The stall puzzle of "Old Man Le Yi Ge"

China Newsweek reporter/Wang Yu

Published in the 2023th issue of China Newsweek magazine on June 6, 5

On May 111, 5 days after founder Li Guoxin reported the secretary of the Changle County Party Committee in his real name, the Changle County People's Court announced that the former "old manle" leader Reading Automobile Group Co., Ltd. had filed for bankruptcy from him.

On the evening of January 2023, 1, Li Guoxin, founder of Reading Automobile, released a report video of his own appearance through the official account of the group. In addition to reporting the current leader of the county party committee in his real name, Li Guoxin also said that because the Changle County government was unwilling to provide loan renewal support for Reading, it affected investor confidence, which in turn led to Reading's financing not being in place as scheduled, and the company stopped work and production. On the day the report was issued, Shandong announced the establishment of a provincial and municipal joint investigation team to enter Changle County to investigate and verify the situation and deal with it in accordance with laws and regulations.

An investigation by China Newsweek found that before Li Guoxin issued the whistleblower letter, from April 2021, when the first Reading Mango rolled off the production line, Reading Automobile, which has transformed from a low-speed electric vehicle to a micro electric vehicle, has collected hundreds of millions of yuan in prepaid payments from about 4 dealers but has not been able to deliver the car, including many bank loans guaranteed by the group by Reading salespeople. At present, these loans have been overdue.

The reporter's on-site visit found that the Reading Industrial Park and the Bidwen Industrial Park located on Biedwin Road in Changle County were very quiet, and according to the security guard, except for one or two employees on duty in various departments, there were no employees in the park to work, and they had not received their wages for three months. In addition, there is a Changle County government worker at the entrance of the Reading Industrial Park for a long time to receive visiting dealers.

On May 5, the Reading Industrial Park in Changle County, Weifang City, Shandong Province, was very quiet. The staff of the Changle County People's Government are on duty at the entrance of the industrial park every day to receive dealers who come to collect money. Photo by reporter Wang Yu

Relevant staff in Changle County said that the county government is also helping enterprises receive dealers, count dealer appeals, and actively contact interested investors to try to promote the bankruptcy reorganization of Reading Automobile. "In the final analysis, Reading is a private enterprise, and there is a market behavior between it and dealers, and distributors cannot seek the government for funding because they lose money."

China Newsweek learned that as early as after the Spring Festival in 2022, Reading was already in business trouble. Since then, Redding has tried to fill the "hole" by pledging equity to banks, contacting investors in Series A financing, and collecting large advance payments from dealers. However, how the "hole" is formed, what is the scale, and the final flow of hundreds of millions of yuan in prepaid car payments by dealers are still unsolved mysteries.

Redding, eager to transform, dealers looking for a way out

After selling "Old Man Le" in the county for six years, Liu Juntao, who came out of the construction site, finally saved hundreds of thousands of yuan, but just having this money did not make him feel relaxed - the wind of "Old Man Le" completely withdrawing from the market became tighter, and Liu Juntao longed to become a "regular army".

In 2021, the Reading low-speed electric vehicle dealer in Yiyang County, Luoyang City, suddenly saw an opportunity. This is a five-door, four-seat A00-class electric vehicle benchmarked against Wuling Hongguang MINI EV, with a total of 4 models to choose from, candy color matching and its exquisite appearance, which is quite commensurate with the product name of "Reading Mango", the official pre-sale price starts from 2,98 yuan, and it will be open for reservation on April 2021, 4. But when the salesman of Reading came to the door and invited Liu Juntao to represent the new car, Liu Juntao did not respond.

In fact, shortly after Reading acquired Sichuan Mustang in 2019, it launched a high-speed car, using the shell of a low-speed car, replaced with a large motor and a large battery. I ordered 6 cars at that time, but that car did a failure, the styling and endurance are still the standard of low-speed cars, the price is still high, and the market does not recognize it. The two cars sent first have not been sold for a long time. Liu Juntao asked for the return and exchange of the four vehicles that had not yet been shipped, but Reading did not agree.

Therefore, after hearing that Reading rebuilt a high-speed electric vehicle after two years, Liu Juntao was immediately alert.

Reading Automobile was founded in 2008, its predecessor was Weifang Biedwin Electric Vehicle Co., Ltd., which started with electric bicycles. Shandong Province, where Reading Motors is located, is the birthplace of low-speed electric vehicles in China. According to public information, from 2016 to 2018, the sales of Reading cars at the outlet of low-speed electric vehicles were 15,21, 28,7 and 30,<> respectively, and they won the sales championship of low-speed electric vehicles for three consecutive years, with a market share of more than <>%, becoming the domestic "old man happy brother".

But the watershed of Reading's boom and bust soon appeared. In 2018, the Ministry of Industry and Information Technology and other six ministries and commissions issued the Notice on Strengthening the Management of Low-speed Electric Vehicles, requiring local governments to stop approving or filing low-speed electric vehicle investment projects, stop building new low-speed electric vehicle enterprises, expand production plants and other infrastructure projects in accordance with the general idea of "upgrading a batch, standardizing a batch, and eliminating a batch".

In the face of the already big market cake, Li Guoxin obviously does not plan to give up the "dream of building a car", and he began to try his best to "transform". In April 2018, with the support of Changle County, Reading Automobile acquired Shaanxi Qinxing Automobile Co., Ltd., obtained the production qualification of new energy commercial vehicles and special vehicles, and announced an investment of 4 billion yuan to establish a production base in Xianyang. In January 200, Reading Automobile acquired Sichuan Mustang Automobile for CNY 2019.1 billion and obtained the production qualification for new energy vehicles, traditional fuel passenger cars and buses, for which Changle County provided a guaranteed loan of CNY 14.5 billion.

At first, dealers, including Liu Juntao, were skeptical about the transformed Reading electric vehicle. Until dealers around Luoyang City brought back the existing car, "I looked at the car, the shape is very fashionable, attracting young people." "In June 2021, Liu Juntao decided to act as an agent after taking a test drive on his own." After deciding to act as an agent, you must first make a deposit of 6,5 yuan, as well as 5,10 yuan of store decoration, and the first batch of <> cars. Liu Juntao told China Newsweek.

In Yancheng, Jiangsu, Gao Haowei, who has operated an auto trade store for 20 years, knows that today's consumers are increasingly recognizing car brands, and the auto trade store model determines the products it sells, with prices ranging from thousands of yuan to millions of yuan, and it is difficult to form brand potential. In fact, his store sales have been declining for 10 consecutive years, with revenue down by half from its peak in 2012. The epidemic has accelerated the elimination of stores, and Gao Haowei believes that to survive, he can only turn to brand franchise.

However, it is not easy to follow this path. "The entry threshold of each car brand dealership system is very high, not to mention the capital threshold, in addition, to assess the ability of your sales team, to identify your contacts in the local political and business circles, and to assess the location of your store." Gao Haowei told China Newsweek. In October 2021, when Reading's salesperson approached Gao Haowei, who had never worked with Reading, he was surprised to find that Reading's access to the network was much more relaxed, and there were no other hard and fast requirements other than a certain amount of prepayment.

The license of Guangdong Jiangmen auto trade shop owner, which has been mainly engaged in the sales of fuel vehicles for 15 years, also needs to be transformed. "At that time, tens of thousands of electric vehicles on the market were very few, and in June 2021, the sales of Reading came to me, and I was optimistic about its market space, coupled with our own transformation needs, there was a demand for a brand." License told China Newsweek.

Urumqi, Xinjiang, Yang Jianmin has provided brand authorized after-sales service for Sichuan Mustang users since 2011. After Sichuan Mustang was acquired by Reading, Yang Jianmin transformed into a distributor of Sichuan Mustang in 2021, and in November of that year, he received a notice of the suspension of Sichuan Mustang, and Yang Jianmin handled the withdrawal from the network. In May 11, Yang Jianmin, who was looking for a way out, saw the investment promotion information released by Reading Auto's WeChat public account and took the initiative to contact the investment promotion manager in charge of Xinjiang.

From the model point of view, according to a number of dealers, when Reading Mango was released, although it was claimed that there were three endurance versions of 130km, 185km and 300km, in fact, the lowest equipped model priced at 2,98 yuan has been out of stock, and because there is no air conditioning in the car, the battery life is too short, and it has basically not been circulated in the market. "Later, we added a model with a range of 200km, and we basically sold this one, with air conditioning and heating, for more than 4,<> yuan." Liu Juntao said.

From the quantitative point of view, a Reading dealer rebate policy statement obtained by the reporter shows that Reading's rebate to dealers is divided into two types: basic rebate and step rebate. Among them, the basic rebate is based on different models, according to the different models, according to each unit 1000 yuan, 1500 yuan, 2000 yuan to the dealer; Step rebate is divided into "≤9 units", "10-29 units" and "30 units and above" according to the number of orders, each of which will return 2000 yuan, 3000 yuan and 3500 yuan to the dealer respectively.

An investigation by China Newsweek found that dealers do not have much choice in terms of models and orders. On the one hand, because of insufficient production capacity, Reading sales usually recommend dealers to choose a single model in the ordering system, and dealers cannot choose their favorite models and configurations; On the other hand, the salesperson will explicitly or imply the distributor that in the case of insufficient production capacity, Reading will give priority to large distributors with stronger supply capacity.

"In the past, I gave models to other brand manufacturers, and I specified the model and color first, but not in Reading, I couldn't specify it, they were all free to specify the assigned model. The regional manager and salesperson also hinted to me, saying that they were also talking with other dealers who had the intention of cooperation, and I behaved better and entertained thoughtfully, so as long as the payment was called, the matter of entering the network was decided. Gao Haowei told reporters.

In the face of the former low-speed car dealership, Reading's sales system is more aggressive in dunning. A chat record of sales personnel in Reading Hubei region obtained by the reporter shows that on April 2021, 4, the sales staff forwarded a regional notice reprimanding dealers: "Dear low-speed families in Reading... if you want to do it, you will directly pay the high-speed, if you can't do it, don't drag on, tomorrow you can't hit the high-speed model, start to re-check and develop other businesses on the 21nd, don't intercede with me... Look at the customers who have already paid Yiyang, Macheng, etc., directly sharp, you don't do not pay, the high-speed side will not be considered, The low-speed business will not call you again..."

Are dealers filling the "hole" in car building?

"Since I paid 2022,7 yuan on July 19, 637000, I haven't received a single car." Yang Jianmin told China Newsweek.

A number of dealers told reporters that in the automobile sales industry, it is common practice for dealers to prepay manufacturers. But unlike Reading, other brands usually deliver their cars within a week of receiving payment.

A number of dealers feedback, Reading Mango in the early stage of the market, market feedback is very good. Autohome data shows that from January to June 2021, Reading Mango came off the production line for less than two months, with a total sales volume of 1,6 units, ranking tenth in the mini vehicle market sales ranking. "Let's sell one, so we're in a hurry to get a car."

On June 2022, 6, Luo Chao, who is in charge of regional sales in Xinjiang, went to Urumqi to meet with Yang Jianmin. Previously, because Yang Jianmin has served Sichuan Mustang for 20 years, he has more information channels to understand Reading than other new online dealers. Yang Jianmin learned through a number of fellow friends that Reading has owed more than 10,2021 vehicles to dealers in 1. Therefore, when he saw the investment announcement issued by Redding in May 2022, he first confirmed to Luo Chao whether the company returned to normal. "Luo Chao told me that the company is developing normally, there is no problem, and it can start." Yang Jianmin said.

Of the $63,7 paid to Reading, $50,10 was for the car and $6,10 was a deposit for the primary seller. Yang Jianmin originally planned to order only 2000 cars, and after completing the model selection in the system, the sales told Yang Jianmin that due to the long distance in Xinjiang and the inconvenient logistics, he suggested that he increase the number to 8 to "make up enough for one plate". After Yang Jianmin agreed, the sales further proposed that each car would also charge more than 10,<> yuan in freight. "Afterwards, I asked my logistics friends to find out that the number of trucks was <>, not <>." Yang Jianmin told China Newsweek.

Similar to almost all Reading high-speed car dealers, Yang Jianmin did not get a paper or electronic version of the contract, and Reading did not make any written commitments about the delivery time and delivery model. For the sake of caution, Yang Jianmin confirmed with Luo Chao on WeChat on July 7 that after the payment was completed, Yang Jianmin would become the only distributor in Urumqi and Changji City, Xinjiang. Yang Jianmin's chat records with Reading sales Luo Chao show that Luo Chao promised that Yang Jianmin would collect the car by the end of July.

On July 7, Yang Jianmin informed Luo Chao on WeChat that he had switched to a shop in a better leased area, but Luo Chao did not reply. On August 22, Yang Jianmin, who had not seen the departure of Reading for a long time, sent a WeChat message again, informing Luo Chao that the new store had been moved, "Just wait for the mango car!" What's going on now? Luo Chao replied: "It is expected that the 8th will contact Xinjiang for logistics delivery." Since then, Yang Jianmin has repeatedly urged the progress of the train on August 2 and 6, and Luo Chao has not responded positively with "calling after the meeting" and "calling back tomorrow".

  8月19日,忍无可忍的杨建民打电话给罗超,催问进展。事后,罗超微信回复称:“在2022 前半年原材料疯狂上涨以及 2021~2022 属于集团公司大面积投资建生产基地阶段,资金周转情况在今年前半年十分艰巨,在 6 月份已和成都市政府签订完融资框架协议,而且在本月中旬已完成进(尽)调。希望您作为投资人,能再给我们几天时间,您的处境我真的非常理解。至于您担忧的公司倒闭问题,以及您的资金安全问题,目前没有任何风险,还是那句话,在职 4 年,雷丁公司目前没有坑过任何一个经销商车款保证金。”












But his explanation is clearly unconvincing. After the Reading incident, dealers in various places exchanged information and claimed: as early as 2021, Reading's production capacity was not enough to fulfill the dealers' prepaid orders, and since then, it has continued to lure dealers to continue to pay on the grounds that the company is financing and funds are about to be in place. Yang Jianmin said that in a conversation with Liu Wei, the latter made it clear that the dealer's prepaid car was used for Reading's capital turnover, not all for vehicle production.

According to the Criminal Law, the crime of contract fraud refers to defrauding the other party of property in the process of signing and performing a contract for the purpose of illegal possession. Including inducing the other party to continue to sign and perform the contract by performing a small contract first or partially performing the contract without actual ability to perform; There are several circumstances such as fleeing after receiving goods, payment, advance payment or secured property from the other party.

At present, a number of dealers have tried to report the case to the Changle County Public Security Bureau and the public security bureau where the store operates. According to a "Notice of Not Filing a Case" issued by the Changle County Public Security Bureau on November 2022, 11, provided by Jiangmen Distributor License, the contract fraud case filed by four dealers such as the license on October 7, 4, "our bureau found that there was no criminal fact...

Notice of Not Filing a Case issued by the Changle County Public Security Bureau. Photo/provided by interviewee

After Liu Juntao reported the case to the local public security organ in Yiyang without success, he sent the report materials to the Letters and Visits Department of the Henan Provincial Public Security Department on April 4 this year, and received a return call from the Luoyang Municipal Public Security Bureau on May 4.

"Whether the Reading Group's actions constitute contract fraud should be judged according to the specific circumstances of the case. There are two elements to determine whether the crime of contract fraud is constituted: first, it depends on whether it has fabricated facts and concealed the truth, that is, whether there is so-called fraud; Second, it is necessary to see whether he has the subjective intention to illegally occupy other people's property, which should be judged comprehensively according to his willingness, behavior and ability to perform the contract. Mao Lixin, director of Beijing Shangquan Law Firm, told China Newsweek.

Mao Lixin introduced that in judicial practice, it is more difficult to determine subjective intent such as "illegal possession". "If the business entity is real, there is often some room for controversy over whether the specific act is fraud in business activities or fraud with the purpose of illegal possession."

It is worth noting that since Reading has filed for bankruptcy with the court, for dealers, whether or not the final determination of Reading contract fraud will have a significant impact on the recovery results.

"Whether contract fraud can be established depends on whether the public security organ files a case, and the second step depends on the investigation after the case is filed. If it is determined that the dealer is a victim of contract fraud, then the public security organ can recover the property and return it to the victim, because this part of the property is essentially the property belonging to the victim and cannot be included in the property disposal scope of the bankruptcy procedure. "Mao Lixin analyzed, in addition, because Reading has entered bankruptcy proceedings, dealers can defend their rights by declaring claims, but this method will be limited by the status of Reading's assets." That is, in the end, it is all creditors who divide Redding's remaining assets in one cauldron. If the distributor is the victim of a criminal case, this avenue of redress may be unfair. ”

How do huge "holes" form?

According to enterprise investigation data, on May 5, the 29 million yuan equity of Sichuan Mustang Automobile held by Reading Automobile has been frozen for one year by the Kuiwen District People's Court in Weifang City, Shandong Province. From December 1, in less than half a year, the amount of Sichuan Mustang Motor's equity held by Reading Automobile has been frozen to more than 2 million yuan. In addition, Reading Auto has defaulted on three notes on March 2022 and April 12 this year, with overdue amounts of 5 million yuan, 96 million yuan and 3 million yuan respectively.

"After in-depth cooperation with Sichuan Mustang, because we did not ask the due diligence company before, it was checked by our own company's finances, and the company completed the settlement with Sichuan Mustang, only to find that the supplier system still had a lot of hidden debts, which were purchased with less than 13.50 billion in cash, but actually spent nearly <> billion yuan." When explaining to Yang Jianmin why Reading's capital chain is tight, Liu Wei cited the financial pressure brought about by the acquisition of Sichuan Mustang as the primary reason.

But Liu Wei's explanation is inconsistent with the facts. A review of public reports in January 2019 shows that Sichuan Mustang's equity transfer was listed anonymously on the Beijing Equity Exchange, and the listing disclosed in detail 1.2 billion yuan of total liabilities, including 7 million yuan of long-term liabilities and 35.5 billion yuan of current liabilities. On January 38, Beijing Business Daily verified and confirmed that the target was regarded as 3.1% of the equity of Sichuan Mustang.

Reading and Mustang officially signed a strategic restructuring agreement on January 2019, 1. "After signing the contract, many suppliers began to come to us for money, and the company took over (Sichuan Mustang) for most of the year, and after the acquisition, our income was decreasing, and the company was also a second venture." Liu Wei said.

Liu Wei said that the amount of funds required to transform from a low-speed car to a high-speed car far exceeds Reading's expectations: "If it is a low-speed car, it is very OK for us to take out 5 million to transfer within the system." The factory price of low-speed cars is more than 2000,5 yuan, 50,20 units are only sold for 80 million, and the internal circulation cost is 100 million, which is almost enough. But suddenly cut into (high-speed car), found that it is not a volume class at all, that is, take <> billion, not a large number. After entering, I found that to play this system, it is not <> billion, but <> billion, <> billion. ”

"The boss comes from a private enterprise and has a weak understanding of capital. Although the company also proposed to go public very early, the boss had doubts about whether this matter was reliable or not, and he worked until he was 50 years old, and in the end, he may be hollowed out and trapped by (capital), and returned empty-handed. Based on these ideas, the company has not paid much attention to financing. Liu Wei said.

It is worth noting that on September 2022, 9, when Liu Wei received Yang Jianmin, Liu Wei said that Reading had raised hundreds of millions of yuan from the Weifang municipal government, and "the government came in 26 million some time ago. In addition, Liu Wei said that Reading is negotiating with the Sichuan provincial government, "The due diligence work has ended, but I don't know if it is the impact of the epidemic in Chengdu, originally at the end of August to give (money)... Now the amount of feedback given to me by the leader is about 1 million." ”

A screenshot of Li Guoxin's WeChat chat record with Wang Xiao circulating on the Internet shows that September 2022, 9 is the starting point for Li Guoxin to start frequently contacting Wang Xiao to seek government support for loan renewal. When the reporter of China Newsweek mentioned the content of this chat record, the relevant staff of Changle County did not deny its authenticity.

According to the Series A financing news disclosed by Reading Automobile on November 2022, 11, the 21.32 billion yuan financing mentioned by Li Guoxin was led by Weifang Weicheng West Investment and Development Group.

In this chat record, on December 2022, 12, Li Guoxin said to Wang Xiao: "At present, more than 30 billion yuan has been raised but only 30 million has been delivered, and the capital knows that the Changle government will not renew the loan to support us, they dare not give money anymore, and the banking institutions in Weifang learned that the Changle government does not provide collateral and does not support this industry, and everyone has begun to compress loans." ”

In a previous whistleblower letter, Li Guoxin accused the county party secretary of "being indifferent to Changle's enterprises, almost never going to enterprises, and never asking questions about enterprises."

On May 5, China Newsweek contacted and visited the companies mentioned in Li Guoxin's whistleblower letter, such as Sunshine Paper, Ensign Industrial, and Jiacheng Digital. Among them, Sunshine Paper and Jiacheng Digital refused to be interviewed after hearing the reporter's intention. A staff member of the office of Ensign Industrial Group said: "We think that Secretary Wang Xiao is still quite responsible, and he did not ignore the company, mainly because (if) he comes too often, the enterprise may not be able to stand it." ”

Li Guoxin, on the other hand, pointed the finger at the county government for Redding's predicament of stoppage, believing that the "change of face" of the government's attitude was the root cause of the rupture of the company's capital chain. But in fact, Reading may already have serious business risks, and it is impossible for the local government not to understand it.

As for whether the Changle County Party Committee and County Government played any role in the Reading collapse, the Propaganda Department of the Changle County Party Committee said that it could not respond, and everything should be subject to the report of the provincial and municipal joint investigation team.

"Reading itself is a private enterprise, and the government is not obliged to back it up." The above-mentioned Changle county government staff responded that what the county-level government can do at present is to actively help enterprises introduce investors while waiting for the results of the investigation, promote enterprises to enter bankruptcy reorganization procedures, and count dealer appeals.

"January 1 is a small Chinese New Year's Eve, and since Li Guoxin sent out the report letter, we have been revolving around this matter. We at Changle have been greatly affected. We most hope that Changle can restore the order of investment as soon as possible, and we are most eager to await the results of the investigation. The aforementioned Changle County government staff said.

(Permission is pseudonym at the request of the interviewee)

China Newsweek, Issue 2023, 20

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