Author: Xu Jinkai

Although the result of the capital increase of Voyah has not been announced, the new capital source for Dongfeng’s “return to A-share” is ready.

On October 17, Dongfeng Motor Corporation (hereinafter referred to as Dongfeng Motor; stock code: 600006) announced that the delivery of the tender offer for the company’s shares between Dongfeng Motor and Dongfeng Motor Group Co., Ltd. (hereinafter referred to as Dongfeng Group; stock code: 000489) had been completed. Dongfeng Group became the controlling shareholder of Dongfeng Motor with 11 billion shares, accounting for 55% of the total share capital of the listed company.

On October 21, Dongfeng Group announced in a Hong Kong Stock Exchange filing that Dongfeng Motor (also known as Dongfeng Automobile Group Co., Ltd., the parent company of Dongfeng Group) had increased its holding of 10,950,000 H shares, increasing the number of shares of Dongfeng Group held by Dongfeng Motor to 5,850,046,000 shares, accounting for 67.90% of the total issued shares.

Dongfeng Group also stated that, based on its confidence in its prospects and its recognition of its long-term investment value, Dongfeng Motor will also increase its holding of H shares in Dongfeng Group at an appropriate time.

While continuously attacking the controlling stake of its listed subsidiaries in the A-share market and strengthening its voice in the H-share market, coupled with the recent external financing initiative of Voyah, Dongfeng seems to be seeking a major change.

The reason for the change is quite simple – they need money.According to the performance report previously released by Dongfeng Motor Corporation, the revenue for the first half of this year was CNY 44.309 billion, a year-on-year decrease of 36.7%, and the revenue scale was the lowest in the same period in nearly five years; the gross profit was CNY 5.2 billion, only half of the same period last year.

However, the market performance is not optimistic, with data showing that Dongfeng Motor Corporation sold a total of 1.2342 million vehicles in the first half of this year, a year-on-year decrease of 13.4%; of which commercial vehicle sales were 174,600, a year-on-year decrease of 50%; passenger vehicle sales were 1.0596 million, a year-on-year decrease of 1.5%.

When the pressure of business performance meets the urgent need for expansion of the LanTu and the MengShi, the pocket of Dongfeng Motor Corporation also feels obvious pressure.

Poor Market Performance, LanTu Needs to “Chase the Light”

Compared to the unclear performance in business, there seems to be no hope in the new business sector, making it even more challenging.

As a key tool for Dongfeng Motor Corporation to enter the high-end new energy market, the performance of LanTu is not satisfactory. According to data from the China Passenger Car Association, LanTu sold 2,519 vehicles in September, which is significantly lagging behind top new brands that are striving to reach a monthly sales target of 20,000 vehicles;

The accumulated sales volume of LanTu vehicles in the first 9 months of this year was 13,619 units. Although before this, the annual sales target of LanTu was lowered from 46,000 units to 31,000 units, even so, the completion rate of LanTu’s sales target in the first three quarters was only 44%, and the failure to achieve the sales target is likely to occur.

The connection between the “losing situation” and LanTu has become increasingly close, which is not the outcome that Dongfeng wants.At the beginning of its establishment, Zhu Yanfeng, Secretary of the Party Committee and Chairman of Dongfeng Motor Corporation, wrote in a letter to the H Division (the predecessor of Voyah) that “Dongfeng is committed to assuming the responsibility of being the leader in the industry, firmly adhering to the new energy vehicle route, and actively promoting the transformation of traditional fuel vehicles to new energy vehicles. Voyah is the bearer, practitioner, and pioneer of this task, carrying the heavy responsibility of lifting the entire Dongfeng brand and conveying the courage of Dongfeng to soar.”

The expectations of Dongfeng for Voyah are evident.

In order to create this new business sector, Dongfeng has given it high autonomy. You Zheng, member of the standing committee of the Party Committee and Deputy General Manager of Dongfeng Motor Corporation, once defined Voyah as follows: “Although it belongs to Dongfeng, Voyah operates independently in a market-oriented manner, integrating the operating models of mature automakers and new players in the field of car manufacturing. The dual support and mix of mature automakers’ rich experience in car manufacturing and innovative mechanisms of new players become the distinctive features that set Voyah apart from other new brands.”

“New power of Dongfeng” is how some insiders describe Voyah. Offering high salaries to attract talent has become an important means for Voyah to maintain its new power image. At the beginning of its establishment, Voyah posted several positions with an annual salary of over 600,000 yuan on various recruitment websites, which made a group of employees who were originally working for “We Xiaoli” feel excited.

Furthermore, in order to motivate employees and accelerate the integration of personnel from various parties, Voyah has also launched an employee stock ownership plan.

On June 26, 2021, “Voyah Automobile Technology Co., Ltd.” was officially established. The newly established Voyah Automobile will be jointly funded by Dongfeng Motor Corporation and the core employee stock ownership platform. Voyah’s core backbone holds at least 10% of the shares in Voyah Automobile.The seemingly perfect talent structure and equity incentive system in the automotive industry often conceal the problems that arise during the team integration process. When people with diverse backgrounds, such as those from traditional car manufacturers, new players, and luxury brands, come together, not only do they create sparks of creativity, but also a certain level of alienation. This may be the reason why the brand image of Voyah is not very focused.

Taking its flagship model, Voyah FREE, as an example, it has absolute competitiveness in terms of product strength. With a price of just over 300,000 yuan, it comes equipped with costly air suspension, adjustable central control screen, panoramic sunroof, and a 4.5-second 0 to 100 km/h acceleration performance, which allows it to crush its direct competitor, the Liangdao ONE.

However, compared to the clearly defined positioning of the Liangdao ONE as a car for dads, the positioning of the Voyah FREE is puzzling. This year, when it launched its long-range version, the official named it the “Voyah FREE Long-range Pure Electric Performance-level Intelligent SUV”, adding a long adjective to its name.

Although it’s understandable that Voyah wants to convey more information about its models, highlighting all the features means that there are no standout features, which largely contributes to the lower-than-expected sales performance due to unclear communication priorities.

The same logic applies to the Dreamer model. In the eyes of Voyah insiders, the Dreamer is an all-around MPV that combines performance and comfort, and is suitable for both family and commercial use. Some media even described it as “racing with the boss”, highlighting its stunning performance.

However, in reality, the main demand for boss cars is for them to be comfortable and safe, which is a mismatch with the Dreamer’s proud 5.9-second 0 to 100 km/h acceleration performance, resulting in its unclear market image and poor market performance.

Nowadays, the third model of the Voyah car, the “Chasing Light”, has officially appeared. Only by understanding trade-offs, avoiding one-size-fits-all approaches and constantly sharpening its brand competitiveness can Voyah have the potential to break through the market.

Compared with the Voyah FREE and Dreamer, which have a certain trial-and-error opportunity, Chasing Light has only one chance, and its success or failure will largely determine the future direction of Voyah’s survival.

The warrior with an arrow on the string only earns attention without making money

Compared with Voyah’s opportunity to enter the high-end new energy market independently, the probability of a warrior already on the threshold of the market making a profit is almost zero.

Firstly, from the perspective of market capacity, the warrior is positioned in the luxury electric off-road market. However, whether it is the luxury car market or the off-road vehicle market, the market capacity is extremely limited. This means that the sales performance of the warrior brand will not be very high, and its profitability will be limited.

Secondly, from the perspective of brand positioning, the warrior, which directly enters the luxury car market, is the culmination of Dongfeng’s new energy technology, and needs more advanced technology to support it. This also means that it needs higher operating costs.

From the perspective of the entire Dongfeng Motor Corporation, Voyah plays the role of Audi, with a certain brand height and expectations for its market performance;

However, unlike Voyah, the warrior carries more of the role of Lamborghini and Bugatti, with a low market share but a leading brand recognition.

In other words, the warrior is the stage on which Dongfeng showcases its “leading technology” to the market.

“The brave is the pioneer and leader of Dongfeng’s technological leap, gathering Dongfeng’s most forward-looking original technology to build a highland of technological innovation. The confidence of the brave comes from the mastery of independent key core technologies.” Yu Zheng expressed at the Brave brand launch conference.

Before this, Zhu Yanfeng described the Brave brand as “an impressive endeavor of Dongfeng people.” He said, “We should work fast, work scientifically, follow the rules, and work efficiently to improve productivity, seize the day and push for technological innovation breakthroughs, make products more high-quality and outstanding, and show the world a new Dongfeng image.”

It is not difficult to see that in the hot field of new energy, Dongfeng wants to change its strategy of “barbaric development” in the era of fuel cars and present a clearer technical image to achieve further development.

And the demonstration of advanced technology in the field of new energy technology, intelligent driving, and intelligent cockpit has fallen on the shoulders of the Brave. This may be the reason why the Brave is rooted in the field of electric off-road vehicles with high technical difficulty.

In recent years, although the development of new energy vehicles has been rapid, nobody has dared to try in the high-end off-road vehicle field. One is due to the complexity of the off-road scenery, which requires extremely high product power; the other is because new energy vehicles have weaknesses such as energy supplementation and short-term high-power operation of the motor, which are not suitable for off-road scenarios such as long-time traversing and large torque output, resulting in a blank market for electric off-road vehicles.

The arrival of the Brave has filled the blank market for electric off-road vehicles to a great extent, and the market opportunity has been seized. The expectations for the two concept cars, M-Terrain and M-Terrain S, with strong voices have also been met. The next phase will be to wait for the market test of the actual cars. Whether Dongfeng’s technical image can be established depends on this step.

Returning to A-share, Can It Uphold the Sky?# An Unexpected Development vs. a Hungry-for-Cash One: Dongfeng’s Alternative Fundraising Attempts

While facing different predicaments, Voyah and Fengxing are equally in need of financial support. Just like a frustrated middle-aged man who needs to guarantee his main source of income while seeking new revenue streams to sustain his family, Dongfeng, at this moment, needs financing as the best option to fulfill this goal.

On September 13th, Voyah initiated its first external financing on the Shanghai United Property Exchange. The company aims to raise about CNY 5 billion to enhance its overall competitiveness.

According to official plans, after the completion of this round of funding, Voyah’s equity structure will change, with Dongfeng Group holding no less than 77% of Voyah’s shares, strategic investors holding no more than 15%, and employee shareholding platforms holding no less than 8%.

The financing information and Voyah’s financial status were exposed together. Data show that as of June 30th this year, Voyah’s total assets amounted to CNY 7.412 billion, total liabilities amounted to CNY 6.529 billion, and the debt ratio exceeded 88%, up from 76.46% by year-end last year (total assets of CNY 6 billion and total liabilities of CNY 4.589 billion).

In 2021, Voyah’s total operating income was CNY 1.767 billion, and the net loss was CNY 706 million.

The poor financial condition has also aroused doubts from many media outlets, which may negatively impact Voyah’s bargaining power for fundraising.

Just as Voyah seeks independence from fundraising, Dongfeng Automobile has obtained control of Dongfeng Motor Corporation, which is listed on the A-share market. The plan to re-enter the A-share market has apparently been put back on the agenda.

Back in 2020, Dongfeng launched its A-share IPO plan, with a financing plan of 21 billion yuan, which broke the financing record of the SME board at that time. In September 2021, Dongfeng announced that it had decided to withdraw its application documents for listing on the SME board and planned to apply for the first public issuance of RMB common stock (A-shares) to be listed on the Shenzhen Stock Exchange.

Seeking A-share listing and financing to support the development of the Landtourer Automotive has always been Dongfeng’s development plan. However, with the arrival of the pandemic, it has further intensified Dongfeng’s financial pressure, and independent financing and returning to the A-share market have become Dongfeng’s first choice to resolve its financial pressure.

With Dongfeng Automobile’s full control of Dongfeng Motor Corporation, listing on the A-share market using Dongfeng Motor Corporation’s A-share shell resources seems to have become a matter of course, and Dongfeng Automobile’s financial pressure will be alleviated to some extent during that time.

Compared with solving the financial problems, the future development of Landtourer and Mengshi is more critical, as Dongfeng’s A-share financing opportunity only comes once. If the input-output ratio is not proportional, Dongfeng will inevitably face a bigger financial crisis, and the key to avoiding the crisis lies in the hands of Landtourer and Mengshi.

This article is a translation by ChatGPT of a Chinese report from 42HOW. If you have any questions about it, please email bd@42how.com.