The future of Zotye Automobile casts another shadow. On the evening of December 23, the Shenzhen Stock Exchange listed company Zotye Auto announced that its parent company (actual controller) Tech-New Group had recently received the “Civil Ruling” issued by the Yongkang Court, declared bankruptcy of Tech-New Group, indicating that the major shareholder of Zotye Automobile is dead in name.
The announcement showed that Tech-New Group had previously applied to the court for bankruptcy and reorganization, but the court held that because Tech-New Group was already seriously insolvent and had no ability to continue operations, it lacked the possibility of salvation. In accordance with the first paragraph of Article 78 of the “Enterprise Bankruptcy Law of the People’s Republic of China”, it was ruled to terminate the reorganization procedure of the Tech-New Group and declare its bankruptcy.
According to company information, Tech-New Group was established in 1992 and its main business covers the fields of vehicle manufacturing and sales, key components, real estate, electronic materials and components. The company’s registered capital is 1.668 billion yuan, and the actual controller is the company’s chairman and manager Ying Jianren, with a shareholding ratio of 90%.
From 2017 to 2019, Zotye Auto’s non-net profits were 1.224 billion, 1.241 billion and -11.131 billion yuan, respectively, with a total loss of over 11.1 billion yuan in three years. According to the previously signed gambling agreement, Tech-New Group shall compensate Zotye Auto. However, Tech-New Group has pledged more than 80% of Zotye Auto’s equity. In addition to the judicial freeze, Tech-New Group could not fulfill its commitment to cancel the shares. At the same time, Tech-New Group has no cash on the books to make up, so compensating Zotye Auto has become empty talk. It also means that although Tech-New Group is now bankrupt, it is impossible for Zotye Automobile to obtain compensation to repay related debts.
After the Tech-New Group was ruled bankrupt, Zotye Auto is still working hard to find a remedy. It stated in the announcement that Zotye Auto and Tech-New Group remain independent in terms of assets, business, and finance. The company’s current main business is in a state of suspension and will not have a significant impact on its daily operations. The subsequent disposal of Tech-New Group’s bankruptcy may cause changes in the actual control of Zotye Auto.
The parent company was ruled bankrupt, Zotye Auto’s life was not easy, its employees and dealers joined the ranks of asking for salaries and debts. In addition, Zotye Auto’s announcements in November and December showed that its subsidiaries Hangzhou Jieneng Power Co., Ltd., Hangzhou Yiwei Automobile Industry Co., Ltd. and Zhejiang Zotye Automobile Sales Co., Ltd. were all ruled for bankruptcy and liquidation by the Yongkang Court.
Although Zotye Auto is still moving forward, as one of the Ying’s family companies, its credibility may have been lost, the future is unpredictable, not like Lifan Auto, Zotye may be difficult to find a good taker.