Shanghai (ZXZC)- Yang Xueliang, the spokesman of Zhejiang Geely Holding Group (Geely Holding), denied the rumor exposed by Reuters on June 19 which said Geely Holding plans to become the top shareholder of Chongqing Lifan Holdings Co., Ltd. (Lifan Holdings) and inject fresh capital into the latter.

The media, citing three people with knowledge of the matter, disclosed that Geely is set to take over a Chongqing-based automaker plagued by a prolonged sales decrease worsened by the impact of the COVID-19 pandemic.

(Photo source: Zhejiang Geely Holding Group's WeChat account)

Following Geely's denial, Lifan Industry (Group) Co.,Ltd. (Lifan Group), a subsidiary of Lifan Holdings, stated on June 20 that the report is untrue and it has not been in talks with any third party about being acquired or injected with capital. As of now, there is no relevant cooperative intent that has been reached.

Lifan Group is facing operational risks brought by sustained profit loss, high debt, substantial downturn in PV sales, heavy debt to be overdue, vast amounts of asset freeze, quite a few lawsuits (arbitrations), weak liquidity of controlling shareholder, and incapability of repaying the capital raised, the company added. Up until now, it has not determined any effective solutions yet.

Founded in 1992, the Chongqing-based Lifan Group is mainly engaged in the R&D, production and sale (including export) of automobile, motorcycle, and engine, and takes new energy vehicle business as a strategic development direction. Nevertheless, it is now vexed by severe capital problems and liquidity risks, the company said in the latest announcement.

(Photo source: Lifan Motors' WeChat account)

According to its annual result, Lifan Group earned 7.45 billion yuan ($1.053 billion) in 2019 revenue, posting a year-on-year plunge of 32.35%, and suffered a net loss of 4.682 billion yuan ($662.031 million), nosediving from the year-ago profit of 252.972 million yuan ($35.77 million). Besides, the annual net cash flow generated by operation activities was -1.13 billion yuan (-$159.893 million).

The performance kept waning in the first quarter of 2020 due to the impact of pandemic and the adverse capital condition. During this period, Lifan Group saw its revenue tumble 74.88% from a year earlier to 564.225 million yuan ($79.78 million), and recorded a loss of 197.38 million yuan ($27.909 million).

The company said the loss is likely to continue for the second quarter if no apparent improvement occurs, so that the first-half profit might remain negative as well.