Fang Yunzhou, founder and chairman of Chinese electric vehicle maker Neta Auto, has publicly apologized to the company’s dealers and suppliers, pledging swift action to resolve delivery and service issues. A recent video of Fang bowing deeply at a dealer meeting has gone viral, underscoring the urgency of the company’s financial crisis.

Dealers have accused Neta of failing to compensate them for operating losses since September 2024, withholding vehicle rebates, and suspending after-sales services. Some said they had paid in full for vehicles—amounting to tens of millions of yuan in some cases—without receiving the cars.

Fang has promised to restore spare parts supply for Neta’s 400,000-plus car owners by April 30 and to address undelivered vehicles within a week. However, no firm plan has been announced.

Neta’s struggles came to light in late 2023, with reports of mass layoffs, wage cuts, halted production, and unpaid supplier bills.

Fang stepped in as CEO last December after former chief Zhang Yong moved into an advisory role. Since then, the company has implemented aggressive cost-cutting measures, including shutting most self-operated showrooms, reducing staff, slashing R&D on self-driving tech, and shifting from wholly owned overseas factories to joint ventures.

These actions have lowered Neta’s monthly operating expenses by over 70%, according to the company.

To ease its debt load, Neta signed more than 20 billion yuan (US$2.75 billion) worth of debt-to-equity agreements with 134 core suppliers in March. Participants include leading players such as CATL, Gotion High-Tech, and Beidou Zhilian. The company said these moves were crucial to lightening its balance sheet and rebuilding investor confidence.

Neta is also expecting a fresh injection of 3 billion yuan (US$413 million) from a lead investor in its ongoing series E round this April. The funding will go toward restarting production and accelerating recovery efforts.

Fang has set bold targets for the company: achieving a break-even gross margin in 2025, returning to overall profitability by 2026, and reaching a 50:50 split between domestic and international sales within the next two to three years. An initial public offering is also in the pipeline, pending stabilization.

🔗 Source: National Business Daily

🧠 Food for thought

1️⃣ Chinese EV market facing inevitable consolidation amid profitability struggles

Neta’s crisis represents a broader pattern affecting Chinese EV manufacturers beyond just one company.

In 2021, Hozon Auto (Neta’s parent company) reported revenue of 5.73 billion yuan but incurred a substantial net loss of 2.90 billion yuan, highlighting the early financial challenges that preceded the current crisis1.

The high capital intensity of electric vehicle development creates significant barriers to profitability, as Ford’s losses on EV models and industry-wide concerns demonstrate2.

This financial pressure is affecting investment sentiment across the sector, with electric vehicle-related private equity deals dropping by 74% in Q2 2024 compared to the previous quarter and 89% year-over-year3.

Recent Neta developments