Text | Lianxian Travel, author |Lu Qianying, Editor | Chen Feng
On the first day of work resumption after the Spring Festival this year, the media reported that HiPhi Auto had stopped production for 6 months. Soon after, HiPhi issued an announcement stating that since February 19 this year, the company has made major adjustments to its daily operations and is currently taking all possible measures to alleviate its difficulties.
During this period, HiPhi charging stations, charging pile installation, and App charging functions (including free charging services) will be temporarily suspended, and the issuance of App HiBei points and the mall will also be temporarily suspended.
This high-end new energy vehicle company, which was once highly anticipated, is now facing multiple crises including shutdown, capital shortage, and supply chain disruption. It is also rumored that the company’s founder Ding Lei has absconded with the funds.
However, at the beginning of this month, Ding Lei appeared in a live broadcast after a long absence and publicly refuted the rumors of running away, saying that he was still in the company and emphasizing that the company was entering the pre-reorganization stage in an all-round way, rather than bankruptcy.
In fact, during the period of “disappearance”, Ding Lei was not idle, but was still trying to find a way out for HiPhi.
Image source: HiPhi official Weibo
At the beginning of this year, there were rumors in the market that Changan Automobile was interested in acquiring HiPhi, but ultimately no substantial progress was made. Then in May this year, HiPhi and iAuto Group signed a “Comprehensive Strategic Cooperation Agreement” worth US$1 billion. However, there is no new news on when the funds will actually arrive.
Earlier, the US$5.6 billion investment intention signed with the Saudi Ministry of Investment in 2023 was originally seen as a life-saving straw for HiPhi, but this funding was not actually implemented.
After repeated failures in financing, Ding Lei and his team are still looking for other potential investors, including trying to obtain short-term funds through “common benefit bonds” to maintain the company’s basic operations.
At the same time, HiPhi employees are also trying to gain more survival opportunities for HiPhi through live streaming and other means.
But all the attempts by Ding Lei and his employees had little effect. It was not until July 1 this year that Gaohe applied to the court for a preliminary reorganization, and the court accepted the case on August 8.
Today, HiPhi’s fate hangs in the balance. Ding Lei and his team’s persistence, whether there will be capital injection, and how to restore after-sales service have all become key to this restructuring game.
For HiPhi, every step forward in the future is a matter of life and death.
Ding Lei did not run away, but took his employees as the final gatekeepers
Since HiPhi stopped operations and production in February 2024, the number of HiPhi employees has been greatly reduced, especially the sales team has almost been disbanded.
According to a report by Yinshi Finance in March, an after-sales employee of HiPhi said that the company currently only retains a small number of after-sales personnel, and basic after-sales service operations are only maintained in 9 cities across the country. There are only about 100 employees left in the entire company.
In addition, according to public disclosure by engineering project director Yang Yueqing, the monthly salary of these remaining employees, including senior executives, is only 2,690 yuan, which is the minimum wage standard in Shanghai.
During the months of suspension, the company tried a variety of self-help plans. On March 8, Gaohe officially started live streaming to sell goods, and Yang Yueqing personally took part in the live streaming to raise funds for the after-sales department by selling steaks and other goods.
Image source: HiPhi Auto’s official Douyin account
However, these attempts did not bring about significant improvements, and the company ultimately chose to embark on the path of pre-reorganization.
On July 1, Gaohe applied to the court for pre-reorganization, and the court accepted the case on August 8. On September 11, the company issued an announcement to recruit strategic investors, requiring participating investors to pay a high deposit to ensure that they have sufficient financial resources and investment willingness.
In addition, Ding Lei never made a public appearance in the months after the shutdown, which led to speculation that he had “run away”. The company did not respond to these rumors in a timely manner, which led to more and more speculation from the outside world.
It was not until September 13 that Ding Lei finally appeared in the live broadcast room and responded to the rumors for the first time. Ding Lei made it clear that he was still in the company and that the company was actively undergoing pre-reorganization and had no intention of bankruptcy or running away. Ding Lei revealed that the company had signed contracts with some parts suppliers and was negotiating with more partners.
In fact, Ding Lei’s appearance at this time is also sending a signal to the outside world to a certain extent:
He did not have the idea of abandoning HiPhi and running away. Instead, he wanted to lead the remaining employees to act as “gatekeepers” and continue to lead HiPhi to complete self-rescue in the pre-reorganization stage.
For Ding Lei, who has been working in the automotive industry for more than 35 years, this is not an easy task. Admitting the failure of HiPhi is one thing, and finding a new way out for HiPhi is another.
In his early years, Ding Lei worked as a senior executive at SAIC-GM. As a manager of a multinational company in China, Ding Lei not only has many years of experience in the field of production and manufacturing, but is also familiar with the management of upstream and downstream supply chains. In traditional car companies, he witnessed the rise of China’s auto industry, and these experiences provided him with experience for his future entrepreneurship.
Ding Lei’s real transformation came after he joined LeTV Auto in 2015.
In LeEco’s smart electric car project, Ding Lei began to get involved in the research and development of electric cars based on intelligence and Internet thinking. Although LeEco collapsed due to capital chain problems, this experience opened up new horizons for Ding Lei.
He saw the future of the electric vehicle market, so Ding Lei founded Human Horizons in 2017 and launched the high-end electric vehicle brand HiPhi, officially entering the new energy vehicle market. He tried to combine his experience in traditional car companies and LeTV Auto to create a high-end product that integrates intelligence, luxury, and technology.
Image source: HiPhi official Weibo
However, despite HiPhi’s huge investment in technology and the introduction of cutting-edge features such as autonomous driving and smart connectivity, the market response was not as expected. The high price has limited its consumer base, and the average annual sales of HiPhi cars in the past three years have not even exceeded 5,000.
At the same time, the continuous investment in huge R&D and production costs also made HiPhi’s capital chain increasingly tight, eventually leading to pre-reorganization.
Gaohe is still waiting for life-saving money
HiPhi Auto’s road to financing can be described as long and tortuous.
The latest news about its financing dynamics is still in May. According to foreign media reports, HiPhi Auto and iAuto Group Inc signed a “Comprehensive Strategic Cooperation Agreement”. This investment worth US$1 billion is regarded as a key step for HiPhi to resume work and production.
According to the agreement, the two parties will carry out all-round cooperation in production collaboration, equity mergers and acquisitions, technical cooperation, etc. iAuto promises to provide the first round of funds for HiPhi Auto’s restructuring, with the goal of completing the transaction before the announcement of the first half financial report of 2024.
However, according to the Times Weekly, HiPhi insiders remain cautious, saying that “only when the funds are actually received can it be considered reliable”, and revealed that other investors are still planning to join in the future. Therefore, although this funding is a key step for HiPhi to resume work and production, its actual implementation still needs to be observed.
This attitude reflects HiPhi’s caution after its multiple financing intentions failed to materialize.
When on the verge of bankruptcy, HiPhi chose to seek a new way out through “pre-reorganization” rather than directly entering bankruptcy liquidation.
To a certain extent, the pre-reorganization not only bought valuable time for HiPhi, but also built a channel for it to introduce strategic investors.
For HiPhi, this means that the company can continue its capital operations and business adjustments without entering into bankruptcy proceedings.
In other words, entering the pre-reorganization stage actually buys HiPhi time to negotiate with potential investors and avoids the risk of rapid liquidation of assets. In addition, the pre-reorganization also sends a signal to the market that the company still has the potential for recovery.
At the same time, HiPhi is also publicly recruiting strategic investors. On September 11, Human Horizons issued a recruitment announcement for strategic investors. The announcement requires investors to pay a deposit of 5 million yuan during the due diligence stage and a performance bond of 50 million yuan before signing the investment agreement.
The announcement also shows that from the date of publication, any institution that has strategic investment intentions in Human Horizons Jiangsu and Shanghai companies and meets the above conditions can sign up. The registration deadline is 18:00 on October 10, 2024.
The reason why HiPhi’s requirements are so strict is that HiPhi’s previous financing history was full of twists and turns. Previously, Ding Lei and his team had met many potential investors in the process of looking for funds, but most of them failed to materialize in the end. This further exacerbated the company’s financial difficulties.
In June 2023, HiPhi announced that it had signed a $5.6 billion cooperation agreement with the Saudi Arabian Ministry of Investment to establish a joint venture to engage in the research and development and production of electric vehicles. Although the Saudi cooperation was once regarded as HiPhi’s “lifeline”, the agreement has always remained at the intention stage and failed to bring actual financial support to the company.
HiPhi’s operational difficulties may be another important factor in the failure of Saudi Arabia’s investment.
Although HiPhi is positioned in the luxury market, its sales have not improved. Saudi Arabia may have realized that HiPhi’s luxury positioning and technological advantages, although attractive, are not enough for it to gain a foothold in the global market.
Saudi Arabia has been actively promoting the development of the electric vehicle industry to reduce its dependence on the oil economy. In previous similar investments, Saudi Arabia invested $1 billion in Lucid Motors in the United States and signed a cooperation agreement with China’s Skywell Auto. However, due to the suspension of production in China, Saudi Arabia’s investment was also stranded, which may have led Saudi Arabia to become cautious in investing in new energy vehicles.
At the beginning of 2024, HiPhi was also reported to be in talks with Changan Automobile for an acquisition. Changan Automobile was once considered an important strategic investor that might take over HiPhi. Later, there were reports that several automakers would acquire HiPhi, such as Avita, FAW Group, and Lifan. However, these subsequent reports were all dropped without further follow-up.
In May this year, some media reported that iAuto had signed a strategic cooperation agreement with HiPhi’s parent company Human Horizons, planning to inject $1 billion to help HiPhi resume work and production. However, according to the Times Weekly, insiders at HiPhi remained cautious about this, saying that “it would be reliable only if the funds actually arrived.”
The failure of multiple financing intentions has left Gaohe still facing a huge funding gap. Ding Lei and the Gaohe team have had to turn to other financing methods, including recruiting “common benefit bond investors.”
This method allows investors to provide Gaohe with loans during its bankruptcy process to maintain production and operation, and to repay the project with priority through the cash proceeds after the project is completed. Although this financing method is riskier, it has won Gaohe a valuable chance of survival.
After experiencing a series of failed financing intentions, HiPhi’s future remains full of uncertainty.
Whether the funds can be truly in place and whether strategic investors can take over are issues that will determine HiPhi’s fate in the coming months.
HiPhi owners, still waiting
In a live broadcast a few days ago, Ding Lei said: “HiHi car owners are HiHi’s most valuable assets. As long as the car owners stay, HiHi will not die. The entire HiHi company is experiencing a stage of rebirth from the ashes, and the HiHi team is undergoing a complete transformation.”
According to official data from Gaohe, the sales of Gaohe cars in 2021 and 2022 were 4,237 and 4,349 respectively, and the sales in 2023 were 4,829. Roughly estimated, the total number of Gaohe owners is less than 20,000.
Most owners of HiPhi cars currently have mixed emotions. They closely follow the latest developments of HiPhi, and many support the brand, while others are deeply concerned about after-sales issues.
Many car owners expressed their firm support for HiPhi, praising its unique design and domestic luxury car positioning. For example, in the Autohome forum, a car owner said: “Although HiPhi has encountered difficulties, I still support HiPhi and have no regrets buying this car. Domestically produced products with such unique characteristics are worth supporting!” Such voices are not uncommon among HiPhi car owners, and many car owners have a very high opinion of HiPhi’s product quality and uniqueness.
Of course, many car owners are beginning to worry about after-sales issues. According to multiple social platforms and the HiPhi official app, many car owners have reported that their vehicles cannot be repaired for a long time at the repair center, especially because the lack of spare parts has caused the repair progress to stagnate.
A car owner mentioned: “After I bought it, I had a car accident last month. The repair shop has not repaired it for me, the parts are out of stock, and there is no response from after-sales service.” This situation makes many car owners feel helpless, especially after HiPhi announced the suspension of work and production, the sustainability of after-sales service has become the biggest problem.
Despite this, some car owners do not think they need to worry too much about after-sales issues, saying their vehicles can still receive basic maintenance. On a social platform, a car owner shared: “I just had my car serviced and the glass replaced a few days ago. The after-sales service is still operating normally. Although there is a shortage of spare parts, regular maintenance is not a big problem.”
As the first Chinese luxury car brand to enter the 600,000 to 800,000 yuan price range, HiPhi owners generally have a high degree of recognition of the product. In other words, for HiPhi owners, buying this car is not only a choice, but also a trust.
However, car owners’ patience is limited, and they are also waiting for the company to come up with an effective solution.
Regarding after-sales service, HiPhi released an announcement in early August 2024, announcing that it authorized Shanghai Yueda Intelligent Driving Automotive Service Co., Ltd. to purchase spare parts for HiPhi vehicles and resume after-sales service response. This initiative has gradually resumed operations in many cities across the country, the supply of some regular parts has begun to resume, and the after-sales service center is also increasing its service coverage.
However, despite the official promise, many car owners have recently complained about the severe shortage of spare parts and long waiting time for repairs, causing great inconvenience to vehicle use.
Whether HiPhi can resolve these core issues in the coming months will directly affect the confidence and loyalty of car owners.
The future of HiPhi remains uncertain. Despite strong support among car owners, patience is ultimately limited.
At this juncture, HiPhi’s fate depends not only on the arrival of strategic investors, but also on whether it can restore its promise to car owners. The stability of after-sales service and the restoration of parts supply have become the core elements for HiPhi to rebuild market trust.
If HiPhi can grasp these key points in the subsequent reorganization, it may be able to be reborn.
However, at the moment, the company’s financial difficulties, after-sales service problems, and the efforts of Ding Lei’s team are intertwined into a game of life and death for HiPhi.
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