NIE 2023 | Hongri Auto Wu Jianguo: Lock in future users, lock in future markets, and face the future market

Short-distance micro-travel is a daily life scenario that unfolds, with multiple scenarios such as commuting, picking up children, leisure and entertainment collectively forming the short-distance travel ecosystem. Apart from first-tier cities like Beijing, Shanghai, Guangzhou, and Shenzhen where commuting distances are longer, in more than 60% of markets in China, residents usually commute within 25 kilometers, with most concentrated within ten kilometers, which provides a huge demand for short-distance travel in China.

Among them, first-tier, second-tier, and third-tier city household users, as well as young users, A00-class passenger vehicles have become their means of commuting to and from work and for family travel; in fourth- and fifth-tier cities, as well as rural areas, middle-aged and elderly customers over the age of 50 use low-speed electric passenger vehicles to meet personal needs such as daily grocery shopping and economic mobility.

Wu Jianguo stated that in the future, China's incremental growth will shift from demographic dividends to population structure, with an aging trend driving increased travel demand among the elderly. In terms of market distribution, low-speed electric passenger vehicles account for up to 95% of sales in the sinking market. Due to limited transportation infrastructure resources and lower per capita income levels in low-tier cities, rural areas, and towns, low-speed electric vehicles have become popular models in local markets due to their price advantage, lower usage costs, flexibility and convenience, and strong adaptability to road conditions.

In the future, intelligent micro-electric vehicles based on the current upgrade of short-distance micro-trip products will become a trendsetter for future travel, providing consumers with a more comfortable, safer, and convenient short-distance micro-trip experience.

Wu Jianguo believes that new energy travel has become an irreversible trend worldwide, mainly influenced by three major factors. Firstly, it is effectively guided by the global 'dual carbon' strategic goal; secondly, it is effectively driven by China's 'Belt and Road' initiative towards developing countries and industrial exports; thirdly, it has increased the market penetration rate for short-distance travel by relying on the complete standard systems of Europe and America. Nearly 70 countries have implemented favorable policies for new energy vehicles, such as China's exemption from vehicle purchase taxes on new energy vehicles, and governments in the EU, Japan, South Korea, and Southeast Asia have provided import tariffs exemptions and subsidies.

At the same time, low-speed electric passenger vehicles, as a category within new energy vehicles, currently have their domestic production standards mainly benchmarked against overseas markets. These standards mainly cover the Japanese K-car standard, European L6e and L7e standards, and the American Neighborhood Electric Vehicle standard. The well-established industry standards in overseas markets provide good references for the sustainable development of low-speed electric passenger vehicles in China. Moreover, as a market necessity in China, low-speed electric passenger vehicles, following the national overall strategy of 'upgrading a batch, standardizing a batch, and phasing out a batch', have undergone short-term adjustments from 2019 to 2022. In the next five years, this market will continue to improve. Currently, it is mainly targeted at low-income rural areas and developing country markets, with the market expanding continuously in the future.

Wu Jianguo believes that the opportunities for the short-distance micro travel market in the future lie in users and products. Hongri Group's overall strategy will involve two 'locks': one 'targeted at': locking in on future users, locking in on the future market, and targeting the future market.

According to the forecast of the National Health Commission of China, by around 2035, the elderly population aged 60 and above across the country will exceed 400 million. Based on the target elderly users, products should start from four aspects: sensory factors, physical function factors, cognitive judgment, and psychological factors. Introducing intelligent vehicles as the design carrier for intelligent mobility solutions, combined with exterior styling, age-friendly interaction, and intelligent protection, products can be created that are more comfortable, economical, and intelligent.

It is expected that the scale of China's micro-electric vehicle industry will exceed 200 billion yuan by 2026. The European low-speed electric vehicle market is expected to reach 93,000 units by 2030, and Japan's penetration rate of pure electric K-cars is expected to reach 35.0% by 2030. The Thai government expects the penetration rate to increase to 50% by 2030. Therefore, it is predicted that the low-speed electric vehicle market will have greater market potential in the future.

Wu Jianguo introduced that Hongri Group is headquartered in Qingdao and switched to the micro-electric vehicle market in 2014, quickly establishing a scale. The group focuses on the research, development, manufacturing, sales, and service of micro-electric vehicles, adhering to the development concept of 'miniaturization, intelligence, and modularization', striving to become the leading brand in intelligent short-distance micro travel. It has established a diversified brand structure, including high-speed pure electric passenger vehicles - Weiao Auto, low-speed pure electric passenger vehicles - Hongri Auto, and three-wheeled pure electric vehicles - Hongxida, with three major categories and three brands.

Hongri currently has three major production bases in Rizhao, Binzhou, and Anhui. It has established R&D centers in Qingdao and Shanghai, and plans to build a new automobile production base. At the same time, it is expanding its global perspective, drawing on Japan's development experience in the global microcar field. In 2019, it was approved by the Japanese city of Nagoya to establish an International Electric Vehicle Research Institute and has launched comprehensive cooperation with Azerba Corporation in Japan on the research and development of microelectric vehicles.

To date, Hongri has established over 3,800 first-level and second-level channels covering 65% of China's districts and counties, ranking first in industry production and sales for three consecutive years. At the same time, the comprehensive layout and rapid breakthroughs in both domestic and international markets have injected strong momentum into the group's development. Hongri currently has 15 first-level overseas agents and has initially established cooperation intentions with 20 countries, targeting developing countries in Southeast Asia, South America, the Middle East, and Africa for its products.

In the next five years, Hongri will launch 11 new products to boost micro travel into the autonomous driving era and create functional vehicles tailored for the elderly that fit their daily scenarios. At the same time, based on the development of fully autonomous intelligent logistics vehicles, it will provide integrated solutions for digital smart cities. Through intelligent distribution and mobile services, it aims to build an intelligent, platform-based, digital, and ecological digital smart city, making urban life better with technology.

It is reported that Hongri Group has officially launched the IPO process in September, and by the end of this year, it is expected to receive 500 million to 600 million yuan in fund investment. The group plans to complete its Hong Kong stock listing before the second quarter of 2024.