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  7. Qualification of BYTON? FAW...

[YesAuto News] Recently, it was revealed that Tianjin FAW Huali Automobile's production qualification will be transferred to Byton Automobile to take over, so as to solve the production qualification problem of new car manufacturers. We asked the official car company for verification as soon as possible, but Byton currently “does not comment.” In light of the previous cooperation with FAW's investment in Byton, there is indeed a greater possibility for this matter.

On July 19, FAW Xiali announced that the board of directors decided to transfer 100% of its wholly-owned subsidiary Tianjin FAW Huali Automobile Co., Ltd. (hereinafter referred to as “FAW Huali”) at a price of not less than RMB 1. According to the announcement, the total equity of Huali Auto's shareholders is estimated at -961.8794 million yuan.

The predecessor of Tianjin FAW Huali Automobile Co., Ltd. was Tianjin Automobile Manufacturing Plant. It was founded in 1965. After several equity changes, it is now a wholly-owned subsidiary of FAW Xiali. Its business scope includes the production and sales of cars, mini cars, and light duty vehicles. Cars etc. According to data, FAW Huali mainly produces various types of vehicles such as jeeps, 130 series light trucks, 1010 minivans and 6320 series minibuses. FAW Huali once entered the list of the top 500 companies in the country, but it is currently in a state of long-term loss. Only in the first half of 2018, it had a net loss of RMB 8,266,100. Due to the continued decline in operating efficiency, FAW Huali has entered the list of “Specially Announced Vehicle Manufacturers (3rd Batch)” by the Ministry of Industry and Information Technology.

Despite the huge losses, FAW Huali at least still has the passenger car production qualifications that countless new car companies dream of, and they are very complete. If it can successfully take over, Byton Motors can legally produce the planned SUV, sedan and MPV models.

Byton Motors was established in 2016 by Bi Fukang, former Vice President of Engineering of BMW Group, Dai Lei, former General Manager of Infiniti China, and others. It is positioned to build high-end pure electric smart cars. The headquarters and production plants are located in Nanjing. Byton has already unveiled two concept cars, namely a medium-sized pure electric SUV and a medium-sized pure electric sedan. The first SUV will be officially mass-produced at the Nanjing plant at the end of 2019.

On July 2nd, Byton and FAW Group signed a strategic cooperation framework agreement in Nanjing. The two parties announced that they would carry out a series of cooperation in platform technology, investment in shares, and parts procurement. Byton's Series B financing also received the participation of FAW Group. It is reported that the investment amount has reached 260 million US dollars.

According to the latest “Automotive Investment Management Regulations” (draft), the possibility of new car manufacturers applying for new qualifications from scratch is close to zero, and most of them can only adopt the method of OEM or acquisition of existing qualifications. Based on the current policy threshold and the background of enterprise cooperation, Byton's acquisition of FAW Huali's production qualification is also reasonable.

However, if Byton wants to adopt FAW Huali’s qualifications, there are also major challenges, and it needs to help it to get out of the special public list. Secondly, it will also negotiate with the Tianjin local government on the feasibility of transferring the qualification to Nanjing. For automobile and motorcycle manufacturers that cannot maintain normal production and operation, a two-year special public announcement management (except for newly-built enterprises) shall be implemented, and they shall be required to rectify and meet the access conditions as soon as possible. Therefore, Byton Motors needs to complete the integration and activation of FAW Huali before May 2020. But according to the mass production plan, Byton has to be faster.

In addition to FAW Huali’s “zombie” qualification transfer, from the previous cases of Weimar Automobile’s acquisition of Zhongshun and Dianjia Holdings Xihu, car manufacturing qualifications are still very scarce. It is expected that new energy car manufacturers will adopt measures to obtain qualifications in the future. There will be more and more cases of acquiring or integrating existing qualifications.