Neta Auto, a prominent electric vehicle (EV) maker in China, is currently facing operational challenges due to its high debt. In order to address this issue and prepare for the resumption of production, the company has reached a debt-for-equity swap agreement with 134 core domestic suppliers, totaling more than RMB 2 billion yuan ($275 million).
According to reports from local media outlets, Neta offered its suppliers a proposal wherein 70 percent of their claims would be converted into equity in its parent company, Hozon Auto. The remaining 30 percent would be treated as interest-free debt. The company plans to repay the debt in 15 installments, with the first installment scheduled for repayment in May.
The debt restructuring plan has received support from major suppliers, including CATL and Gotion High-tech. Neta’s parent company, Hozon Auto, was established in 2014 and obtained the qualification for automobile production in 2017. Currently, the company only operates under the Neta brand.
In light of its financial difficulties, Neta made significant layoffs in November last year. To address its financial challenges and facilitate new financing, the company held a communication meeting with suppliers in March to discuss the conversion of debts into shareholdings.
Neta’s total liabilities amount to nearly RMB 10 billion yuan, with a significant portion owed to suppliers. Potential investors are hesitant to provide new investment until the company reduces its debt burden. Despite its recent struggles, Neta experienced a surge in deliveries in 2021-2022, delivering 152,073 vehicles in 2022.
While Neta has faced operational setbacks in China, it is actively expanding overseas. The company recently participated in the Bangkok International Motor Show and aims to sell over 10,000 vehicles annually in Thailand. Additionally, Neta secured a credit line of 10 billion baht ($294 million) from a Thai financial institution.
In conclusion, Neta’s debt restructuring efforts and expansion into international markets reflect its commitment to overcoming financial challenges and securing a sustainable future in the competitive EV industry.
