In tougher climate, Chinese automaker cuts jobs, shifts to green cars
24/02/2017 10:00
* Cuts more than 20 pct of staff since 2015 - spokesman
* Shifting towards plug-in cars - vice-chairman
* Predicts profitability by 2018
* Firm has lost $1.4 bln since 2007 founding
By Jake Spring
BEIJING, Feb 24 (Reuters) - Chinese automaker Qoros, founded
10 years ago, has cut jobs and is shifting its focus to
faster-growth electric cars in response to increased competition
in the world's largest car market.
In previously unreported cuts, Qoros, which is backed by
nearly $1 billion each from Chery Automobile and Israeli-funded
Kenon Holdings KEN.N , has shed more than a fifth of its
workforce - down to 1,910 from 2,450 two years ago, a spokesman
said.
Four former Qoros employees said the cuts included the
recent loss of around 80 engineering contractors and workers,
mostly more expensive non-Chinese hires and senior staff.
Qoros has won quality plaudits for its petrol cars,
including its Qoros 5 sport-utility vehicle launched last year,
but it now highlights some of the risks that auto start-ups face
as competition intensifies and a slowing Chinese economy weighs
on car sales.
"You tend to drink your own Kool-Aid and believe whatever
forecast you had. Then you grow and grow and grow, and before
you know it, you have a monster," Dan Cohen, vice chairman, said
in an interview. "I see this happening now in some other
(start-up) companies."
There's tougher competition all around.
Established Chinese automakers such as Geely Automobile
Holdings 0175.HK and Great Wall Motor 601633.SS are catching
up with global rivals in quality; those global automakers are
increasingly competing with cheaper models; and dozens of local
electric car start-ups crowd a 'new energy' market aggressively
promoted by the government.
Shanghai-based Qoros has lost around 9.5 billion yuan ($1.4
billion) since it was founded, and has missed sales targets by
some margin.
It has recently held talks with Chery on how to reduce
costs, said one recently laid-off employee, who didn't want to
be named as he seeks new employment.
Qoros is leveraging Chery's larger scale to seek better
deals in buying parts, and the two companies are considering
launching "additional platforms" that can rapidly be put into
mass production, Cohen said.
Chery shares resources with all its partners, which include
a joint venture with Jaguar Land Rover, in research, production,
manufacturing and personnel related to parts, a spokeswoman told
Reuters, adding: "Both shareholders of Qoros will continue as
before to support its development."
Cohen said Qoros must more aggressively pursue advances in
battery electric and plug-in hybrid cars as well as autonomous
driving to stay competitive.
"Qoros eventually will be an NEV (new energy vehicle)
company, that's 100 percent sure," he said.
FUNDING ADVANTAGE
Electric vehicles are simpler to build - a manufacturer can
easily order a battery and electric motor from a third-party and
put it in a standard car frame. But if it's that simple, rivals
can do the same, increasing the competitive pressure, said Yale
Zhang, managing director of consultancy Automotive Foresight.
China's government is pushing battery and plug-in hybrid
cars to reduce pollution and boost local automotive technology.
Sales in this segment have grown more than sixfold since 2014.
In terms of survival, Qoros may have a funding advantage
over other electric car start-ups, which are mainly backed by
venture capitalists who will be quicker to pull the plug if
sales targets are missed, Zhang said.
"The Qoros investors are different. The Israeli investor
looks very generous and the local investor is a state-owned
enterprise," he noted.
Idan Ofer, an Israeli businessman who is the principal
shareholder of Kenon, inherited half of his father's business
empire and has shown an appetite for risk - investing in an
electric car charging station venture called Better Place that
went bankrupt in 2013, and specialist deep-water driller Pacific
Drilling SA PACD.N , whose U.S. market value has slumped with
the price of oil.
Ofer's net worth has more than halved since 2013 to $3
billion, according to Forbes.
A third-party representative for Kenon declined to comment.
Cohen, who worked for Ofer prior to joining Qoros, said
Kenon remains committed to the automaker despite stock exchange
filings that say Kenon is looking to reduce its exposure to
Qoros.
For now, Cohen says Qoros will continue to upgrade its
petrol vehicles, and expects sales to increase by more than 50
percent this year to at least 37,000 vehicles, but future
products will mostly be NEVs. It has previously said it had
hoped to be selling 150,000 cars a year by 2015 or 2016.
Qoros hopes to almost double its dealerships this year, to
200, the spokesman said, with Cohen acknowledging its current
network has been too small and often in the wrong locations.
Cohen said he expects Qoros to be profitable by 2018.
($1 = 6.8791 Chinese yuan renminbi)
(Reporting by Jake Spring; Editing by Ian Geoghegan)
((jake.spring@thomsonreuters.com; +86 10 66271032; Reuters
Messaging: jake.spring.thomsonreuters.com@reuters.net / Twitter:
@jakespring))
Keywords: CHINA AUTOS/QOROS