In recent days, reports have surfaced highlighting the financial turmoil faced by Jiyue Automotive, a company born from the merger of Jidu Auto and other entities, which currently finds itself in a precarious position with a staggering debt of around 7 billion yuan (approximately $1 billion). The debts are primarily owed to several key players: Baidu, the tech giant, holds a debt of 900 million yuan; Geely, the well-known automotive manufacturer, is owed 2.6 billion yuan; banks account for another 1.1 billion yuan; while various suppliers, totaling approximately 2.4 billion yuan, are left waiting for payments.

Historically, Jiyue's financial lifeline has depended heavily on two main sources: revenue generated from vehicle sales and external financing acquired through different avenues, including capital injections from shareholders and bank loansBaidu and Geely have played crucial roles in sustaining Jiyue's operations since its inception, with reports indicating that Baidu has invested a total of 4.4 billion yuan over the past three years and Geely a staggering 3.17 billion yuan in equity

However, despite these investments, Baidu retains a significant influence over the board with an 84% voting power, compared to Geely's 16%.

The transformation of Jiyue from Jidu Auto to its current form was jumpstarted in early 2021 with an influx of $300 million in startup capital, followed by a notable $400 million Series A funding round announced in January 2022, again featuring contributions from both Baidu and GeelyHowever, there has been a lack of publicized funding since then.

Insights reveal that Jiyue completed additional funding rounds, namely the B and C rounds, in late 2022 and the fourth quarter of 2023, respectivelyThe B funding round saw a substantial $400 million raised, again through proportional contributions from Baidu and GeelyThe C round in late 2023 brought about another $250 million, with Baidu contributing around 650 million yuan, equating to nearly $100 million

However, the influx of funds in late 2022 proved insufficient in covering Jiyue's ongoing expenses as the new year commenced.

The company faced numerous financial commitments in 2024, including expenses associated with launching its vehicles and advancing developmental costs for its prospective models set for release in the first quarterBy the close of 2023, Jiyue projected losses of around 7 billion yuan, with major allocations for research and development, marketing, and administrative expenses totaling 3 billion, 3 billion, and 1 billion yuan, respectively.

Baidu and Geely's partnership extends beyond mere financial transactions; Geely is considered Jiyue's largest supplierThe intertwining roles the two companies play in the vehicle manufacturing processes are evident, with Geely providing critical components such as the chassis for Jiyue's flagship model, the Jiyue 01, in contrast to Baidu, which primarily offers software-related services like maps and intelligent driving technologies.

Industry insiders have noted that Jiyue's dependency on Geely far surpasses its relationship with Baidu, estimating that Geely's financial input via manufacturing and procurement often reaches several hundred million yuan monthly

Despite this, Jiyue found itself in a dire situation through the first four months of this year, recording dismal sales figuresIn March, for instance, the company sold a mere 511 vehicles, underscoring a need for immediate intervention to prevent a cash flow crisis.

When faced with escalating expenditures and dwindling revenues, Jiyue's management opted to tackle the most significant outgoing payments firstIn May, an official alert was issued noting that the then-CFO, Liu Jining, formally communicated to shareholders about the need to prioritize creating liquidity to pay external suppliers and meet payroll obligations, resulting in a temporary agreement with Geely to postpone some debts.

This concession from Geely provided Jiyue with a crucial breather as they urgently sought external funding and recognized the importance of boosting vehicle sales to reverse their fortunes

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As of mid-2023, Jiyue's sole available model was the Jiyue 01, which had, unfortunately, struggled to gain tractionFollowing its launch, which offered an initial price point of 249,900 yuan, a price drop of 30,000 yuan was announced just a month later due to underwhelming sales performance.

According to high-ranking Jiyue officials, the adjusted starting price of 219,900 yuan is perilously close to the manufacturer's costThe vehicle shares the same platform as its directly competitive counterpart, the Zeekr 001, leading to inherently high manufacturing costs that fail to be offset due to a lack of economies of scaleAfter the cut, Jiyue found itself with virtually no profit margin.

In attempts to rejuvenate sales figures, a desperate strategy was employed in JulyThe company introduced a time-sensitive promotional campaign, offering discounts between 15,000 yuan to 20,000 yuan on the MVE variant of the Jiyue 01 while simultaneously providing financial incentives including insurance subsidies and low monthly payments

When all costs were factored in, the financial forecasts indicated a gross margin of -35% per vehicle sold.

Some customers even reported acquiring the Jiyue 01 for as low as 170,000 yuan during this campaign—an approach that momentarily spurred sales, resulting in a nearly 150% increase in July sales figures, totaling 1,143 unitsHowever, this rush for volume sales did not translate into profitability.

Certain insiders have indicated that each unit sold contributed to a loss near 100,000 yuan after considering marketing expenses, commissions, and dealership costs, propelling the company further into a downward spiral of increasing financial deficits.

September marked the release of Jiyue's second model, the Jiyue 07, with an introductory price of 209,900 yuan, but estimations indicated similarly unprofitable gross margins of -35% on transactionsBy the end of September, Jiyue reported a cash reserve of over 1 billion yuan, a figure that offered little respite given looming debts and additional repayment obligations tied to a bank loan from two years prior