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After Evergrande and Baoneng, another real estate company announced its entry into the auto industry. Earlier this month, real estate developer R & F Group and Huatai Motors announced a strategic cooperation, the two sides proposed to develop electrification, intelligent network connection and driverless car technology, work together to create new energy vehicles. As Huatai Motor, which is on the verge of disappearing, and Evergrande Group, which is mired in a debt affair, can the two be "negative and positive" this time?

Huatai facing the crisis of "marginalization"

Huatai sold about 120000 vehicles in 2018, only half of its 2018 sales target and down 8.92 per cent from last year, according to the Federation of passengers. The company reported overall production of 215300 vehicles in 2018, accounting for only 55 per cent of its production. Huatai is mired in a debt crisis due to a serious imbalance between production and sales. Huatai Motor lost more than 1.6 billion yuan last year, with a total debt of 37.566 billion, according to Huatai's 2018 results. The company has been exposed to scandals such as production stoppage and wage arrears since last year, and so far, some employees have been in arrears of wages for more than four months.

So what is the core competitiveness of the heavily indebted Huatai Motor? The answer is no. In the early years, when there was a lack of technology, the models of many car companies were mainly imitated, while Huatai Automobile attracted many consumers through its high-end appearance and low price because of its strong "imitation ability". With the passage of time, domestic independent brands gradually have their own family design language, while Huatai still does not have its own design language. Huatai is reluctant to invest money in redesign in visible appearance, let alone invest a lot of money in research and development in invisible places such as chassis training and ergonomics. As for the money-burning areas such as new energy and self-driving, Huatai lags far behind other independent brands.

R & F holding high the flag of debt

So how does R & F take a fancy to the uncompetitive Huatai Motor? In fact, this is also related to R & F's own lack of sufficient funds. According to R & F's first-quarter results, R & F's current total debt has reached 321.8 billion yuan; its company's debt ratio from 2015 to 2018 is 73.21%, 79.31%, 78.23%, 80.92%, respectively, and the ratio of net debt to total equity has increased year by year, reaching 124.3%, 159.9%, 169.6%, 184.1%, respectively. By June 2019, R & F Group's loan balance had reached 195.234 billion yuan, an increase of 31.995 billion yuan compared with the end of 2018, and the accumulated new loans exceeded 40% of the company's net assets of 69.83 billion yuan at the end of 2018. The above data show that R & F's current financial situation is not optimistic, under such circumstances, R & F Group wants to enter the auto industry, Huatai Motor is also a helpless move.

However, with regard to the current optimistic financial situation of R & F Group, after joining hands with Huatai Automobile, there is still a lot of uncertainty about whether it can carry out a "big blood transfusion" for Huatai. Different from the high turnover mode of real estate, automobile is a technology-intensive industry, which does not have a clear strategic goal and requires continuous investment in research and development. Baoneng, for example, has hardly pulled out of a new product since it bought it in early 2018. It can be seen that R & F wants to do Huatai Automobile, but also needs continuous investment, and these investments will not have a considerable return in the short term.

So, for Huatai and R & F, the two debt-laden "big negative Weng", this joint operation can make the two "play" the auto industry? Industry insiders have said that they are not optimistic. Compared with real estate, automobile is a technology-intensive industry, which requires a larger and longer period of investment. In terms of R & F's current unoptimistic financial situation, R & F is unlikely to give Huatai a "big change". It is self-evident that it is difficult to rely on Huatai's uncompetitive foundation to develop in the automobile industry. As for the future, the shadow of this partnership is getting thicker and thicker.

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