Financial Crisis? Lifan Was Sued For Claiming 1.4 billion Yuan

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Recently, auto parts supplier Zhejiang VIE Science & Technology announced that its wholly-owned subsidiary Zhejiang Zhuji Wanbao Machinery Co., Ltd. (hereinafter referred to as Wanbao Machinery) submitted a civil complaint to the Zhuji People’s Court of Zhejiang Province on July 22, requesting Chongqing Lifan Passenger Vehicle Co., Ltd. (hereinafter referred to as Lifan Motors) and Lifan Motor Beilu Branch, a subsidiary of Lifan Co., paid approximately RMB 6,075,700.


Financial Crisis? Lifan Was Sued For Claiming 1.4 billion Yuan

According to the announcement issued by Zhejiang VIE Science & Technology, since 2007, Lifan Motors and Lifan Motors Beibei Branch have continuously purchased auto parts such as brakes, clutch total pumps and vacuum boosters from Wanbao Machinery. However, starting from 2018, Lifan Motors and Lifan Motors Beibei Branch began to default on payment. As of July 22, Lifan Motors and Lifan Motors Beibei Branch had arrears of payment of 6.0759 million yuan.

But in fact, the arrears mentioned by Zhejiang VIE Science & Technology are only a small part of Lifan’s total arrears. According to the announcement issued by Lifan Co., Ltd. on July 26, the accumulated amount of litigation (arbitration) that Lifan has not disclosed in the past 12 months has reached a total of 1.423 billion yuan. Including Bohai International Trust Co., Ltd., Shanghai Red Star Macalline Commercial Factoring Co., Ltd. and Chongqing Senmai Auto Parts Co., Ltd. are all “creditors” of Lifan.

Financial Crisis? Lifan Was Sued For Claiming 1.4 billion Yuan
2017 Lifan X80 SUV

According to Lifan’s financial report for the first quarter of 2019, its first quarter operating income was about 2.25 billion yuan, down 31.07% year-on-year; the net profit attributable to shareholders of listed companies was about -97.20 million yuan, down 257.56% year-on-year. According to production and sales data of June 2019 released by Lifan, in the first half of this year, the cumulative sales volume of Lifan’s traditional passenger vehicles was about 20,800 units, down 62.55% year-on-year; the cumulative sales of new energy vehicles was 1,257 units, down 60.66% year-on-year.

Selling-car has almost become a business that does not make money. By selling land and qualifications have also become the main way for Lifan to make profits. In February 2018, Lifan issued an announcement and sold two assets, namely Chongqing Lifan Automobile Co., Ltd., a subsidiary of the company, which was transferred to CHJ Automobile at a price of 650 million yuan. In addition, Lifan also sold the production base of the original 150,000-passenger-car project to the land reserve rectification center of Chongqing Liangjiang New Area at a price of about 3.315 billion yuan.

Judging from the relevant announcements issued by Lifan, its operating pressure and sales pressure are relatively high, the litigation of related creditors has caused a lot of trouble for Lifan. In the past year, the Chinese auto market has fallen sharply, placing higher demands on smaller auto companies such as Lifan Motors.

Lifan Group started in the motorcycle market in 1992. Founded by the founder Yin Mingshan at the age of 53, he entered the passenger car industry in 2006. In the end, he used 200,000 yuan of capital to turn Lifan into an industry group with revenues of tens of billions. Until November 2017, Yin Mingshan, the 79-year-old founder and chairman of Lifan Motors, officially announced his retirement.

Whether Lifan Motors can successfully overcome the difficulties, we will continue to pay attention.