Chongqing Sokon - a Chinese automaker that has never been on the radar before - saw its market capitalization top RMB 100 billion ($1.55 billion) for the first time yesterday. So far this year, it has risen about 380 percent.
Chinese tech giant Huawei's partnership is an inescapable factor in the rise.
Huawei signed a comprehensive cooperation agreement with Chongqing Sokon at the beginning of 2019, stating that it will deeply promote cooperation in the field of new energy vehicles.
Huawei announced on April 20 that the company officially started selling cars, with the Seres SF5 from Chongqing Sokon as the first model to enter its channel, and it received 3,000 orders within two days of opening for sale.
"After working with Huawei, we've had so many orders. Customers who place orders now won't get deliveries until the end of July at the earliest," a 21jingji.com report late last month quoted a sales executive at the Seres 4S dealership in Shenzhen's Longgang district as saying.
The Seres SF5 is a hybrid car with extended-range technology similar to Li Auto's Li ONE. It is available in two versions, with the 4WD version priced at RMB 246,800 ($38,000) and the 2WD version priced at RMB 216,800.
Huawei provides the 4WD version of the model with its self-developed HUAWEI DriveONE electric drive system, HUAWEI HiCar and HUAWEI Sound.
The two-wheel-drive version of the model is equipped with Seres' electric drive system, but it also has HUAWEI HiCar and HUAWEI Sound.
Since the official announcement of its relationship with Huawei, Chongqing Sokon's market value has nearly tripled.
However, Chongqing Sokon's past financial situation is not as good as it should be.
Chongqing Sokon is a manufacturing company with engines and new energy vehicles as its core business and complete automobiles as its main business.
Chongqing Sokon had RMB 2.95 billion in cash on its books at the end of 2018, down for the third consecutive year, with cash reserves of only RMB 935 million this year.
The 2020 annual report showed the company's cash flow from operating activities was about RMB 1.088 billion and current liabilities were about RMB 16.247 billion.
As of the first quarter of 2021, the company's total assets were RMB25.147 billion and its gearing ratio reached 78.61 percent, which has continued to grow since 2019.
In terms of profitability, Chongqing Sokon's automotive business gross margin was only 2.19 percent and has been on a downward trend for five consecutive years. This is well below Nio's 21.2 percent, Li Auto's 17.3 percent, and Xpeng Motors' 11.2 percent.
Chongqing Sokon posted its first loss in nearly five years in 2020, which the company says was driven by the Covid-19, with declining sales and gross margins.
Whether this financial situation can support its current high market capitalization, the sales figures to be released next month could provide some clues.
Until then, though, investors are opting for an optimistic view. As of press time, Chong Qing Sokon is trading at about 6 percent on its Shanghai-traded stock to set a new all-time high. The stock was up by the daily limit of 10 percent.
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