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Sept.30 (NBD) -- Chinese car maker Tianjin FAW Xiali Automobile Co., Ltd. (FAW Xiali, 000927.SZ) announced Friday that it has agreed to sell 100 percent stake in its money-losing subsidiary FAW Huali (Tianjin) Automobile Co Ltd (FAW Huali) to Nanjing-based Future Mobility Corporation (FMC) behind the all-electric car brand Byton, according to a filing submitted to the Shenzhen Stock Exchange.  

The stock transfer is made only at one yuan (14.5 cents), but that does not include the payment of land and factory. In addition, FMC has to take responsiblility for FAW Huali's 7.9-million-U.S. dollar unpaid wages and 117.8-million-U.S. dollar debt. So far, the net asset of FAW Huali is valued at -962 million yuan (-141.7 million U.S. dollars) and the debt will be paid off in stages.

Industry insiders believed that what really attracted the buyer is FAW Huali's qualification to produce passenger vehicles. But according to a source close to the electric car maker, the qualification hasn't been transferred to Byton, as it is seeking for approval for the transfer from the local regulator.

FAW Huali, which mainly produces jeeps, light trucks and mini coaches, has been under scrutiny of the Ministry of Industry and Information Technology of China due to sliding revenue. Thus Byton has to launch new models at an early date to save FAW Huali's qualification which could be withdrawn in 2020. 

Byton beat other bidders, including EV maker Xiaopeng Motors, SiTech Dev and ICONIQ, due to close bond between Byton and FAW Huali formed in earlier cooperation.

In April this year, FAW entered into an agreement with Byton in Beijing to back the latter's B-round financing as a strategic investor and promised to forge wider cooperation in the future.

Dr. Carsten Breitfeld, CEO and co-founder of Byton, said at the signing ceremony that FAW Group has a proven track record in R&D, car manufacturing and supply chain management. The tie-up will surely facilitate the production of Byton cars.

It is noted that Byton invested 11.07 billion yuan (1.6 billion U.S. dollars) in a Nanjing car manufacturing plant with a designed annual production capacity of 300,000 units in 2017 and then secured the qualification to produce passenger cars after taking over FAW Huali this year.

NBD learned from Byton that its first production model will roll off production line in the fourth quarter of 2019.

Currently, it is common for Chinese startup car makers to secure qualification for car production through acquiring a shell company. WM Motors and DEARCC, too, made their way to manufacture and sell cars in this way.

Email: tanyuhan@nbd.com.cn