Caixin
Jul 31, 2018 04:43 AM
BUSINESS & TECH

Beijing Vantone Wheels Into Electric-Car Market

Beijing Vantone is the latest real estate developer to tap into the new-energy vehicle market. Photo: VCG
Beijing Vantone is the latest real estate developer to tap into the new-energy vehicle market. Photo: VCG

Beijing Vantone Real Estate Co. Ltd. agreed to pay 3.17 billion yuan ($465 million) for control of electric-vehicle battery supplier Phylion Battery Co. Ltd., becoming the latest property giant to jump on the new-energy vehicle bandwagon.

Shanghai-listed Beijing Vantone, one of China’s largest privately owned real estate developers, said Sunday it will acquire 78.3% of Sunzhou-based Phylion Battery, marking the developer’s first foray into an electric car-related business.

The booming electric-auto market has attracted several other Chinese real estate developers, including Evergrande Group, Baoneng Group and Country Garden. China is the world’s largest new-energy vehicle market, accounting for more than half of global electric-vehicle sales last year with the support of generous government subsidies.

By investing in the new-energy vehicle sector, developers can tap into a booming new market while paving the way to winning easier access to local land deals, said Song Sing, a real estate analyst at the China Development Institute. And acquiring an existing industry player is often a good start.

Developers have found it increasingly difficult to acquire land for pure residential development amid the government’s campaign to tame housing market bubbles, said Xiao Wenxiao, an analyst at the real estate market research institute CRIC. Local authorities often try to attract developers and boost their local economy by offering tracts of land with industrial development requirements.

While such a business model is attractive to developers, the heated competition in the new-energy vehicle sector also makes acquisitions risky. Many of the companies springing up today are weak performers that are likely to be forced out of the market in a few years, said Fang Jianhua, president of a state-backed new-energy vehicle investment fund.

Established in 2003, Phylion Battery is the 10th-largest lithium-ion battery supplier in China in terms of installed capacity, according to market research provider EV Economy Institute. Phylion Battery accounts for about 1.7% of China’s market for batteries for electric commercial vehicles and light electric vehicles such as battery-powered bikes and scooters.

In 2017, Phylion Battery posted revenue of 1.44 billion yuan. Its 2017 profit nearly doubled from the previous year to 202 million yuan, according to a company financial report.

Beijing Vantone said Phylion Battery had 1.6 billion yuan of total assets at the end of March, with net assets of 622 million yuan. Beijing Vantone valued the company at 4 billion yuan in the deal, which Fang called fair based on Phylion Battery’s growth prospects.

According to data from the China Association of Automobile Manufacturers, 777,000 new-energy vehicles were sold in China last year, up 53% from 2016. China has set a sales target of 7 million electric vehicles annually by 2025.

In the first half of this year, sales of new-energy vehicles in China doubled from a year earlier to 412,000, despite policy shifts to gradually phase out subsidies and incentives by 2020.

Baoneng, which initiated a high-profile hostile bid to take over China Vanke in 2016 that failed, is one of the most active real estate companies in the electric-car industry. Earlier this month, a company backed by Baoneng spent more than 300 million yuan for 5% of vehicle battery producer Shenzhen Zhaoxin New Energy Co. Ltd.

In January, Baoneng invested 6.63 billion yuan to take a 51% stake in Shanghai-based automaker Qoros Automotive Co. Ltd. Qoros was set up in 2007 as a joint venture between Chinese automaker Chery Automobile Co. Ltd. and Israeli billionaire Idan Ofer’s Kenon Holdings Ltd.

Since last year, Baoneng has signed investment agreements with local governments totaling 120 billion yuan to develop new-energy vehicle production projects in Hangzhou, Guangzhou, Xi’an and Kunming.

Contact reporter Han Wei (weihan@caixin.com)

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