The sudden collapse of Jiyue Auto has dominated the Chinese automotive landscape this week, marking a significant industry event. In a significant blow to China’s automotive sector, a second major player has filed for bankruptcy in 2024, just months after the collapse of HiPhi and its parent company, Human Horizons. It’s unlikely that they will be the last major firm to struggle in China, as many others have already faced similar challenges and failures are inevitable.
What lingering consequences might arise from these catastrophic events, and could a lasting impact truly manifest? As automobile owners reliant on manufacturers like these, there is a lingering concern about not just accessing their vehicles but also maintaining them over time. The condition of an item has a significant impact on its value in the second-hand market.
On December 13, Han Lu, an automotive blogger, took to Weibo to share his recent purchase: a Jiyue 07, which he acquired last month for a price tag of 230,000 yuan, equivalent to approximately $31,600 USD. Despite his persistence, the majority of dealers initially turned him down flat, with only one offering a paltry 20,000 yuan – equivalent to approximately $2,750 USD.
Han Lu retorted furiously, suggesting he would partially disassemble the vehicle and market its components as spare parts to DIY enthusiasts. Notwithstanding reports suggesting that 70% of the components in Jiyue’s fashion range originate from Geely, it is plausible that this dependence on a single supplier will not necessarily create a significant obstacle to sustaining the vehicles in the long run.
The precipitous decline may simply be attributed to the overwhelming uncertainty surrounding Jiyue Auto’s current situation. According to Quick Expertise’s report on December 13, 2021, the founders’ edition of the HiPhi X model, boasting a mileage of 27,000 kilometers, was appraised at a value of 200,000 yuan (approximately $27,500 USD). Initially acquired for approximately 680,000 yuan, equivalent to $93,500 USD, the automobile’s purchase price implies an underselling by roughly 200,000 yuan, or $27,500 USD per year?
Comparable to a 2022 BMW X5 xDrive 30Li, which originally sold for approximately 639,000 yuan (or $87,850), and had a mileage reading of 29,000 kilometres, the valuation for this vehicle was set at around 400,000 yuan ($55,000). Homeowners who purchased vehicles from defunct manufacturers often face substantial financial hardships.
Will significant financial setbacks potentially dissuade consumers from purchasing vehicles from emerging market players? This could indeed be the scenario during a short timeframe. The model most in danger is likely to be Neta. As gross sales decline significantly and speculation spreads throughout the company, nervous customers may understandably stay away, fearing the worst-case scenario of the firm’s collapse – potentially creating a self-reinforcing cycle of uncertainty.
While some larger startups in the EV space, such as NIO and XPeng, have garnered significant attention, lingering doubts persist regarding their long-term sustainability. Despite declining losses per vehicle, automakers strive to maintain high and consistent sales figures.
The collapse of a prominent project controlled jointly by Geely and Baidu raises significant questions about the viability of similar initiatives in the industry, leaving a substantial degree of uncertainty in its wake. The ongoing value disparity is hindering the situation by compelling manufacturers to compromise on profits in pursuit of volume.
As previously reported, many original equipment manufacturers (OEMs) are urging their suppliers to reduce expenses. The sudden surge in demand has ripple effects throughout the supply chain, inducing unnecessary stress. Within narrow profit margins, the collapse of an OEM struggling to pay its providers could precipitate a catastrophic domino effect across the supply chain.
By 2025, China’s automotive landscape may undergo significant recalibration.
Supply: Quick Expertise
