Baidu backed Ji Yue Auto, an EV manufacturer, found itself in deep trouble after failing to pay its employees’ social security. One of Jiyue’s live stream hosts even broke down mid livestream,“I worked so hard, and now the company is gone?”
But Jiyue isn’t the first (and certainly won’t be the last) EV manufacturer to face such challenges. In China’s hyper-competitive EV market, we’ve seen similar collapses, consolidations, and even brands turning to global markets to escape the intense domestic competition.
Tune in as we discuss the fall of Jiyue Auto, why Baidu and Geely refused to invest more in this joint venture, and what’s next for the EV market in China.
Also available on Spotify and Apple Podcast
[AI-generated transcript]
Sabrina: . [00:00:00] Hi everyone so we will explain what that means later. So today we’re going to talk about electric vehicles and more specifically Chinese electric vehicles. So over the past year or two, we’ve kind of seen the explosion and growth of Chinese EVs, not just in China, but globally as well.
Sabrina: But of course we know that the competition in China is very, very competitive. And so this year we’ve kind of seen Couple of consolidations and of course, companies closing down as well, right? Which leads us to what happened last week. So last week, or two weeks ago, from when you guys are watching this, Ji yue Auto, a joint venture between Baidu as well as Geely, who is an automotive manufacturer.
Sabrina: Actually, they didn’t announce it. It was, they said that they had employees realized that their social security hasn’t been paid. And will not be paid.
Jianggan: So, what happened was was the CEO suddenly released a note saying that, oh, we are going into our start up 2. [00:01:00] 0 mode. And what the heck is that? Right?
Jianggan: So, basically, because. The company is facing some cash flow problems, and as a result the company needs to stay super lean. And as a result, people’s social security might not be paid. So
Sabrina: he means by startup 2. 0.
Jianggan: That’s what he meant by startup 2. 0. Of course, nobody resonated with that kind of like call to action. So when he showed up in office what happened, I think, I think you can play some videos of that or what happened is that he was surrounded by people demanding, say that, Hey, we need to get our social security paid. We need to get our salary paid. Yeah. So
Sabrina: seeing the videos, they had quite a few employees.
Jianggan: There are a few thousand employees, right? And yeah, and in addition to the offices, they also have showrooms across the country. I think most of them are actually run by themselves.
Sabrina: Yes, I was watching this video like after when I was doing research on podcast and it was just, so someone went to the Ji yue showroom, I think in Chengdu or something.
Sabrina: It was, so it was the day after like the news broke out about [00:02:00] all this. So the person went to the showroom and he was trying to find the staff. So he was just walking around and he was like, nobody’s here. Like nobody came to work. The cars are all still there.
Jianggan: So basically what happened is that is that when that incident unfolded Was kind of unexpected for many people because people said, okay, this company has two rich dads, right?
Sabrina: Yeah, maybe we step back a bit. So let’s set a bit of context for viewers who might not be familiar with the China EV scene, right?
Sabrina: Who is Jiyue Auto?
Jianggan: Jiyue Auto is a company initially built by Baidu and you guys probably remember like a few years ago Baidu, which was I mean China’s Google you can put it that way but has I mean, a little bit falling behind Alibaba and Tencent. There used to be BAT back, Baidu, Alibaba, Tencent.
Jianggan: And in the last few years,
Sabrina: B is Bytedance, I
Jianggan: mean, Baidu has been replaced by Bytedance, so the company is falling behind and a few years ago it decided to go all in AI. And [00:03:00] that was before generative AI came about. So so one area that Baidu in was autonomous driving. They built this Apollo system. And obviously when you create a new system from outside, I can Tesla will face the same problem, right?
Jianggan: They realized that, okay, trying to convince car companies to work with you to test new software. Text, whatever.
Sabrina: Yeah,
Jianggan: so so what they did is that , they asked for partners to say, okay, let’s build our own auto capability so we can test our software and. I don’t even think selling cars is their big objective.
Sabrina: It’s more the software.
Jianggan: Yes. So they build this capabilities to get, you know, they build this together with Geely, which is one of the largest auto manufacturers in China. And I think the company was initially called Jidoo. It’s actually a good friend of mine. I actually joined at the senior ranks in the very, very beginning because I mean, everybody was thinking that, okay, here’s Baidu, here’s Geely.
Jianggan: One has the software capabilities. The other one has the. Manufacturing capabilities.
Sabrina: Both have the money. They both
Jianggan: have the money, and you put both together, [00:04:00] and you’re going to create wonders. So the company initially was called Ji Du, I mean Du as Baidu school, yeah. And they ran into a challenge two years down the road, where they couldn’t get a permit to manufacture cars.
Sabrina: Was this recently or? It
Jianggan: was like last year.
Sabrina: Last year. A
Jianggan: year and a half ago.
Sabrina: Oh.
Jianggan: So, they have to restructure the company into Ji yue. So in a way borrowing the license of Geely to manufacture cars. Oh. So that’s the context.
Sabrina: Okay. And it was kind of very unexpected, right? So recently, I’m not sure how recent, but Ji yue launched a new car, which was the Ji yue 07, which was a pretty anticipated, like, it’s a normal consumer sedan.
Sabrina: I say that as if I know cars, but, and it was very reasonable price.
Jianggan: Sabrina kept saying in office that if she drives and be aware, so
Sabrina: yeah,
Sabrina: so it’s very reasonable price sedan. It’s priced at about RMB 199, 000. So that’s about us 27, 000. So it’s a pretty affordable car. [00:05:00] Like
Jianggan: it’s it is, yeah, it is mid rank and top in the middle class, but that price about 200 K RMB.
Jianggan: It is a
Sabrina: very competitive,
Jianggan: it’s a blood bath.
Sabrina: I mean it’s a blood B Generally the mass market is right, not just in EV cars. When we talk about like coffee bubble tea,
Jianggan: that’s not even the mass market. I mean if you set price even down, I think you have Wu ling right, which produces things less than a 100K RMB
Jianggan: . 12, 13, okay, USD. So that range you do have players which play on enormous scale. And also you have other players like Li Auto, which sets the price up, right. I think 300, 000 to 400, 000, but the LOD has a Li Auto car. But at the 200, 000 range,, it’s very, very competitive.
Jianggan: There’s so many different models at this price range. Yeah.
Phyllis: For context, right, how much is a normal Toyota car in China?
Jianggan: Well, that’s the funny thing, right? I mean, people in Southeast Asia keep talking about Toyota car because it’s the most common one, you see.
Sabrina: That’s not common in China. [00:06:00] And, and you probably,
Jianggan: you probably know, never in China, actually.
Sabrina: What is a more popular, like, family car in China?
Jianggan: Okay, so in early days, back in when car was first a thing, late 1990s it was Volkswagen Santana, then people who were a little bit more affluent would buy a Volkswagen Passat and people in the north in cold areas would buy a Volkswagen Jetta.
Sabrina: Yeah, Volkswagen.
Jianggan: Volkswagen was the, was the first like international company, car company, which had confidence in the Chinese market. Went in with the joint venture at some, was was only part of Volkswagen as well. It is okay. Yeah. We have resident Germany. So at some point of time, audi was the default government senior official sedan like even like 10 years ago, I mean, we’ll see all the car without the model level at the back is the government’s in there.
Sabrina: So
Jianggan: [00:07:00] that was how close folks are. I can, at
Sabrina: some point in time, average, like Volkswagen be
Jianggan: now. I have no idea because that’s, that’s really fallen off, right? So, so not have that, that much models. The last time I drove a Volkswagen in, in through a rental company was about, I think April, may this year.
Jianggan: There was a motor called Chiro. It’s a fairly large SUV and that thing would cost probably around 202, I think between 180 to 2030 KRD based on the, the specifications and I mean, how many sort of additional features you pack into the panel.
Sabrina: So it’s quite similar in terms of price range to all this, to this EV at least.
Jianggan: I mean, I’m sure this guy’s did lots of research that, and this is range where you have the most middle class were able to afford it.
Sabrina: Okay, we don’t need to go too deep into cars because the two of us know absolutely nothing about cars.
Jianggan: We’re an expert here.
Sabrina: Yeah, so maybe we do an episode with Joshua instead of talking about cars.
Sabrina: But so yeah, coming back to Ji yue, [00:08:00] so essentially after they launched Ji yue 07, everyone kind of thought the company was going in the right trajectory, right? I mean, it had two big parents. That was supporting it. Well, it
Jianggan: is on a car, I mean, in a competitive market, but I think I spoke with quite a few people who went to the showrooms, very good reviews about this stuff.
Phyllis: There were a lot of people, there were a lot of others place for this car as well, even their own employees took out loans to buy the car. Yeah,
Jianggan: of course, because we have been working for like a few years and you look at this as amazing product. They said, okay, I must have one, right? Yeah.
Phyllis: They’re very confident.
Sabrina: So then what happened? Why?
Jianggan: You run out of cash.
Sabrina: But, but if your parents are such big investors, nepotism, baby, stop, just go to your parents for more money.
Jianggan: So Baidu is a parent of this car company, but it’s also a parent of many other initiatives. It’s building large language models.
Jianggan: Yeah. It relies on cash for advertising and it has other, other initiatives. So it doesn’t, [00:09:00] I mean, way it, see how much money is, I think they, they, they re invest about seven.
Sabrina: They invested 8.8 billion RMB, which is about 1.2 billion USD into this venture.
Jianggan: That’s a lot, lot of money. Yeah. And they probably saw a projection and saying that, okay I, I don’t know the exact numbers, but some rumors in the market are saying that you would take probably another 10 billion RMB to make it possibly or plausibly sustainable.
Jianggan: So ,
Phyllis: so in this situation. Basically Baidu being the parent saying like, oh, this child is way too expensive. I need to invest a lot more for this child to become like a professional or something. So they just decided to cut off this child. Yeah. ’cause they got so many other, I think
Jianggan: as a, as a StepStone rather than, yeah.
Sabrina: And it’s the same for GI as well, right? Because they also have other joint ventures. Julie,
Jianggan: I mean, has hiss own sort of brand and they also have their own other. It has Zika, it has Lincoln Code. It has, and he also owns Volvo. Yeah. So, and poster. So it has a lot of a lot of initiatives, and obviously, as the market [00:10:00] becomes sort of so competitive that consolidation is expected.
Jianggan: And for them, they were thinking that, okay, do we really want to spend money to maintain so many different brands? So, in fact, the boss of Geely actually released the manifesto. I think I think you can post the image of that in September saying that we are going to consolidate our assets.
Jianggan: So, so I think that Zika and link and co have already merged. So when that happens we look at, okay, this company, which is out there, which you own a minority share, which still owes you lots of money because there’ll be my traffic costs for them. They have not been paying you adequately for that.
Jianggan: And I mean, I think when do the cold, hard calculations, I mean, the decisions are obvious.
Sabrina: To me, but it’s interesting because. How to say, like, Ji yue is not the first EV company to kind of like collapse or like they didn’t announce bankruptcy, but have faced this kind of challenges, right? So obviously there was another EV company that actually filed for bankruptcy last year.
Sabrina: So the English name is Weltmeister and the Chinese name is Weima.
Jianggan: Weima. [00:11:00]
Sabrina: Weima.
Jianggan: I think there are two, I are the companies which went into a restructuring this year as well. So the market is consolidating
Sabrina: and it’s a very, very competitive market, but this particular incident with Ji yue seems to have blown up the most in terms of the news.
Sabrina: And I think a big proportion of that was because of the amount of live streamers that has, right? So. Jiyue itself has over 300, 300 live streamers.
Jianggan: 300 live streamers. . And I was talking , to some colleagues, they said, wow, I didn’t know live streaming got so deep into even cars, right? I mean, how can you sell cars in live streaming?
Sabrina: That’s probably a good thing to sell on live stream, because it’s something that people would.
Phyllis: But you want to explore the features of, but if you have to travel all the way down, it’s going to take like three, four hours. So yeah.
Jianggan: So exactly the point, right? I mean, if you are, at the showroom yourself, you probably have limited time.
Sabrina: Yeah.
Jianggan: You probably feel embarrassed that if you spend like three or four hours,
Phyllis: then you don’t buy anything. I
Jianggan: mean, either buy or [00:12:00] you don’t buy, I mean, you feel the pressure, right? So, yeah,
Sabrina: and then you’ll be asking the salesperson questions, you know, and then you’ll feel bad if you don’t buy after you ask them questions.
Phyllis: One salesperson to like probably one group of people or two. Yeah, as opposed to live streaming, you can have one salesperson selling. to ten.
Jianggan: Yeah. So with live stream, you can sit at home and watch and you can feel the pressure. The sales assistant or the live streaming host to explain the cars and you can hear the questions others would ask.
Jianggan: Sometimes, I mean, we try to try to make a decision over large purchase. I mean, you probably don’t buy it on live stream yourself.
Sabrina: No,
Jianggan: but it gives me enough context, enough understanding about the car and if and for you to actually make a decision.
Sabrina: I feel like when you buy big ticket items, people just like to watch a lot of videos of it.
Sabrina: Yeah. Just to convince yourself that I should buy this, I should spend the money.
Jianggan: And also think about live streaming, where you can see the interactions and how the person explains to other customers. You can observe.
Sabrina: That’s true. They might ask questions that you haven’t even thought. But I guess this was kind of why it blew up, right?
Sabrina: So obviously there [00:13:00] were live streamers who were live streaming. When they kind of got the news. So I think for this, you can play the clip, the one we uploaded on our YouTube shorts. Yeah. So there was for context it’s a live streamer who was doing a live stream halfway when she heard that she was not going to be paid.
Phyllis: Yeah. She was not going to be paid her social security for, I think for the month of November, which she worked the whole month off and the following December.
Phyllis: She looks very stressed out. She is very stressed out.
Jianggan: So look at her face, that was a genuine shock, and of course I’ve been schooling through that. The comments here and some people are saying that, hey do you want a job or something?
Jianggan: And there are also some pretty, like, mean comments. Someone is saying that, okay, this actor is so rude. That should be included in the textbook for Beijing Film Academy.
Sabrina: Yeah.
Jianggan: I think it’s probably genuine. So because that was not the only one, right?
Sabrina: Yeah, it wasn’t the only one. And it’s really like, I think they really did just find out on the stream itself.
Phyllis: There was a cello. So he like on the [00:14:00] topic of the rich dads and the stepsons, right?
Phyllis: So he was saying that he was saying that he also has such a rich dad as they should pay him because they owed him, I think about 300 million RMB, 37 million,
Jianggan: 37
Sabrina: million.
Jianggan: So somebody, I think you can play that clip a little bit. So it’s basically someone who helped do you sort of invest in. In online marketing, and obviously sometimes you pay first and you, you bill your client letter.
Jianggan: So what this guy did is that, I mean he said, okay, the company owns me 37 million the money that I have already paid to douyin, it shows that how much the And look at his face, he looks genuinely stressed, right? So, he was saying that as long as this problem is not resolved, he is going to live stream every day and post videos every day until the problem is addressed.
Phyllis: The reason why this whole thing got so much traction is because the live [00:15:00] streamers look really visibly stressed.
Phyllis: So Evidently, the livestreamers have been working very hard, and I think they work almost every day. So that’s why they’re so, like, visibly stressed that they’re not gonna be receiving any money for all the work they have already put in.
Jianggan: And of course that resonates with the audience, right? Because especially when the economy is, is kind of weak and people worry about their own future. And when you look at people who work hard and and suddenly have this kind of stress is where it resonates. So that’s why you propagate it a lot.
Sabrina: , but then the question is, so what now? Right. I mean. If Ji yue doesn’t have money, then what happens? So obviously there’s the issue of the consumers who bought the cars.
Jianggan: So the problem has been addressed actually. , so obviously it has lots of lots of, so public calls towards Baidu and and Gili.
Jianggan: Baidu and Gili actually released a joint statement saying that. A couple of things first. The two companies have set up a fund just to pay the social security so the employees will be okay.
Sabrina: Okay. And
Jianggan: at, unless they will get [00:16:00] paid, I mean, if they get laid off, you’ll get properly compensated because, I mean, the two companies been this big and they need to show some social responsibility
Jianggan: And second I think for the car buyers, I think they mentioned that Zika, the other GI brand will be taking over the, the service.
Jianggan: Of the cars, they also said that the engineers are still working on sort of maintaining the software and stuff, which might be absorbed into another company. But this is not harder because the cars are manufactured by Jimmy. So I would imagine lots of components and stuff would be shared, right?
Jianggan: I mean, just like the Volkswagon cars or different models. It’s all the same, you know. Components.
Sabrina: It’s interesting because I was looking at the comments online and a lot of people were concerned. So obviously, this kind of electric vehicles or the new EVs, they rely a lot on software, right?
Sabrina: So if a company goes down and your car software, , for example, let’s say it’s a much smaller company and it didn’t have the backing of like two giant parents and the company really does file for bankruptcy and your car just doesn’t have the software to function anymore. Then what [00:17:00] do you do with the car?
Jianggan: I have a friend who is who’s early investor into the auto, then one of the larger ones. And and he, he was telling me that so when they look at EV investments, if any particular model achieves like 10, 000 cells, they feel that is more than secure because you will have enough customer base to make this model viable.
Jianggan: So to make, make it meaningful for the country to continue, continue to pay for subscriptions or
Sabrina: 10, 000 sales a month or 10, 000 sales, like
Jianggan: 10, 000 sales as a starting point.
Sabrina: Oh, like, so when you launch the car, at least 10, 000 sales,
Jianggan: so, so just, just put things in perspective. I think Ji yue sold 2, 400 cars in,
Sabrina: we have a chart on, can you show the chart?
Sabrina: So this is number of costs sold in November this year. Mm. There is GG is 2000 E auto is about 48,000
Jianggan: thousand. Of course Tesla sold money, money. That, and and Leo two are the, what so called the [00:18:00] new sort of car manufacturers.
Jianggan: They’re not established manufacturers entering the market. Or transitioning from traditional manufacturing to sort of new energy or EVs, but just look at BYD. It’s
Sabrina: just, it’s not just in November, right? So there was a, this is an article post on WeChat comparing like the sales of cars just two weeks ago in China.
Jianggan: So let me unpack this a little bit. So, so basically the associations publish figures of sales every week and every month.
Jianggan: . The first one is the sales figures of the, I mean this is between 2nd of December to 8th of December.
Jianggan: So basically weekly sales.
Jianggan: These are the new manufacturers. You see that the Li Auto is, is Much ahead of others, right? It is like 12,600.
Sabrina: When you say new, you’re talking about companies that traditionally were not in the com automotive manufacturing industry, right?
Sabrina: So they,
Jianggan: or, or this new company, startups venture funded to actually build cars. So these are not manufacturers. [00:19:00] Either enter China from outside, or have been manufacturing traditional, like, fuel vehicles.
Sabrina: Do they only manufacture electric vehicles?
Jianggan: Most of them, most of them do only.
Jianggan: Li Auto has a, a caveat. Because they also manufacture I don’t know how to call it in English, but a type of car where you burn fuel to charge your battery.
Sabrina: Hybrid, hybrid.
Jianggan: No, no, no, not hybrid, not hybrid, hybrid is you can power the engine using either electricity or fuel. But this, this thing, the engine is powered purely by electricity.
Jianggan: But how do you charge the battery? You can either burn a fuel. Or charge from external sources. So this is different, not hybrid. So obviously, auto is much ahead of others. And I think GA is not in the list. If you go to the next one. So this explains the luxury cars. And I don’t know why Tesla is considered a luxury car [00:20:00] because I mean, all the people I know in China who bought Tesla is because it’s good value for money.
Jianggan: My friend was complaining to me that. All his uncles, aunties, who in the late sixties were buying Teslas because they feel that it’s like
Sabrina: Tesla in China. I think about
Jianggan: 200k. But there are more models in China compared to in Southeast Asia, but the basic model is probably below 200k.
Sabrina: 200k RMB
Jianggan: so Tesla is, I mean, it’s not that like, but of course there are like more upscale models which are sold in China. But, but you can see the sales of Tesla is, is ahead of Mercedes is ahead of BMW. It’s ahead of Audi. So I actually have a friend who is head of strategy of one of these companies and and I was saying that, hey, what strategy do you do?
Jianggan: I said, and his replies that I don’t know. Making markets there, so that’s why you see all the, like, the European car manufacturers in China. Are sort of lowering their prices.
Sabrina: Just cause the market is so competitive.
Jianggan: The market is [00:21:00] so competitive and the problem is that all these like local manufacturers, they launch a few models a year and they can do software updates and all this like traditional European or Japanese manufacturers or even GM, so they have built a system of lots of outsourcing partners.
Jianggan: So, which means that I mean if, if you rely on this model, it’s very cost efficient. But if you want to move away from this, if you want to like do things faster, you rely, there are so many different players up to value chain. It’s very difficult to coordinate everyone to move.
Sabrina: They can’t update their software as quickly.
Sabrina: Yeah. They, my software, they can’t
Jianggan: update their hardware that quickly. I mean I have a Volvo, right? And used to be a really popular car in China. And now people’s complaints that, Hey, you only update your motor every six years. What the heck is that?
Sabrina: But how often are you buying cars that you would need the car model? Yeah.
Jianggan: For instance, so if you want to buy a new car this year and you know that This is the 3rd year of that [00:22:00] model. Versus there’s another company saying that, okay, I have a new model just for this year.
Jianggan: So if you go to the last image of this. So this is the what they call new energy vehicles, which includes I think, a pure hybrid as well as that model I mentioned to you. I don’t know how it is called English. Yeah. So you see BYD is actually far ahead of everybody else.
Jianggan: Tesla is second and willing, so this is a very cheap, you said the lowest price is 30,000.
Sabrina: Yeah. It’s like half the price of the lowest price of BYD
Jianggan: Yeah. So, so lots of people in the countryside, if they want to carry like small goods and stuff, they will buy a mini ev. So, I mean.
Jianggan: I’m living in the countryside. I have a shop somewhere. It’s very, very affordable. Very, very affordable. And they have the auto, et cetera, et cetera.
Sabrina: But so here’s the thing, right? Like in China, obviously, like besides BYD, that’s carrying everything. It’s a very, very competitive market for this EV space.
Sabrina: And obviously, like we mentioned at [00:23:00] the start, either there will be consolidation or many of these EV brands are probably looking to expand globally as well, right? Because that’s how you can compete.
Jianggan: Yes., in Singapore nowadays, you see more and more BYDs
Jianggan: on the
Jianggan: road.
Sabrina: Yeah, I see a lot of BYDs. So I think that’s. That’s all for this week’s episode. We hope you guys enjoyed this episode on the EV market in China and a little bit about cars for some reason. So if you guys enjoyed this episode do like and subscribe to the, our YouTube channel as well as share this video with your friends, and of course we are launching this the day, two days before Christmas.
Sabrina: So Merry Christmas if you celebrate Christmas and happy holidays. See you next year. Bye bye.
Sabrina: If they change all the buses to electronic, are we going to get motion sickness? It’s easy to get motion sickness.
Jianggan: But there’s a technical problem that if enough people
