LeEco gets 10 billion yuan lifeline, breaks ground on China car plant
LeEco’s 12 billion yuan Deqing assembly will have the capacity to produce 400,000 electric vehicles a year by 2018
LeEco said it has received a 10 billion yuan (US$1.44 billion) lifeline from an unidentified strategic investor, the same day that the cash-starved video streaming and TV maker founded by Jia Yueting broke ground on a car assembly in China.
The plant, located in Deqing (德清) county of Zhejiang province close to the tourist destinations of Moganshan and Hangzhou, will have the capacity to assemble up to 400,000 electric vehicles by 2018.
The factory will be fully automated, with robots handling up to 90 per cent of the work, said Zhang Hailiang, chief executive of LeSupercar, the LeEco unit that’s producing the vehicles.
Trading in the shares of LeEco’s video streaming unit Leshi Internet Information & Technology Corp. was suspended on the Shenzhen exchange on December 7, after an 8 per cent plunge in its stock price a day earlier amid concerns about LeEco’s cash shortage.
The company said it asked for shares to be halted to protect shareholder interests, after market rumours surfaced that margin calls on the credits of Jia and his brother Jia Yuemin had been triggered when the stock price slipped to below 35.21 yuan on December 6. LeEco refuted the margin call rumours.
In a November letter to his staff, Jia highlighted the company’s financial woes. LeEco had expanded quicker than it could raise external funds, and the company’s capital structure was “weak,” Jia wrote.
Concerns overs LeEco’s capital woes had also been mounting, with mainland Chinese media reports stating that the company had defaulted on payments to suppliers of smartphone components.
However, within two weeks of Jia’s letter,LeEco said that it raised US$600 million from various unidentified investors.
The announcement of the 10 billion yuan investment is the latest source of funding for the company. LeEco said it had received an unspecified sum of money as “a gesture of sincerity,” without specifying the amount,and without disclosing whether the total investment is in cash or stock.
LeEco is also seeking to restructure and optimise its operational efficiency. Last week, LeEco laid off over 60 employees in Hong Kong, following its retrenchment of about 100 staff at its LeSports subsidiary at the end of November.
Several management restructures had also taken place, most notably the appointment of Anthony Gao Jun as its Asia-Pacific chief executive, replacing previous head Mok Chui-tin.
However, LeEco’s financial troubles have not deterred Jia from his dream of producing its LeSee Pro autonomous electric car.
On Wednesday, LeEco broke ground on its 12 billion yuan car factory in China, with assurances that it’s on schedule to begin production.
"The car plant is designed to produce high-end cars that can meet the standards of luxury cars in the world,” Zhang said during the inauguration of the factory. Jia, who had previously been front and centre to show off his company’s carmaking aspirations, skipped the groundbreaking ceremony.
The Deqing car factory is part of a 20 billion yuan development with the Zhejiang government in the county called the Eco Experience Park, including a theme park.
The car plant will reach its full production capacity upon completion of the second phase of the entire project, Zhang said, without giving a schedule, but the company said mass production will begin in 2018.
The first phase of the park is estimated at 11 billion yuan, he said. LeEco will introduce virtual reality for customers to experience the car assembly process and help the company produce vehicles custom-made detailing and specifications.
The project will enjoy the support of the local government, which is keen to develop car production in the area, said Chen Weijun, mayor of Huzhou city where Deqing county is located.
Automobile assembly is one of LeEco’s most important business units because it can be integrated with the company’s software, smartphone and smart TVs in future, said co-founder and vice chairman Liu Hong.
Trading in Leshi’s shares will remain suspended from Thursday to prevent “abnormal price fluctuations,” although the suspension will not exceed 10 trading days, LeEco said.