Lifan’s bets on alternative fuel cars fail to relieve sales slump

Gasgoo.com (Shanghai June 9) - Before reaching a relatively large scale in production and sales, Chinese Lifan Motors now bets on alternative fuel cars for more profits. In an announcement released a few days ago, Lifan Holdings stated that it would issue no more than 430 million non-public offering stocks, funding no more than RMB 5.2 billion raised for alternative fuel projects, as well as reimbursing bond and bank loans.

Some insiders maintain that the current investment boom in the alternative fuel vehicle market is due to a series of governmental support and subsidy policies, however, it is still uncertain that if those stimulating policies can stimulate the sales of the alternative fuel vehicle in the long term. Without a size advantage in traditional cars, Lifan faces overcapacity risk even in any of those new energy vehicle projects, if the alternative fuel vehicles don’t sell well, no matter how big the investment is.

Statistics shows that the Lifan Holdings sold 135,100 passenger cars in 2014, falling behind the target of 189,000 units. As Chinese cars export market shrinks, Lifan witnessed a big decline in sales this year, with 34,300 in the first four months, a 17.45% drop compared with the same period of last year. Lifan Holdings responded that they would catch up by developing the intelligent alternative fuel vehicles.

Before that, Lifan Holdings rolled out four new energy car models, in order to challenge Chinese alternative fuel car giant BYD. According to Lifan’s new energy car development plan, in the future Shanghai Jiading factory will produce high-end alternative fuel vehicles with lithium battery, while He’nan factory will assemble cars with lead-acid battery as electric drive.

Lifan said that these non-public offering stocks and the raised funds would be mainly used to establish an integrated industry chain for alternative fuel vehicles as well as to reduce the debt ratio of the company. Lifan Holdings will put all the funds, except for the issue expense, into intelligent alternative fuel vehicle energy station project, intelligent alternative fuel vehicles 6 billion Wh lithium battery cell project, 300,000 intelligent electric cars and electronic control project, 300,000 intelligent electric cars transmission project, platform development project for intelligent electric cars and reimbursement of some bonds and bank loans.

Although Lifan Motors made an early start in alternative fuel vehicles, its first real EV, i.e.Lifan 320ev was not launched until last September. And Lifan 620ev was released thisApril. This means that Lifan’s new energy cars projects are still in the launching stage with a slow sale rate.

BYD, as the major rival of Lifan, currently ranks No.1 at the sales of alternative fuel vehicle, with 8,944 BYD Plug-ins sold during the first four months of this year, as well as 1,989 for E6 pure EVs. On the other hand, Lifan’s sales statistics can’t be found in the alternative fuel vehicles statistics of China Association of Automobile Manufacturers. Besides, Lifan 320 had been only sold 183 in the April in accordance with national statistics for passenger cars. Hence one can see that Lifan’s alternative fuel vehicles don’t sell well and the promotion speed in private car market was quiet low.

Industry analysts hold that the speed-up of many Chinese carmakers’ alternative fuel projects should be bound up with the government’s encouragement in the development of new energy vehicles. Though for many companies like Lifan, it is an opportunity to transform and thrive, to push forward alternative fuel vehicles forcibly can hardly succeed when their traditional cars hasn’t received recognition.