At the Chengdu Auto Forum, ZAP CEO Mr. Steve Schneider announced that ZAP have officially taken over Zhejiang’s Jonway UFO brand in a bid to further the electric car market.
A more official announcement regarding the buyout of Jonway UFO is expected to be made later next week at a news conferences. In a later interview with auto.sohu.com, Mr. Schneider revealed that they are not aiming for China to become the largest market for ZAP’s electric vehicles, but they hope that it will remain an important one. ZAP are aiming to start selling an electric version of the UFO SUV to taxi fleets in China, which account for a large percentage of sales. Later in the interview, Mr. Schneider goes into the problem of pushing electric vehicles into the mass market rather than leaving them in the sidelines as niche vehicles, which has so far been the problem for electric car manufacturers.
Like the idea of keeping focus on the masses market, the Xebra experience is welcomed by many but multiple EV choices will be more than great. Already desperate to have a close up on real life conditions with the progressive X-prize model Zap brought in.
http://www.zapworld.com/ZAP-Acquires-Majority-Stake-in-Chinas-Jonway-Auto
How can that be? Vehicles are restricted industry, no Foreign company can hold 51% share in a Chinese company that intends to sell vehicles in China.
Please correct me, if I got that wrong.
I guess the big foreign players would pull their buyout strategy out of the drawer immediatly to get rid of their “partners”.
From that link link I uderstand that Jonway Auto is a wholly owned subsidiary of Jonway Group, Jonway’s management will be leading and expanding its product line of traditional vehicles and will begin to build the production line for ZAP’s EVs while ZAP will enhance its operations management team to focus on delivering the opportunities at hand.
Is it weird? Why?
http://zapglobal.wordpress.com/2010/09/17/china-government-approves-zap-acquisition-of-majority-stake-in-jonway-auto/
Yes beni-w, you are right. If the automaker is FAW/SAIC, there is no chance you can get over 51%. However Jonway Auto is just peanut and there is no significance of its existence in China’s auto industry. Its main business is export to ZAP so it is OK for ZAP to hold the company. There are lots of ways to get around this rule. You just ask a local Chinese company representing ZAP’s interest to hold a certain share, then two of them will get over 51% controlling Jonway. GM/SAIC/Wuling is a good example.
Thanks hk, you just took my words.
I do believe Chinese Market is as challenging as to propel your biz solution solving skills to new levels of understanding, but you just have to interiorize and see legal technicisms as what they are, “Technicisms”.
Let me quote M.K. Ash on this, “Don’t limit yourself. You can go as far as your mind lets you.”
Works for me every day.
Cheers.
D.Manuel, your insight on business is fantastic, needs deep thought. As far as “Technicisms” is concerned, the Lehman Brothers fiasco showed how worse it could be when got too far. The Jewish investment bankers are the experts on that account, Chinese have a lot to learn from them.
Its risky for ZAP to proceed this way, if they upset anybody in the authorities, they can pull the plug any given day.
Or anybody who has a distant cousin in the authoities and sees an business opportunity there can make them loose it all…any bet on their stocks is prone to bust…question is when.
China is changing, all the cowboy stuff that worked 10 years ago, isnt working anymore, at least not for foreigners. to many similar propositions went sour already. ZAP just deceided to go down the drain.
At the current exchange rate the ZAP company would have to make a 1 to 5 Reverse split to get the Capital needed to close the deal on the Jonway purchase + keep a reserve for capital requirements as dictated by the Stock exchange. Zap did not win X trial so its exposure is limited and it doesn’t seem to be getting DOE money it hoped to do a US manufacturing plant. Are the Chinese Venture Capitalists going to loan ZAP the rest of the money to fully buy out Jonway?
beni-w, you are wrong. ZAP is still in the upperhand because Jonway Group needs ZAP more than the reverse. ZAP can provide the capital for expansion, technical supports in EV development and dealership network in the US for market growth. You maybe right when there is no need for ZAP, Jonway Group will kick it out to regain full control. The chance of getting to such situation is very slim, ZAP has to bet on this. Anyway you really know how business is working in China.
The Chinese law is very simple. No foreign company will gain majority ownership of a Chinese auto manufacturer. Fifty (50)per cent is the maximum stake allowed to be held by a foreign auto maker.
Essentially Zap is just a global EV distributor. Jonway, aka Zhejiang Feidie Auto, on the other hand, is a manufacturer of gas engine driven buses and recently a car model, sold as far away as Italy, maybe Germany, and elsewhere. Jonway also has a domestic tie-up with Wuzheng, maker of light trucks.
According to China’s 2004 Auto Policy (the one still in force), foreign companies can only own up to 50% of an auto assembly joint venture, UNLESS that joint venture is used to export vehicles.
There is precedent for this. Honda owns more than 50% of its JV with Guangzhou Auto because it exports vehicles.
But as another commenter pointed out, Jonway is a private company, so the fact that a foreign company wants to buy one of its subsidiaries is of less concern to Beijing. FAW, SAIC, Dongfeng, Chang’an, etc. will never be majority owned by foreigners.
Did any of you notice that NEITHER ZAP Jonway nor ZAP Hangzhou is qualified for the Subsidy program by the Chinese Govt.
Zap stock price has cooled in the USA and one wonders where the 100 Million will come from to build new cars for export?
Zap nor Zap Jonway has no line of credit with any American Bank and it does not seem to be able to get Venture Capital money from Wall Street. (It has an atrocious past history with Wall street and has been ejected from 3 stock exchanges in its past 10 years)
Are Chinese Venture Capitalist going to fund this company in its present form? Or has Holley Group in China and Samyang company in Korea going to be the venture capitalists? Zap has pledged every P patent that it has to the Cathaya group run by Dr Priscilla Lu.
We note that This Zap Jonway deal can terminate by May 30,2011 without any termination fee. So all that will be left is highly leveraged 300Million shares of Zap stock and some PO former investors.