Xu Jiayin's five sentences, Evergrande did not listen to a word

Text | Chetech, author | Yin Kai, editor | Yang Zhichao

On November 12, 2019, at the Evergrande New Energy Vehicle Global Strategic Partner Summit, Xu Jiayin gave a 26-minute unscripted speech.

But it's only one minute that is really impressive. In that 1 minute, Xu Jiayin summarized the development strategy of Evergrande Auto with the classic five sentences: "Buy, buy, buy, combine, circle, big big, good good." ”

This one-minute video was ridiculed on Station B for four years. Some people say that Boss Xu's speech is the same as the elementary school essay.

Boss Xu is actually not nonsense, the connotation of these five sentences is very simple: it is to throw money, and if you can't buy technology, you will cooperate and form your own circle of friends. Finally, do a good job in the product and make the enterprise bigger. For Evergrande Automobile, which lacks technology and has a lot of funds, this is a very reliable way of development.

There is nothing wrong with five sentences, the only fault is that not a single sentence is done, and all of them come the other way around.

If we now summarize Evergrande in five sentences, it is: selling and selling, dividing points, owing owes, small and poor. It is likely to be followed by a sentence: upside down. Boss Xu's 1-minute speech video will always become the target of ridicule after the masses' tea and dinner...

From buy to sell

In fact, in Xu Jiayin's five sentences, "buy, buy, buy" is the real core, and it can even be said to be the only core.

The birth of Evergrande Automobile was described miserably by Xu Jiayin: "We want no people, no technology, no experience, no manufacturing base, no manufacturing base, one poor and two white." "For the automotive business, Evergrande really has nothing.

In addition to money.

At that time, Evergrande's annual revenue was nearly 500 billion yuan, and the cash on the account exceeded 200 billion yuan. Since you are so poor that you have money left, then buy it.

Evergrande buys and buys everywhere like it did when it formed a football team: it first spent 160 billion yuan to build a base in Nansha, Guangzhou, which covers an area of 1.26 million square meters, 1.5 times the area of Tesla's Shanghai factory. Subsequently, Evergrande invested 120 billion yuan in Shenyang to build a car production plant, and at the same time, Evergrande Automobile's automobile manufacturing base in Tianjin, and parts manufacturing bases in Shanghai and Guangzhou were also put on the agenda.

In terms of vehicle manufacturing qualifications, Evergrande Health first acquired MiniMinor Limited and its 51% stake in NEVS in Sweden for US$900 million, and then spent US$379.5 million to acquire the remaining 17.6% stake in NEVS.

In terms of technology, Evergrande acquired two in-wheel motor companies, Tate Electromechanical and Protean in the UK, and introduced a series of world-leading production equipment and processes such as Siemens, Schuler and KUKA in Germany in accordance with Industry 4.0 standards.

In terms of the power battery, the core component of electric vehicles, Evergrande spent 1.06 billion yuan to acquire 58% of the equity of Kanai New Energy, and also introduced internationally renowned battery scientist Li Junxiu, Yamaha Motor Battery R&D Director Zhang Cang of Japan, and Li Guicheng, general manager of LG Chemical Battery PACK Development Center in South Korea.

As of 2020, Evergrande has invested a total of 47.4 billion yuan in the new energy automobile industry, and in the first half of 2021, Evergrande Automobile's various expenses were 4.531 billion yuan, a cumulative total of nearly 52 billion yuan, which has long exceeded Xu Jiayin's three-year investment budget of 45 billion yuan.

In hindsight, the path was right, but the fault appeared on the wallet.

In 2020, relevant policies have drawn three red lines for real estate enterprises, first, the asset-liability ratio cannot be higher than 70%, second, the net debt ratio cannot exceed 100%, and third, the proportion of cash short-term debt is not less than "1". Evergrande stepped on three in a row, and the cash flow crisis became increasingly intensified, so Xu Jiayin began to sell Evergrande real estate at a discount throughout the country to fill the deficit, and Evergrande Auto changed from a rich second generation to a poor boy.

From this moment on, the fate of Evergrande Auto has been decided, because it has lost its only advantage, more money.

On the contrary, due to the highly leveraged nature of the industry, Evergrande does not have any buffer zone between the rich and the "negative". Soon, Evergrande became the poorest enterprise in the world. In Evergrande Group's 2021 half-year report, the monetary funds that can be flexibly dispatched are 86.8 billion yuan, and the short-term liabilities due within one year are as high as 240 billion yuan. Insolvency began.

As a result, Xu Jiayin's first sentence changed, from "buying, buying, buying" to "selling, selling".

Let's not talk about how real estate and football are sold, just look at cars. After problems such as layoffs and limited production capacity, Evergrande began to hope for outside investment. In August 2023, China Evergrande initiated an overseas debt restructuring and began to introduce strategic investors to Evergrande Automobile.

At the same time, it is reported that the Middle Eastern tycoon Newton Group spent $500 million to make a strategic investment in Evergrande Automobile and expanded its stake in Evergrande Automobile to 27.5%, but with Xu Jiayin being investigated, Newton Group urgently sent a letter to adjust transaction needs.

At its peak, Evergrande Auto considered what to do if the core technology could not be bought. And now Evergrande Auto is thinking about what to do if the assets are not worth much and cannot be sold.

The circle of friends becomes the circle of creditors

According to Xu Jiayin's vision, some core technologies cannot be bought. So what to do? Make friends.

Money is the best lubricant for friendship.

When you're rich, you definitely have a lot of friends. For Boss Xu, who has deep pockets, "conjunction" and "circle" are not difficult things.

Since its birth, Evergrande Auto has not lacked cooperation and friends. In terms of capital, in September 2020, Evergrande Auto received HK$4 billion from Tencent, Didi Chuxing, Sequoia Capital and Yunfeng Fund. In January 2021, Evergrande Auto completed the most luxurious round of financing in history, according to the announcement issued by Evergrande Automobile, a total of six investors signed subscription agreements, raising a total of HK$26 billion, including Chengyu Holdings, Cui Lin, Hong Kong tycoon Liu Luanxiong's wife Gambie, etc.

In terms of technology, Evergrande has many friends. At the strategic partner summit that said "buy, buy, buy", Evergrande signed contracts with more than 60 automotive suppliers such as ZF, BENTELER, Delphi, Bosch, Magna and Continental.

Since then, Evergrande Automotive has successively signed R&D and design strategic cooperation with global technology leading companies, including German FEV, German EDAG, German IAV, Austrian AVL, and Canadian MAGNA.

Of course, this is not because Evergrande is too strong in social skills, come out to mix, everyone wants to find a rich friend. But the downside is that when you run out of money, your friend's face becomes faster.

With the outbreak of Evergrande's financial problems in 2021, Xu Jiayin's "world-class car company circle of friends" soon became a "world-class creditor circle".

As early as around October 2021, it was reported that Evergrande Auto owed payment to suppliers, which eventually caused the Tianjin production line to come to a standstill. Another project, "Evergrande Health Valley" and new energy vehicle living space, also led to the suspension of some projects due to arrears of supplier payments and project payments. The production personnel of Evergrande's manufacturing bases in Shanghai and Nansha also began to take paid rotations, and the listing of Hengchi 5 was delayed again and again.

Figure: On March 27, 2022, the Hengchi 5 "Pay Attention to Quality and Ensure Mass Production" supplier conference was held simultaneously in Shanghai, Tianjin, Guangzhou and other places.

There are reports that all suppliers are now reluctant to cooperate with Evergrande Auto. - Don't talk about cooperation, it's good not to collect debts. With the rupture of funds, the stock trading is suspended, and the once circle of friends has become a circle of creditors. By the end of 2022, Evergrande Auto had a total asset of 115.2 billion yuan and a debt of 183.9 billion yuan.

It is impossible to pay back money, only to reduce labor costs. The financial report disclosed that from 2019 to 2022, the number of employees of Evergrande Auto decreased from 9,207 to 4,506, and at the end of March this year, the number of employees of Evergrande Automobile has dropped to 2,795. I just don't know if the boss owes them N+1 compensation.....

Evergrande becomes constant

Over the years, Evergrande has left the impression of a big business and deep pockets. Wherever Boss Xu went, he took the money with him.

The first to feel this "banknote ability" should be football fans. In 2010, Xu Jiayin bought the Guangzhou football team, and half of the national team was bought by him. In 2012, Xu Jiayin offered an annual salary of $10 million and recruited world champion coach Lippi. And successively spent a lot of money to buy world-class players such as Conca, Paulinho, Barrios and so on. At that time, many of the Evergrande stars could earn an annual salary of hundreds of millions of yuan. Evergrande thus began its nearly decade-long domination of domestic football.

This is Evergrande's consistent style: spend the most money, buy the best things, and do the biggest things. It is also the basic logic of Xu Jiayin's "buy, buy, big, good, good".

It seems that as long as there is money, getting things done seems easy. However, Evergrande's investment in football is not considered for economic returns, and of course it can be smashed. But what if you need to make money? The story of mineral water proves that money alone does not get anything.

In 2013, Guangzhou Evergrande won the Asian football championship, and at the moment of winning the championship, Evergrande Ice Spring occupied the most golden TV advertising position, and since then it has also spent a lot of money on advertising and occupying the shelves.

According to Xu Jiayin's estimates, the sales of Evergrande Ice Spring will reach 10 billion yuan, and 30 billion in 2016, but Xu Jiayin seems to underestimate the difficulty of operating mineral water, you know, Nongfu Spring, established in 1996, will only exceed 30 billion in sales in 2022, and has been operating for 26 years. There are reports that Evergrande Ice Spring invested more than 7 billion yuan, with a loss of about 4 billion. Today, Evergrande Ice Spring has basically disappeared from the shelves.

Compared to mineral water, car building will only be more complicated.

When the tide receded, Evergrande became a naked swimmer. Two years of huge investment did not return much, and it turned out that the car company could not survive independently without external blood transfusions: the product was delayed in delivery and the losses were serious.

In fact, this number is 1000 or 500 or 2000 is meaningless, in the statistics of third-party market share, this is 0%.

The promise of "good, good, good" certainly did not be fulfilled. Xu Jiayin claims that the Hengchi 5 is the best SUV within 300,000. But according to the reaction of the owner after the listing, the quality of Hengchi 5 is very worrying, such as the central control screen of the car, there is a phenomenon of text pressing text, the endurance is marked 602 kilometers, but it can only run more than 300 kilometers, the brakes will also have abnormal noise, and L2 assisted driving cannot be used...

According to the current sales volume of Hengchi 5, product reputation, and Evergrande's poor financial situation, the market future of this car is very limited - this is already the most optimistic statement.

In 2023, the new forces of car manufacturing have truly entered the elimination period. According to Cinda Securities Research Report: some second- and third-tier brands are gradually eliminated and withdrawn from the Chinese market, and weak new forces in car manufacturing may be acquired and integrated.

The actual situation is likely to be worse, specifically, not every car company is eligible to be acquired and integrated. For example, WM Motor has been the first to go out, but there are no large car companies to integrate WM. You know, WM can also sell 40,000 units a year at its peak, while Evergrande Auto does not even have a cumulative sales of 2,000 units. Judging from the investment stories and rumors of Xiaopeng, Zerorun and WM this year, the sales volume of a car company directly determines the level of his financial master.

Therefore, the question in front of Evergrande Auto is who will buy Newton Group's share acquisition after it is suspended? And the answer is likely to be pessimistic.