Chinese electric vehicle startup Neta Auto is facing speculation about dissolving its research and development team amid financial difficulties. The company has yet to make an official statement regarding the rumored layoffs, which have sparked concerns among industry insiders about its future direction and ability to maintain its competitive edge. Neta Auto’s financial troubles have significantly impacted its sales performance, with reports indicating a 98% plummet in January compared to the previous year and fewer than 400 cars sold in February.
In response, the company has implemented substantial salary reductions, with remaining employees facing a 75% cut from their pre-October 2023 levels. The company’s Shanghai headquarters has become a center for protesting suppliers demanding overdue payments. Some suppliers have even been sleeping on the floor of the building to press for their dues.
Insiders attribute the crisis partly to the former CEO’s strategy, which heavily favored business-to-business channels while neglecting other areas.
Neta Auto faces financial turbulence
Despite the rumors, Hozon Auto, the parent company of Neta, has denied the dissolution of its R&D team.
In a statement on Chinese social media platform Weibo, the company’s legal department said, “The recent rumors about the dissolution of Hozon Auto’s R&D team are false. We are further cutting costs and improving efficiency through organizational and business optimization.”
Hozon Auto held a debt restructuring meeting with more than 100 suppliers at its headquarters, proposing to convert 70 percent of its debt into equity and repay the remaining 30 percent in cash installments without interest. Many suppliers were said to have accepted the offer.
The company’s founder, who has now resumed the role of CEO, has announced plans to focus on overseas markets and profitable products. However, sources suggest Neta’s debt could be as high as 10 billion yuan (1.4 billion USD), raising concerns about its ability to recover, even as financing talks with a foreign sovereign wealth fund continue. Launched in 2018 as a mainstream new energy vehicle brand, Neta Auto had previously raised substantial investments amounting to approximately 5.3 billion yuan (818.8 million USD), but these funds appear insufficient to sustain the company through its ongoing financial struggles.
The industry continues to watch closely for further developments and official announcements from Neta Auto regarding its current and future plans.
Photo by; Patrick Langwallner on Unsplash
