The cutthroat competition in mainland China’s electric vehicle (EV) market threatens to sink Hozon New Energy Automobile, as the maker of Neta-branded cars faces a lawsuit from a Shanghai-based advertising agency that wants the debt-ridden company to be liquidated.
According to a document recently published on the National Enterprise Bankruptcy Information Disclosure Platform, a court in Jiaxing, in eastern China’s Zhejiang province, is reviewing the bankruptcy case after Shanghai Yuxing Advertising filed a lawsuit against the EV maker for non-payment of dues.
“An increasing number of carmakers are facing a financial squeeze because of intense competition,” said Gao Shen, an independent analyst in Shanghai. “Hozon’s crisis has exacerbated a bearish sentiment surrounding the Chinese EV sector.”
More than a dozen Chinese EV start-ups have collapsed over the past five years in a market crowded with more than 50 assemblers, which include
WM Motor, Human Horizons, Jiyue and Byton.
Only half of the nation’s EV production capacity, or 20 million units, was put to use in 2024, according to Goldman Sachs.
Last week, video clips showing Hozon employees chasing founder and CEO Fang Yunzhou for delayed wages went viral on Chinese social media. The struggling carmaker has been laying off workers since October.
Hozon declined to comment.
Chinese carmakers’ discounts more than doubled to a record 16.8 per cent in April from 8.3 per cent in 2024, according to a JPMorgan Chase report in May.
Industry officials and analysts expect more underperforming EV makers to face financial woes in the next one to two years as an unending price war further erodes profits.
Among Chinese EV builders, only
BYD, the world’s largest EV maker; Li Auto, Tesla’s nearest rival in China; and Aito, backed by telecommunications equipment giant Huawei Technologies, are profitable.
In December, Hozon’s CEO Fang told employees that the carmaker would undergo optimisation and reorganisation, as well as efforts to simplify its management structure, to weather the downturn as the business outlook weakened.
He said the steps were necessary to “establish a new Hozon”, adding the company was determined to launch an initial public offering in Hong Kong despite cash-flow problems.
Hozon filed a listing application with the Hong Kong stock exchange last June, saying it would use the proceeds from its share sale to quicken the pace of its overseas expansion amid cutthroat domestic competition.
Hozon, founded in 2014, raised 26.4 billion yuan (US$3.7 billion) in venture capital funding over 11 rounds from 19 investors, according to data compiled by Crunchbase.
Its backers include Chinese cybersecurity firm Qihoo 360 Technology and Citic Securities, the mainland’s largest brokerage.
The company has already started assembling vehicles in Thailand.
Between 2021 and 2023, Hozon posted a combined loss of 18.3 billion yuan.
