Chinese Truck-Maker Says Unpaid Stake Sale of German Auto Brand Sinks Earnings
Beiqi Foton Motor Co. Ltd. (600166.SH) said its gross profit for the first half of this year stood at 554 million yuan ($85 million), but that the figure would have been a little over 1 billion yuan if the company not still embroiled in “Borgward-related matters,” referring to the sale of a 67% stake in the legacy car brand in 2018. That’s according to the Chinese truck maker’s half-year results (link in Chinese) filed to the Shanghai Stock Exchange on Friday.
However, despite financial trouble caused by Borgward, Beiqi Foton’s net profit as of June 30 jumped 238.8% from a year earlier, when the entire automotive industry faced disruptions caused by the Covid-19 pandemic.
Beiqi Foton said it sold 411,962 vehicles in the period, up 28.7% year-on-year.
In December 2018, Beiqi Foton sold its stake in the originally German car brand for 3.97 billion yuan (link in Chinese) to Changsheng Xingye Xiamen Enterprise Management Consulting Co. Ltd., which was controlled by ride-hailing provider Ucar Inc., a ride-hailing services provider owned by Luckin Coffee Inc. co-founder and ex-Chairman Lu Zhengyao.
Months later in January 2019, Ucar agreed to buy Borgward for 4.1 billion yuan, with Lu eying the brand as the centerpiece of a future auto retailing business.
However, Ucar delayed payment for the purchase, with Beiqi Foton saying in April 2020 that about 1.5 billion yuan of that amount was still outstanding. Beiqi Foton said in its half-year earnings that as of June 30, it was still short nearly 1 billion yuan in pending funds and interest receivables from the December 2018 sale.
Beiqi Foton said that its profit had taken an estimated 490 million yuan hit from these “Borgward-related matters.”
Beiqi Foton, a unit of vehicle manufacturing giant Beijing Automotive Industry Holding Co. Ltd., purchased the rights to the Stuttgart-founded Borgward brand for 5 million euros ($5.9 million) in January 2014. Borgward, once Germany’s third-largest automaker, had been forced into liquidation by creditors in 1961. Beiqi Foton began marketing its Borgward BX7 SUV for the Chinese market in late 2016.
Contact reporter Kelsey Cheng (email@example.com) and editor Heather Mowbray (firstname.lastname@example.org)
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