"Hot Wheels" emergency brake? Neta Auto embroiled in salary arrears controversy
The pressure on China's emerging automakers is mounting, with brands like HiPhi, WM Motor, and Leiding Auto gradually exiting the market.
Before their collapse, these brands were often exposed for unpaid wages and supplier payments, reflecting the financial difficulties faced by these companies.
Recently, this pressure seems to have also affected Neta Auto, one of the emerging automakers.
Think Twice Before Buying Neta?
Recently, discussions about Neta Auto's failure to pay September salaries on time have surfaced on social media, drawing widespread market attention.
Among them, a self-proclaimed "new force worker" and verified Neta Auto employee posted on the Maimai platform, saying, "Neta Auto can no longer pay salaries and owes suppliers a lot of money. I advise everyone to think twice before buying a Neta car."
The issue quickly escalated, with the related topic "Neta Auto can't pay salaries" trending on social media.
Some media reported that Neta Auto responded to the rumors of unpaid wages, stating that frontline employees' salaries have been paid, while middle and senior management are undergoing equity optimization and salary structure adjustments. The company is confirming rights before its IPO, which has delayed some salary payments.
However, Neta Auto's official response did not address all concerns and did not mention the alleged unpaid supplier payments.
According to previously disclosed prospectus, Neta Auto had nearly 8,000 employees in 2023, including 2,132 R&D personnel. The large workforce has put significant pressure on the company's payroll. In 2023, Neta Auto's employee benefit expenses under sales costs, sales and distribution expenses, general and administrative expenses, and R&D expenses were 370 million yuan, 560 million yuan, 700 million yuan, and 850 million yuan, respectively, totaling nearly 2.5 billion yuan.
Over the past few years, Neta Auto has not only continued to incur losses but also experienced persistent net cash outflows from operations. As of the end of April this year, its cash and cash equivalents were only slightly over 400 million yuan. It's clear that Neta Auto's current cash situation makes paying salaries a "huge pressure."
As a result, Neta Auto has been trying to tap into capital markets for "blood transfusions." In late June this year, it submitted its first prospectus to the Hong Kong Stock Exchange, but it has yet to pass the hearing.
"Wind Fire Wheels" Running Out of Steam
How brutal is the competition in Neta Auto's segment?
$GWMOTOR(02333.HK) Chairman Wei Jianjun recently stated that over the past decade, 24 Chinese auto brands have exited the market, and current trends suggest more may follow.
Unfortunately, in this industry's cutthroat battle, Neta Auto has fallen behind, becoming a straggler among emerging automakers.
Neta Auto initially gained traction in the low-end market and achieved decent sales in 2022. Currently, it is actively transitioning, but its high-end models have not met expectations.
On the other hand, amid the industry's "price war," domestic new energy vehicle prices continue to drop. Neta Auto's price range of approximately $15,000 to $45,000 is the most fiercely competitive segment for new energy EVs, meaning the company faces significant pressure.
Based on Neta Auto's disclosed data, its sales have been declining since 2023. In the first three quarters of this year, cumulative deliveries were 85,900 units, down about 12.1% year-on-year. In August and September, Neta Auto's sales declined both year-on-year and month-on-month.
In September, Neta Auto's sales were 10,100 units, down 23.4% year-on-year, making it the only emerging automaker with declining sales. That month, $LI AUTO-W(02015.HK) , $LEAPMOTOR(09863.HK) , and $XPENG-W(09868.HK) posted impressive sales growth, in stark contrast to Neta Auto.
Leading emerging automakers typically sold between 20,000 and 50,000 units in September, while Neta Auto managed only about 10,000, far from achieving economies of scale. Meanwhile, high R&D and sales and distribution expenses have plunged the company deep into losses.
From 2021 to 2023, Neta Auto's annual losses were 4.84 billion yuan, 6.666 billion yuan, and 6.867 billion yuan, respectively, with losses widening each year. Over three years, cumulative losses exceeded 18 billion yuan. Given the current market competition and Neta Auto's poor performance, turning a profit will be no easy feat.
Is the Way Out Overseas?
Chinese automakers with global vision are eyeing vast overseas markets, investing in factories abroad.
For domestic automakers, going overseas offers incremental growth, alleviating pressure from domestic competition. Neta Auto's struggles at home may find a lifeline abroad.
Regarding how to turn losses into profits, Neta Auto founder Fang Yunzhou recently revealed a two-step plan: "going global" and "enhancing brand value." He believes the global new energy vehicle market is just beginning, and Neta Auto's overseas expansion could boost its future growth space and gross margins.
According to its website, Neta Auto began planning its overseas expansion in 2021, adopting a strategy of "deepening ASEAN, seizing South America, and developing the Middle East and Africa." Currently, Neta Auto has established three overseas factories in Thailand, Indonesia, and Malaysia, with five models launched abroad. Its products are sold in Thailand, Indonesia, Malaysia, Ecuador, Mexico, Kenya, and other regions, covering over 30 countries and territories globally, with 420,000 users worldwide.
According to its development timeline, Neta Auto has focused on overseas expansion in recent years, deepening its presence in 2023 and pursuing global expansion in 2024. As of January this year, its cumulative overseas sales exceeded 20,000 units.
In its prospectus, Neta Auto stated that it exported 17,000 units in 2023, accounting for 13.7% of its total sales that year and contributing 12.0% of its revenue.
While Neta Auto has achieved some success overseas, it must also contend with fierce competition in Southeast Asia from strong rivals like $BYD COMPANY(01211.HK) and $SAIC Motor(600104.SH) .
Additionally, due to EU tariff policies, more Chinese automakers are turning to Southeast Asia. Whether Chinese automakers will trigger another elimination race overseas and whether Neta Auto can take root and grow in foreign markets remains to be seen.
Author: Yao Yuan
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