Shulou(Shulou.com)06/02 Report--

What do you think of when talking about Xilai, whether it is "China Tesla", "the future of the automobile industry" or "the representative of high-end intelligent electric cars"? these are all self-proclaimed, but they certainly do not depict the whole picture. On Sept. 24, after Xilai released its second-quarter results, the news of a four-year loss of 40 billion was on the hot search list and became a hot topic.

The darkest moment of Wei Lai

It took less than four years for Weilai to complete the loss of US $5 billion realized by Tesla in 15 years. "Weilai burns money three times faster than Tesla" has appeared frequently on various major media platforms. According to this meaning, today's Weilai seems to be not far from the abyss. The most direct impact of poor performance is the collapse of the stock price. Ulai, with a market capitalization of only $2.2 billion, is getting further and further away from the original vision.

Weilai, who once appeared in front of the public with countless halos, has experienced layoffs and product recalls during the year, and now the embarrassing results have led to the temporary cancellation of the financial call. After five years of development, Weilai has entered its darkest moment.

In 2014, it was founded by top Internet capital giants such as Li Bin, Liu Qiangdong, Li Xiang, Tencent and Hillhouse Capital, and has received investment from dozens of well-known institutions. With the blessing of many giants in the Internet industry, the halo of Weilai will be added as soon as it is born, which is particularly remarkable.

Subsequently, Weilai set up an R & D and design center in 13 places around the world, which gathered a large number of talents, and the positioning of intelligent high-end electric vehicles also had a good response in the market. In 2018, Xilai was listed on NASDAQ in the United States, with a peak share price of $13. But the next development of Wei Lai is not ideal, and the listing does not eliminate the loss cloud that has hung over the head for a long time.

On September 24, Ulai released its results for the second quarter of 2019. Data show that in the second quarter, Weilai's revenue was 1.508 billion yuan, a decrease of 7.5% from the previous quarter, and a net loss of 3.285 billion yuan, an increase of 25.2% from the previous month and an increase of 83.1% over the same period last year, far exceeding the market expectation of 2.9 billion yuan. A total of 3553 vehicles were delivered in the second quarter, down 436 from the previous quarter.

Judging from the financial report, both revenue level and sales performance are not satisfactory. What is more unacceptable than the financial report is the trough of the stock price. Less than a day after the release of the financial report, the stock price has fallen by more than 20%. At present, it is only 2.05 US dollars, and in just one year, its market value has evaporated by 80 billion.

By the end of June this year, Weilai's total assets were 18.2 billion yuan, but its total liabilities reached 17.75 billion yuan, which is only one step away from being insolvent. Under such a status quo, no matter from which point of view, it is difficult to see a bright future. Weilai has lost its future.

According to the normal way of thinking, Lai Automobile is in the environment of vigorously developing new energy vehicles, and it is not too much to describe it with the support of many giants in the Internet industry.

With such a script, Weilai should perform the story of well-off and gifted children who strive to make progress all the way, realize their dreams smoothly, and finally achieve success. However, under the circumstances of a good hand, Weilai has come to today's predicament, the loss situation is difficult to reverse, and the stock price has plummeted. After in-depth exploration, we will find that behind the present dilemma is the common result of self-choice and the change of social environment.

The never-ending strategy of burning money

It is recognized that the automobile industry is burning money, and Jia Yueting fell on this, but the extent of the whole industry's money burning is negligible in front of Xilai Automobile. Weilai, which locates high-end intelligence, is not soft on capital investment. Whether it is R & D and manufacturing, or publicity marketing or after-sales service, Weilai has always been through a lot of investment to create more high-quality products and services.

The R & D expenditure of Weilai in the second quarter was 1.3 billion yuan, an increase of more than 70% over the same period last year, accounting for 86.2% of the total revenue, far exceeding Tesla's research and development expenses, which accounted for only 6.8% of the total revenue in 2018. With the massive investment in the promotion of the Shanghai auto show and the ES6 test, the sales management fee of Weilai increased by 48.6% year-on-year to 1.421 billion yuan, while the previous investment in the fleet and offline stores is often hundreds of millions of dollars.

There is a loss of nearly 650000 yuan for every car sold, which is a shocking figure. One car is sold at a loss of two. This loss has something to do with the unrestrained investment of Ulai, which brings it into the quagmire.

At the resumed conference call, the Weilai official clarified that the news of the loss of 40 billion was not true, and that the loss in the past four years was about 22 billion. In the face of the crisis, such clarification is particularly necessary, but the failure to achieve profit means the continuous expansion of the amount of losses, such data adjustment does not play a big role in restoring market confidence.

The recall storm caused a crisis.

Since the beginning of this year, there have been a number of accidents in the past two months, and the spontaneous combustion incident caused by the problem of battery packaging mold has had a great impact.

Finally, the company announced a recall of 4803 ES8 models made from April to October 2018, which account for 1/4 of the total number of SE8 cars sold on the market. The recall cost of 4803 vehicles is about 340 million yuan, with an average of 70, 000 yuan per vehicle. Although it is reported that battery suppliers will share the losses with Weilai, Weilai still bears most of the responsibility.

The second quarter financial report shows that if deducting the cost of the car recall, the gross profit margin of sales of Xilai will be raised from-24.1% to-4% this quarter, and the performance will be greatly improved. But there is never an if in life. The story of the collapse of a thousand-mile dike in an ant's nest has been staged countless times, and everyone has to pay for their negligence, let alone such a massive Weilai Group.

The impact of security accidents is far more than economic losses, and the impact on corporate image is irreparable. For consumers who put safety issues first, there is bound to be an one-vote veto system for any quality issues. As a manufacturer of electric vehicles, batteries are the core selling point of Ulai. Only 827 vehicles were delivered in July, which is enough to prove the impact of this incident on the long-term building of a good corporate image.

The reduction of subsidies will make things worse.

Domestic subsidies for new energy vehicles are an important driving force for the development of the whole industry, and many new energy vehicle manufacturers, including Lulai Motor, have also benefited a lot.

However, after 2020, the state began to gradually reduce subsidies for new energy vehicles, and by the end of 2017, subsidies for new energy vehicles will be completely abolished. This news is a bolt from the blue for the new energy vehicle industry, which is not yet fully mature.

The sharp reduction in subsidies for new energy vehicles in June also led to the negative growth of domestic new energy vehicles for the first time in July and did not improve the following August. Data show that in August this year, the total domestic sales of new energy vehicles was 5091, accounting for only 0.4 per cent of domestic passenger cars.

The fastest response to policy changes is capital, and the depressed industry is the first to bring about the flight of capital. Data show that domestic investment in the field of electric vehicles has dropped by 86.95% compared with the same period last year. In such an environment, the change and reshuffle faced by the domestic new energy vehicle industry and the departure of investors will inevitably further aggravate the danger faced by Weilai.

From the highlight moment to the present is the result of a large number of choice decisions and objective environment, today's Weilai how to break the situation is the key.

Start the battle for survival.

From the perspective of social policy to their own management and other aspects, Weilai is facing a very disadvantageous situation, internal and external troubles, Weilai's survival problem has been placed in front of everyone.

Under the predicament, Weilai has been trying to redeem himself. Li Bin, founder of Weilai, announced in August that he would cut another 1200 jobs in September, after Weilai completed a staff optimization in March, which was confirmed in the financial report. The move is seen as an important step in cutting costs, which has laid off nearly 20% of its workforce compared with its peak.

After the layoff storm, Weilai decided to sell its FE team to Lisheng Racing, a well-known domestic racing group, which made a lot of contributions to the establishment of the initial reputation of Weilai, but at this difficult time, Weilai chose to give up this business, which requires a lot of capital investment to achieve self-protection.

Wei to increase revenue and reduce expenditure of more than these, has been playing a high-end line of Wei Lai, in the case of financial constraints, the choice of channels to sink. Weilai Motors, which was once keen to set up franchised stores in prime locations in first-and second-tier cities, also said in its financial report that it would expand its business in medium-sized cities.

It is a great effort to optimize the organization, divest the core business, maximize revenue and reduce expenditure.

At the same time, in the case of a serious shortage of cash on paper, there is the news that the change car will be acquired by Tencent. Li Bin set up Yi car Network in 2000 and went public in 2010. Li Bin currently has a share price of 11%. If this privatization is completed, Li Bin will receive a profit of US $124 million, which will largely be used to give Weilai blood transfusions.

These efforts of Weilai and Li Bin are obvious to all, but for such a large loss, these are tantamount to a drop in the bucket. According to China International Capital Corporation's research report, Weilai still needs to raise about 10 billion yuan a year in 2019 and 2020 to ensure that part of its cash balance will be available at the end of the year, and it will not be possible for the company to achieve a free cash flow turnaround until around 2022.

If the current Weilai can not fight behind the back and win by surprise, then it will surely go to extinction and decline step by step, and there is no other third possibility.

Summary

"since the beginning of this year, we have really entered the qualifying stage. there will be no quick victory, no miracles, our journey is a marathon on a muddy road. Starting a business is never easy, starting a business for smart electric cars is even more difficult, and we should be mentally prepared for more difficult challenges and more setbacks." This is what Li Bin, founder of Xilai, said in an internal letter in August this year, which shows how difficult the current situation is.

Today, Weilai is no longer the elegant demeanor of those days, and most of the discussions about Weilai are related to the issue of survival. The market is changing so fast that it can make an enterprise in a very short time, or it can make it silent in a moment. No one can make a clear conclusion about the future, but we all know that the future is still uncertain and it is bound to be difficult in the shadow.

(official account of Liu Kuang / tr. by Phil Newell) ID:liukuang110

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