The overall listing of FAW is difficult to resolve the predicament of Xiali delisting

Although the outside world is full of expectations for the overall listing of FAW Group, it is clearly that FAW Xiali who has fallen into the edge of delisting has no power. A few days ago, FAW Xiali announced that since April 2, FAW Xiali stock changed its name to “ST Xiali”. According to the previous agreement signed between FAW Xiali and FAW Co., April 6th was originally the final date for the completion of the reorganization of FAW Xiali. However, after waiting for three years, FAW Xiali did not wait until this day. The industry generally believes that FAW Xiali, which has suffered losses for two consecutive years, has little chance to make profits through its own transformation.

Termination of three years ended

According to the announcement issued by ST Xiali, on June 28, 2011, FAW Group implemented restructuring of its main business and established FAW shares. In order to solve the competition in the same industry, FAW Co., Ltd. promised to FAW Xiali: “In the five years after its establishment, it will reorganize its automobile production business through asset restructuring or other means to solve the problem of competition with FAW Xiali. FAW Co., Ltd. will strive for this Within three years after the date of completion of the acquisition, the issue of horizontal competition between FAW Car, FAW Xiali Company and FAW-owned companies, and competition between FAW Car and FAW Xiali Co., Ltd. will be thoroughly resolved at a reasonable price and in a lawful manner."

On April 6, 2012, FAW Co., Ltd. completed the transfer formalities of FAW Xiali shares held by FAW Group, and the acquisition was completed. Now that the three-year contract has passed, FAW Xiali acknowledged that FAW could not completely solve the problem of competition in the industry within three years after the completion of the above-mentioned acquisition. However, this work still has no timetable for restart.

Car analyst Zhang Zhiyong believes that FAW Group did not provide proper assistance to FAW Xiali. In addition, Xiali’s own R&D strength is very weak, and new car shortages can still be maintained by existing products. However, it is difficult to establish a foothold after the intensified market competition.

It is understood that in the late 90s of the last century, Xiali had been on the throne of sales of the nation's economical cars for the first time in many years. Since the acquisition of Xiali by FAW Group, FAW Xiali has been positioned as an “economical car” base. Since then, FAW Xiali has been lacking in the introduction of new technologies for a long time. Most of the products have used the old NBC platform and have suffered losses for two consecutive years. According to the current delisting system, listed companies that have suffered losses for three consecutive years will be forced to delist. Therefore, this year has also become the year of the shelling of FAW Xiali.

Self-help opportunities

In fact, FAW Xiali did not give up its final effort. When the stock was renamed ST Xiali, FAW Xiali had issued an announcement saying that FAW Xiali will take six measures to save itself in order to fight for the withdrawal of the delisting risk warning. The first of these is: Strengthen the power of commodities, accelerate the adjustment of product structure, and constantly introduce new products to adapt to new changes in market development.

It is reported that the important product that currently carries the company’s product transformation and upgrade is the Junpai D60, which was listed in October last year. FAW Xiali hopes to use this new vehicle to help the company improve its profitability. However, the sales of the Chunpiao D60 did not open up. Statistics show that in December last year, Jun D60 sold more than 2,300 vehicles, a far cry from its goal of selling 5,000 vehicles a month.

According to the plan, FAW Xiali will also timely adjust the marketing management system, innovate the modes and methods, actively expand the derivative business, and increase the export intensity of products according to the adjustment of product structure and changes in the market situation. Through product transformation, it supports the overall transformation and ensures the realization of business objectives.

Cui Dongshu, secretary-general of the National Passenger Car Information Association, stated that due to the consideration of the Group’s strategic development, Xiali can only continue to develop low-end brands and it is difficult to transform and upgrade. It is in this situation that the Xiali brand's influence is declining and sales are hard to come by.

Xiali brand life and death

In fact, when Jun sent the brand last year, it was reported that FAW Xiali was planning to “go to Xiali”, but in the end FAW Xiali denied the news.

In this regard, Zhang Zhiyong believes that as the overall listing of FAW Group is expected to strengthen, FAW Xiali is likely to encounter reorganization. Although the settlement mentioned in the announcement is not limited to asset and business reorganization, merger, asset acquisition, liquidation closure, asset custody, and other methods approved by CSRC and/or the listed company's shareholders meeting, basically FAW Group will not take the initiative to FAW. Xiali capital injection, merger and reorganization may be the best choice.

Today, FAW Xiali has no way to retreat. If this year's annual performance cannot turn a profit, it will face the risk of mandatory delisting. A securities analyst told Beijing Daily that it is difficult for Xia Li to change its downtrend in the future. Whether it is a delisting or a merger, the Xiali brand will face the risk of change or even disappear.