Lifan Motors expected to lose 5 billion in 2019

After the transformation of building cars, the Honor of the "motorcycle overlord" Lifan is fading.

On January 21, Lifan shares announced a pre-loss announcement of its performance, stating that it is expected that net profit for 2019 will be a loss of 4.981 billion yuan, a profit of 253 million yuan in the same period last year, a year-on-year decrease of 2068.77%.

Regarding the huge loss, Lifan explained that: due to the impact of the domestic automotive industry environment and the constraints of the company's financial constraints, the company's automotive business was affected, and its revenue fell significantly. At the same time, the company's external financing is difficult and the financial cost is high, which affects the profit. In addition, Lifan expects to carry out asset impairment on fixed assets, bad debts of receivables, inventory and goodwill. It is understood that Lifan's provision for asset impairment in 2019 is approximately 2.125 billion yuan.

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The advance loss announcement has attracted the attention of the Shanghai Stock Exchange. The Shanghai Stock Exchange requested Lifan to supplement the specific reasons for the large losses in 2019 and the corresponding losses, as well as the company's various financing channels and financing amounts during the reporting period.

Lifan's stock price fell accordingly. As of press time, Lifan's stock price was 3.02 yuan (USD $0) , down 2.27%, with a total market value of 3.968 billion yuan. Compared with the market value of 10 billion at the time of listing in 2010, the market value of Lifan shares plummeted by more than 60%.

In fact, the third quarterly report of Lifan has shown a "thunderstorm". Its first three quarters of 2019 achieved revenue of 6.686 billion yuan, a year-on-year decrease of 19.52%; its net loss was 2.633 billion yuan, a year-on-year decrease of 2064%. This means that in the fourth quarter, Lifan was still unable to turn the tide and its net loss exceeded 2 billion yuan again.

Lifan's predecessor was Lifan Hongda Motorcycle Parts Institute, which was founded by Yin Mingshan in Chongqing in 1992. This year, Yin Mingshan was 54 years old. In 2003, 65-year-old Yin Mingshan entered the automobile manufacturing field by acquiring an 80% stake in Chongqing Special Purpose Vehicle Manufacturing Plant and changed the company name to Chongqing Lifan Automobile Co., Ltd.

In November 2010, Yin Mingshan led Lifan to list on the Shanghai Stock Exchange, surpassing competitors Geely and BYD, and became the first listed private car company in China. In the same year, Yin Mingshan took the throne of Chongqing's richest man.

However, with the cyclical weakness of the national auto market, Lifan passenger car sales have been declining all the way. Official data shows that Lifan's passenger car sales from 2014 to 2018 were 134,000, 132,000, 101,000, 125,000 and 92,000 respectively. In 2014, in order to avoid the downward trend of passenger cars, Yin Mingshan decided to spend 5 billion yuan to transform to new energy vehicles. In 2015, Lifan's new energy vehicle sales were 15,000, and sales have never exceeded this number since.

According to the production and marketing express report, Lifan Motors produced and sold 18,598 and 22,536 vehicles in 2019, a year-on-year decrease of 78.62% and 75.52%, respectively. The cumulative production and sales of new energy vehicles were 2888 and 3091, down 71.12% and 69.49% year-on-year.

Nowadays, in addition to the plunge in performance and high debts, rumors of arrears in employee wages and bankruptcy are also accompanied by the former "motorcycle king". In November 2019, a CCTV News survey stated that many workers said that Lifan's third passenger car factory in Chongqing had been in a semi-stop state since the beginning of 2019 and had owed employees nearly two months of wages. In October last year, "rumors of bankruptcy of four auto companies", including Lifan Motors, became a hot topic in the industry, which was later clarified by Lifan Motors.

However, according to Wind statistics, Lifan's asset-liability ratio has been higher than 70% for five consecutive years. As of the end of the third quarter of 2019, the company's asset-liability ratio was as high as 78.4%. In contrast, domestic auto companies' debt ratios were mostly below 60%. According to the latest announcement of Lifan in November 2019, the company's accumulated accumulative amount of litigation (arbitration) has reached 2.223 billion yuan.

Under the severe crisis, can the former Lifan Empire set sail again?