In the thriving landscape of new energy vehicles, power batteries are increasingly recognized as the “heart” of these vehicles, drawing significant market attention. As a leading player in the power battery sector, Guoxuan High-tech Co., Ltd. (002074.SZ), has recently become the focus of external scrutiny due to its strategic moves. On March 21, Guoxuan High-tech announced that it had signed external guarantee contracts with banks, trust companies, and other financial institutions to support financing for its wholly-owned or controlled subsidiaries. The range of these guarantees varies from 70 million to 514 million yuan, with a total guarantee amount exceeding 3 billion yuan, all structured as joint liability guarantees.
According to the announcement, as of March 20, the total external guarantee amount for Guoxuan High-tech and its controlled subsidiaries was 78.011 billion yuan, with a guarantee balance of 47.856 billion yuan. This figure represents 190.92% of Guoxuan High-tech’s audited net assets attributable to shareholders for 2023. The substantial scale of these guarantees has raised concerns about the safety of the company’s operating funds, especially against the backdrop of warnings about overcapacity and ongoing price wars in the power battery industry. Additionally, Guoxuan High-tech’s debt ratio has exceeded 70%. Given this high level of indebtedness, questions arise regarding the rationale behind such an aggressive guarantee strategy.
From March 24 to 26, reporters from China Business Journal attempted to contact Guoxuan High-tech’s securities department. On March 25, a staff member indicated that they would inform company leadership and subsequently mentioned that a colleague from the brand department would follow up. However, by the time of publication, no response had been received.
The significant guarantee has drawn attention. According to SNE Research, Guoxuan High-tech ranks eighth in global power battery installation volume among the top 10 in 2024. The company’s projected installation volume for 2024 is 28.5 GWh, reflecting a year-on-year growth of 73.8%, with a market share of 3.2%, an increase of 0.9%. As competition intensifies in the power battery market, Guoxuan High-tech has undertaken various capacity expansion initiatives both domestically and internationally. The guarantees provided to its wholly-owned or controlled subsidiaries are aimed at supporting their financing for further development.
To ensure continuous support for its subsidiaries, Guoxuan High-tech has made strategic arrangements. On April 18 and May 21, 2024, the company held its ninth board meeting and the 2023 annual shareholder meeting, respectively, where it approved a proposal regarding the anticipated external guarantee limit for 2024, allowing for a total guarantee amount not exceeding 99 billion yuan (or equivalent foreign currency). This approval effectively greenlights Guoxuan High-tech’s external guarantee operations, enabling it to flexibly engage in guarantee activities within the established framework. The guarantees announced on March 21 fall within this anticipated limit, thus avoiding the need for further board or shareholder meetings for review.
This is not the first time Guoxuan High-tech has provided external guarantees. On January 18 and February 21, 2024, the company issued announcements regarding its progress on external guarantees, signing contracts with relevant parties to provide financing support for its subsidiaries. As of March 20, the total external guarantee amount was 78.011 billion yuan, meaning Guoxuan High-tech still has nearly 21 billion yuan available under the approved limit for the year.
However, this high-leverage guarantee strategy comes with significant risks, leading to external concerns regarding the company’s operations. On March 7, an investor inquired about the potential benefits of Guoxuan High-tech’s overseas investments and various guarantee measures on an interactive platform, but the company has not yet responded. In the March 21 announcement, Guoxuan High-tech stated that the guarantee activities had complied with relevant laws and regulations, following the necessary approval procedures, and affirmed that there were no overdue guarantees or litigation-related guarantees resulting in judgments against the company.
In addition to the substantial guarantees, Guoxuan High-tech’s collaboration with Volkswagen has also attracted attention. On December 13, 2024, the company announced that its controlling shareholder, Guoxuan Holdings, along with Li Zhen and Li Chen (collectively referred to as the “founding shareholders”), signed a supplementary agreement with Volkswagen China. This agreement extends the commitment to waive voting rights for a period of 72 months from the registration of relevant shares under Volkswagen’s name, ensuring that Volkswagen’s voting rights remain at least 5% lower than those of the founding shareholders. Recently, Volkswagen China signed a strategic cooperation memorandum with CATL, raising concerns about the smooth progression of its partnership with Guoxuan High-tech. In response, Guoxuan High-tech stated that the standard cells being jointly developed with Volkswagen are currently undergoing rigorous validation, with mass production timelines at their Hefei base to be finalized based on Volkswagen’s product roadmap.
Guoxuan High-tech is focused on accelerating product iteration for standard cells using the latest technology, maximizing flexibility and cost efficiency. The company emphasized that Volkswagen China is a strategic investor and that its memorandum with CATL will not affect their collaboration, which is proceeding as planned.
Public information reveals that Guoxuan High-tech’s main businesses include power battery systems, energy storage battery systems, and power transmission and distribution equipment. For instance, in the power battery systems segment, the company primarily produces lithium iron phosphate materials and cells, ternary materials and cells, power battery packs, and battery management systems. It has established long-term strategic partnerships with numerous companies in the global new energy vehicle ecosystem, and its products are widely used in pure electric passenger vehicles, commercial vehicles, specialty vehicles, and hybrid vehicles.
The rapid growth of new energy vehicles has fueled continuous demand for power batteries, prompting major battery manufacturers to expand production. The overseas market is a key focus for Guoxuan High-tech, which is not only exporting products but also advancing the establishment of overseas production bases. On December 13, 2024, the company announced plans to invest in Morocco to build a high-performance lithium battery production facility with an annual capacity of 20 GWh, with a total investment not exceeding 1.28 billion euros. The motivation behind this investment is based on the promising development prospects of the global new energy industry, Morocco’s strong industrial foundation, and geographic advantages, which align with the company’s future business development and market expansion needs, enhancing its global strategic layout and competitive edge.
In a similar announcement on December 13, 2024, Guoxuan High-tech revealed plans to invest in Slovakia for a high-performance lithium battery production facility, also with an annual capacity of 20 GWh, and a total investment not exceeding 1.234 billion euros. This project aims to achieve local self-supply of power batteries, covering the EU market in alignment with the company’s strategic development plans. In addition to Slovakia and Morocco, Guoxuan High-tech is also establishing production bases in Chicago, Michigan, Argentina, and Vietnam. The company’s diversified global market strategy has resulted in an increasing share of overseas revenue, with data showing that in the first half of 2024, revenue from overseas regions reached 5.527 billion yuan, accounting for 32.91% of total revenue.
However, despite these substantial investments in overseas markets, Guoxuan High-tech’s financial performance has not been particularly impressive. In the first three quarters of 2024, the company reported revenue of 25.175 billion yuan, a year-on-year increase of 15.6%, and a net profit attributable to shareholders of 412 million yuan, up 41.11%. Yet, its net profit excluding non-recurring items was only 8.11 million yuan, a decrease of 47.3% compared to the previous year. Furthermore, Guoxuan High-tech faces significant debt pressure. The third-quarter report for 2024 indicated that the company’s total liabilities amounted to 76.683 billion yuan, with short-term loans of 17.74 billion yuan, non-current liabilities due within one year of 6.3 billion yuan, and long-term loans of 20.142 billion yuan. As of the third quarter of 2024, Guoxuan High-tech’s debt ratio reached 74.31%, raising concerns among observers.
On November 8, 2024, an investor inquired on an interactive platform about the high asset-liability ratio and what measures the company has to reduce it. On November 22, Guoxuan High-tech responded, stating that the increase in debt was necessary to meet the rapidly growing overseas market demand, which required greater investment in capacity expansion, technological research and development, and international talent acquisition. This expansion often involves increased debt financing, thereby raising the asset-liability ratio. The management emphasizes the importance of monitoring changes in the asset-liability ratio and has developed plans to enhance financial stability and market competitiveness, aiming for sustainable, healthy, and high-quality growth.
