1822 vehicles in Russia in 2017 and 3213 in 2018. The two best-selling cars are the Harvard H6 and H9, respectively.

In the first five months of 2019, Harvard Russian dealers have sold 2767 cars, up 80% from a year earlier, of which the Harvard H6 reached 2053. Harvard's future sales target in Russia is 30-50, 000 vehicles per year.

Although it was defaulted by more than 300 million dealers in earlier years, Great Wall Motor chose to continue to invest in Russia. The contract was signed in 2014, construction began in 2015, and the Russian Tula plant of Great Wall Motor was completed and put into production on June 5, 2019, with a total investment of 500 million US dollars. The first model put into production, the Harvard F7, has been offline and sold in Russian dealers. Harvard F7x and Harvard H9 models will also be produced in the future.

Wei Jianjun, chairman of Great Wall Motor, said in an interview: "Chinese auto companies will die in China if they do not follow the path of internationalization."

According to the report, the total revenue of Great Wall Motor in the first quarter of 2019 was about 22.627 billion yuan, down 14.85 percent from the same period last year, while the net profit was 773 million yuan, down 62.84 percent from the same period last year. In the first five months of this year, Great Wall sold 430000 vehicles, up 5.11% from a year earlier.

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