January 6, 2025, marked a day of anxiety for the owners and followers of Nezha MotorsWhen attempting to access the company’s official website, they were greeted by a message that read, "System under maintenance, please try again later." Initial reassurances from Nezha Motors that this was merely a technical glitch did little to quell growing concernsThe sudden downtime of the website served as a wake-up call, triggering significant upheaval in the automotive industry and revealing the deep-seated crises lurking beneath the surface of Nezha Motors.

From publicly available reports, it was evident that Nezha Motors had already plunged into crisis, amassing losses totaling 18.373 billion yuan over three yearsThe preceding year, 2024, was particularly tumultuous for the companyIn October, rumors emerged that salaries at Nezha Motors had been reduced by up to 30%, causing the Tongxiang factory to come to a standstill

By November, the company’s monthly sales plummeted to 1,500 vehicles, representing a staggering 85% year-on-year dropDecember saw the resignation of the company’s original CEO, Zhang Yong, with new CEO Fang Yunzhu acknowledging that Nezha Motors was facing serious challenges.

Heading into 2025, the situation appeared to worsenIn addition to the system failure on January 6, on January 7, founder Fang Yunzhu was subject to restrictions on high spending; the following day brought news that an associated company, Hozhong New Energy Automobile Co., Ltd., faced new equity freezing measures affecting 100 million yuan worth of sharesAdditionally, Nezha Motors was embroiled in multiple lawsuits from suppliers and partners due to outstanding debts, including an execution amount exceeding 9.11 million yuan.

Nezha's offline stores also felt the repercussions, with multiple locations in Beijing quietly shuttering

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Consumers who had reserved vehicles found themselves waiting indefinitely, breeding anxiety and skepticism within the customer baseOnline forums that once buzzed with excitement turned into echo chambers of complaints and concerns, with many questioning whether Nezha Motors was fated to repeat the downfall witnessed by other troubled automakers like WM Motor and Xiaopeng Motors.

Unquestionably, Nezha Motors was grappling with its darkest hour, facing unprecedented challengesYet amidst the turmoil, a thread of optimism remained—a belief that the company was on the verge of a miraculous turnaround.

The deterioration of Nezha Motors’ finances has become increasingly apparent over the past few yearsAccording to a prospectus submitted to the Hong Kong Stock Exchange by the parent company, Hozhong New Energy, Nezha Motors' operating revenues were recorded at 5.087 billion yuan, 13.05 billion yuan, and 13.555 billion yuan from 2021 to 2023. While these figures reflected a compound annual growth rate of 63.2% and a consistent rise in revenue, the underlying profitability was alarming

The company recorded a total loss of 18.373 billion yuan across the same three-year span, with net losses of 4.84 billion, 6.666 billion, and 6.867 billion yuan respectively from 2021 to 2023. Based on the 2023 delivery volume, Nezha Motors incurred an approximate loss of 55,000 yuan for each vehicle sold.

Examining gross margins, the data shows a slight yet concerning improvement: -34.4%, -22.5%, and -14.9% from 2021 to 2023. Despite marginal progress, the margins have yet to turn positive, making Nezha Motors the only midsized new-energy vehicle (NEV) maker with substantial sales still wrestling with negative gross marginsMeanwhile, its competitors have begun to thrive; by the end of 2023, NIO boasted a gross margin of 9.48%, Li Auto managed 21.46%, and Leap Motor achieved a return to positive territory at 0.5%. The financial landscape for Nezha Motors thus appeared increasingly precarious.

By the end of 2023, Nezha Motors held short-term loans totaling 4.317 billion yuan; alarmingly, cash reserves had dwindled to about 2.837 billion yuan, insufficient to cover its impending debt obligations, resulting in net current liabilities totaling 1.991 billion yuan—a state that could be characterized as financially insolvent

Moreover, the company had seen a pronounced contraction in its fundraising activities, securing only 2.326 billion yuan in 2023, a stark drop from its typical annual fundraising range of 7 to 10 billion yuan.

The direct cause of revenue deterioration and losses is the ongoing decline in vehicle salesThough Nezha Motors achieved impressive milestones in 2022 with total deliveries reaching 152,100 units—an increase of 118%—the momentum failed to carry over into subsequent yearsBy 2023, the cumulative deliveries halved to 127,500 units, reflecting a roughly 16% year-on-year decrease, landing Nezha in sixth place among new energy vehicle makersDespite their prior success, Nezha became the only major player in the market to experience a downturn.

The slide continued in 2024, as evidenced by data from the China Association of Automobile Manufacturers indicating that in the first nine months, Nezha’s sales reached only 85,900 units, a year-on-year decrease of 12.13%. October's domestic sales fell to 6,002 vehicles—a staggering 40% dip, with only 1,500 units sold in November, marking a 75% decline.

In addition to financial woes, Nezha Motors faced numerous challenges

Strategic product positioning appeared overly broad, leading to a lack of distinguishing features in their offeringsTheir major models lacked innovation; while Nezha’s models like the Nezha ay and Nezha X were touted as upgrades, their designs did little to capture consumer interest; Nezha S, despite its feature-rich specifications, underperformed in sales, and the Nezha GT paled as a niche product, appealing to only a limited audience.

Employee reports surfaced detailing internal management issues, including delays in decision-making at the executive level, hindering important projects and adversely affecting team dynamics and moraleFor example, a cross-departmental project had been stalled for an entire year, leading to dissatisfaction among staff and contributing to their dwindling motivation.

The automotive landscape has grown increasingly treacherous, particularly with the entry of international giants like Tesla and the rise of domestic newcomers

Compared to these established players, Nezha Motors struggles with brand recognition, technological prowess, and market share, rendering it unable to differentiate itself amidst intensifying competition.

The internal chaos within Nezha Motors has been significantly contributing to its predicamentsOn December 6, 2024, news surfaced that CEO Zhang Yong would be stepping down to focus on a consulting role, while founder Fang Yunzhu would simultaneously take over as CEOZhang Yong had been a key figure in driving success since joining the company in 2018, overseeing the launch of popular models such as Nezha N01, Nezha U, and Nezha V, which thrived on their cost-effectiveness and technological accessibility.

Yet, by 2023, Nezha’s trajectory spiraled downward as sales fell consistently and losses mounted, pushing the company into uncharted watersAmid escalating challenges, it appeared Zhang Yong lacked strategic insight to counteract these market pressures, inadvertently placing Nezha Motors at a competitive disadvantage.

Taking the reins, Fang Yunzhu has been charged with steering the company through rough waters

A seasoned visionary, he has played a pivotal role in advancing NEV technologyHowever, the added responsibilities of leading the company demand innovative solutions and dexterity in addressing daunting challenges.

Nezha faces a compounding crisis: navigating fierce market competition, resolving critical cash shortfalls, and upgrading product competitiveness—all while contending with a rapidly evolving automotive environment dominated by major players like Tesla and BYDFurthermore, the logistical demands of maintaining sufficient financing for R&D and marketing outreach become increasingly precarious as the company’s financial grounding shifts beneath it.

Alarming visibility surrounded the company’s public image with reports of closed storefronts, including the Nezha showroom at Shanghai Hongqiao, which has reportedly been transformed into a juice shop

Other locations in cities like Beijing, Chengdu, Hangzhou, and Nanjing have also succumbed to closures amidst declining sales and visibility.

On January 7, 2025, it was reported that Fang Yunzhu was prohibited from high consumption by the Chaoyang District Court in Beijing, linked to a labor dispute where the company failed to satisfy obligations outlined in enforceable legal documentsJust a day later on January 8, allegations surfaced of equity freezing concerning Hozhong New Energy, further intensifying concerns surrounding corporate malfeasance.

The trajectory indicates a spinning wheel working increasingly against Nezha Motors.

The financial pressures impacting Nezha Motors are not anomalous; numerous other electric vehicle (EV) companies chase growth while simultaneously wrestling with profitabilityThe competitive landscape continues to escalate as price wars, while stimulating sales, ultimately compress margins, leaving companies vulnerable

The substantial investments necessary for R&D, production, and marketing can constrict paths to financing—a reality that places many companies at risk should funding avenues narrow.

The current rate of change within the EV sector requires significant financial investment for continued technological advancement, a demand some smaller companies struggle to meet, leading to technological stagnationWith insufficient focus on R&D, Nezha risks falling far behind its competitors and remains incapable of leveraging its market position.

The complexities of the supply chain within the automotive sector introduce additional uncertaintiesRaw material price fluctuations and supply instability may significantly hinder production and limit cost efficiencyNezha’s oversight in managing these elements could compound its disadvantages regarding price competitiveness.

Shifting consumer expectations signal an ever-increasing appetite for EVs, yet they also carry with them escalated demands for performance, reliability, and advanced technology integrations