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5. Guoxuan High-Tech Co., Ltd. Business Report FY ended Dec. 2018

Guoxuan High-Tech Co., Ltd. Business Report FY ended Dec. 2018

Contract

-In January 2018, the Company became the supplier of ternary positive electrode lithium-ion batteries (662) for the first electric vehicles (EVs) of Zotye Ford Automobile Co., Ltd. The EVs can travel 350 kilometers on a single charge. They are currently under development. So far, Guoxuan High-Tech has won orders to deliver 11,000 sets of power batteries to Jianghuai Automobile for the IEV series models during the first quarter of 2018, and 23,000 sets to Beijing New Energy Vehicle for the EC180 and EC220 during the first half of 2018. (From releases on January 31, 2018)

-In 2018, the Company provided lithium iron phosphate battery packs for JAC New Energy Passenger vehicles; the Company's VDA ternary batteries were supplied to Chery and Zotye (From the Company's 2018 annual report)

Recent Development

-The Company announced on December 7, a plan to issue changeable bonds to raise up to CNY 2 billion. The company is going to allocate the fund to launch the lithium drive battery business, set up production lines and auxiliary equipment for producing 15GWh power batteries a year at a plant in Nanjing (5GWh in the 1st phase), and establish 2GWh lithium drive battery business of Lujiang Guoxuan New Energy, and also for the addition of its liquid fund. (From a press release on December 7, 2018)

-On July 9, 2018, the Company announced a plan to adjust the content of its investment projects that require new fundraising.
The Company is going to change the annual production capacity of a plant of Hefei Guoxuan that produces 600 million Ah high-energy-density lithium power batteries to 4GWh. The total investment will be Chinese yuan (CNY) 2.673 billion. The company's wholly-owned subsidiary, Hefei Guoxuan Battery Co., Ltd., will take over the responsibility to implement the project. The construction requires eight months and the new plant is expected to generate sales of CNY 5 billion and net profit of CNY 639 million at the full capacity.
Guoxuan High-Tech is also going to alter the annual production capacity of a plant of Qingdao Guoxuan that produces 300 million Ah high-energy-density lithium power batteries to 2GWh. The total investment will be Chinese yuan (CNY) 1.036 billion. This plant is going to manufacture lithium iron phosphate batteries instead of ternary batteries. The construction requires 12 months and the new plant is expected to generate sales of CNY 2.5 billion and net profit of CNY 317 million at the full capacity. (From a press release on July 12, 2018)

-In June 2018, Fujian Haiyuan New Material Technology Co., Ltd. received an order from Hefei Guoxuan High-tech Power Energy Co., Ltd., the Company's subsidiary, for battery case covers and also a note for requesting the start of the die production. The car component manufacturer is going to launch the mass production in the latter half of 2018. The Company expects to generate sales of Chinese yuan (CNY) of 81 million in the five-year life cycle of the products. (From a press release on June 29, 2018)

New Company

-On April 4, Tata AutoComp Systems signed a joint venture with Guoxuan Hi-Tech, China to design, engineer, manufacture and supply battery packs for the Indian 4-wheeler market. The JVC has started a prototype manufacturing operation in Pune. Tata AutoComp’s offerings to the emerging EV segment now include battery pack, battery cooling system, battery management system, radiator and DC chargers. The JVC is now geared up to support the Indian EV OEMs.

-On August 1, 2018, the Company announced that its wholly-owned subsidiary, Hefei Guoxuan High-tech Power Energy Co., Ltd., would set up an investment fund jointly with Anhui Jintongzhihui New Energy Automobile Investment Management Partnership (Limited Partnership) and three other companies, using Chinese yuan (CNY) 150 million of its own fund. The new investment fund is tentatively named Anhui Jintong New Energy Automobile Fund (First Phase) Limited Partnership. According to the announcement, the new investment fund is going to allocate more than 80% of the fund collected to important projects in the new energy vehicle industry and its relating areas. (From a press release on August 1, 2018)

-The Company announced a plan to invest Chinese yuan (CNY) 200 million in setting up a new wholly-owned subsidiary, Hefei Guoxuan Battery Co., Ltd., in the Economic & Technological Development Zone in Hefei, Anhui. The new company is going to work on research and development, production and sales of lithium-ion power batteries, receiving technical support from Guoxuan High-Tech.'s engineering lab located in Hefei. (From a corporate announcement on May 2, 2018)

Strategic Alliance

-On October 23, JAC signed a strategic cooperation agreement with Hefei Guoxuan High-Tech Power Energy Co., Ltd. , a subsidiary of the Company in Qingdao City, Shandong Province. The partners will develop battery systems that have an energy density of over 140 Wh/kg for electric passenger and commercial vehicles. From 2018 to 2020, Guoxuan will upgrade its lithium iron phosphate batteries in order to meet the technical requirements of annual subsidy policies. They will also develop proper-cost vehicles as well as batteries to cope with the future without subsidies. Guoxuan will supply 3,500 sets of battery packs to JAC for the iEVA50 in 2018. The battery maker will provide 4 GWh lithium batteries to JAC in 2019.

R&D Center

-The Company has a nationally recognized enterprise technology center, a national postdoctoral research station, a national CNAS accredited laboratory, an Anhui academician workstation and Anhui provincial engineering lab.

Patent

-As of the end of December 2018, the Company has applied for 2,961 patents, including 1,440 invention patents and was awarded 1,560 patents, including 333 invention patents. (From the Company's 2018 annual report)

Investment

-The Company announced a plan to make an additional investment of CNY 200 million jointly with Shanghai Electric Group Co., Ltd. in its subsidiary, Shanghai Electric Guoxuan New Energy Technology Co., Ltd. Guoxuan Hi-Tech will make an additional investment of CNY 98 million, while Shanghai Electric Group will invest additional CNY 102 million. After the transaction, Shanghai Electric Guoxuan New Energy Technology is going to have a registered capital of CNY 500 million, up from CNY 300 million. Then, the Company will be owned 45.4% by Guoxuan Hi-Tech, 47.4% by Shanghai Electric Group, 3.6% by Shanghai New Energy Technology, and 3.6% by Shanghai Xuaneng New Energy Technology Partnership. In the fiscal year ended in December 2018, the subsidiary generated sales of CNY 147.43 million and a net loss of CNY 19.30 million. (From a press release on April 30, 2019)

-The Company held a ceremony to mark the launch of construction of its global headquarters and Shanghai Electric Guoxuan Research and Development Center in Shanghai. The new facilities are located in Waigangzhen, Jiading, Shanghai, and their land space is 92,000 square meters. With a total investment of CNY 3 billion, the Company is planning to complete the construction by the end of 2019 and start operating in 2020. Upon completion, they will serve as a hub in Shanghai for combining skills for strategic investment, personal development, product designing, management services, and operation controls while cooperating with six other global research and development centers in Silicon Valley, Cleveland, Bochum (Germany), Tsukuba (Japan), Singapore, and Hefei, Anhui. The facilities will also house a joint venture between Guoxuan Hi-Tech and Shanghai Electric Group Company Limited, Shanghai Electric Guoxuan New Energy Technology Co., Ltd. (From a press release on January 14, 2019)

-On January 6, 2019, the Company celebrated the construction launch of a new plant that can produce 0.2 powertrain control systems in Baohe District in Hefei. The Company is going to invest CNY 2 billion in total in creating the production base of 150,000 square meters in size. It aims at launching the operation in the first half of 2020. This factory is equipped with a national-level CNAS-certified laboratory centered around Guoxuan High-Tech Process Research Institute. Upon completion, the lab will work on the development of battery materials and cells as well as the reuse and recycling of the batteries. (From media reports on January 10, 2019)

-On June 26, 2018, Guoxuan Holdings Group Co., Ltd., reached an agreement with Technological Development Zone in Huaibei, Anhui, on the construction of a new plant to make power battery components for new energy vehicles. The total investment in the construction project is going to be Chinese yuan (CNY) 1.5 billion. The new plant is going to work on research and development, production and sales of, primarily, power battery components for new energy vehicles. Its annual sales are expected to reach CNY 2 billion. The Company's production lines currently can make power batteries of 6.5GWh as of 2018. This includes 5GWh ternary 622 cells. The Company expects to make up to 8 to 9GWh batteries in total throughout the year of 2018. However, the production plan is to be adjusted to match the market needs. At the end of 2018, the Company's annual production capacity in total is going to reach 13 to 14 GWh. (From a press release on June 28, 2018)