By Joe Berk
Two of the largest motorcycle companies in China are Zongshen and Loncin. I recently learned that Zongshen became the major shareholder of Loncin, turning Zongshen into the largest of the motorcycle companies in China. I asked my contact at Zongshen if he could tell me more about this, and he did.
Hi Joe:
On July 3rd, Zonsen Power, a listed company under Zongshen Group, announced official news. Here are the details:
Zonsen Power announced that its associate company intends to invest 3.35 billion yuan (CNY) to acquire a 24.55% stake in Loncin. Upon the completion of the transaction, Zonsen will become the largest shareholder and the actual controller of Loncin.
In fact, before this acquisition, Loncin Group had been trapped deeply a debt crisis due to heavy losses in its real estate business, leading to significant debts in 13 of its subsidiaries.
In previous years, Loncin had been trying hardly to resolve this issue, and some companies proposed acquiring shares in Loncin, but ultimately, none succeeded.
The Chongqing court ruled that Loncin Group must resolve this debt issue before August 2024, or the company will be auctioned. This acquisition of Loncin by Zonsen is likely the result of coordination by the Chongqing government.
As the previous acquisition of Lifan by Geely Automobile was not successful. Geely, a powerful automotive enterprise in China that is the largest shareholder of Daimler and once acquired 100% shares of Volvo, but had no intention of developing the motorcycle industry by acquiring Lifan. Instead, it aimed to obtain Lifan’s electric vehicle production license. However, after the acquisition, Geely did not invest much in the motorcycle sector, causing Lifan to decline significantly, which greatly displeased the local government.
Although Loncin’s real estate business has suffered heavy losses, its motorcycle business is still operating well. Therefore, the local government is unwilling to let Loncin suffer the same fate as Lifan, so it coordinated with Zonsen to acquire a majority stake in Loncin, and state-owned assets also invested in Loncin.
Whether Zongshen and Loncin’s businesses will be merged is yet to be announced officially, but most people believe that Loncin will maintain its current structure and business, and there will still be competition between the two companies in the same industry.
Thanks!
These are interesting developments. In case you were wondering, Zonsen is the name by which what we knew as Zongshen now wishes to be called. Another bit of information: 3.35 billion Chinese Yuan is the equivalent of approximately 461 million US dollars. I first visited Zongshen more than a decade ago, and the company impressed me greatly.
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