Guided by the 15th Five-Year Plan for the Development of the Intelligent and Connected Vehicle Industry, mergers and acquisitions in China’s automotive sector have accelerated sharply. Major state-owned automakers including FAW and GAC have taken the lead in resource consolidation, kicking off a wave of industrial resource optimization.

Nevertheless, this round of industrial restructuring involves more than central and local SOEs. Shao Ji, Deputy Director of the Industry Development Department at the National Development and Reform Commission, stated at a press briefing that corporate mergers and reorganizations will be advanced via market-oriented and law-based approaches.

Recent high-profile cases such as Taiyi Shenlian’s takeover of NETA Auto, Zotye’s production resumption, and the volatile share price of Haima Auto are typical examples of market-led restructuring.

For chronically loss-making automakers trapped in operational stagnation, the ongoing M&A window presents a rare chance for corporate revival.

According to the disclosed plans of NETA and Zotye, both enterprises regard overseas markets as their core growth engine going forward — arguably the only viable path available at present.

Yet the landscape has changed dramatically. When NETA built its plant in Thailand a few years ago, its main rivals were Japanese automakers. Today, leading Chinese OEMs including BYD, Geely, Chery and SAIC are speeding up global expansion, creating a fiercely competitive environment with rivals from both China and overseas. Even after restructuring, the road to recovery remains fraught with challenges.

01 Capital Inflows: Stricken Automakers Seek a Second Life

Shanzi Hi-Tech’s acquisition of NETA Auto is no impulsive move.

In mythology, after Nezha committed suicide, his master Taiyi Zhenren rebuilt his body with lotus roots. The allegory has been mirrored in NETA’s restructuring: the entity Taiyi Shenlian, named after the mythical figure and lotus, stepped in to rescue the brand once abandoned by consumers and the market.

Taiyi Shenlian and its backer Yuxu Technology are investment vehicles specially established by Shanzi Hi-Tech for the NETA reorganization.

Corporate registration records show Taiyi Shenlian was founded in April 2026. Its controlling entities are Zhejiang Shanzi Synchronization Co., Ltd. and Zhejiang Shanzi Yuxu Technology Co., Ltd. The former is controlled by Ye Ji, Chairman of Shanzi Hi-Tech, while the latter is under Yu Shuxin, head of the Secretary’s Office at Shanzi Hi-Tech, also incorporated in 2026.

Back in 2025, Shanzi Hi-Tech had already shown strong interest in Hozon Auto (NETA’s parent firm). It became the sole qualified investor for restructuring, posting a RMB 50 million bid deposit and briefly taking charge of NETA’s daily operations. However, its proposed RMB 4.5 billion restructuring draft failed to be submitted on schedule and was scrapped.

Why has Shanzi Hi-Tech kept pursuing this debt-burdened halted automaker? The group aims to break out of its auto parts supplier identity and become a full-vehicle manufacturer.

Originally a large real estate enterprise based in Ningbo, Shanzi Hi-Tech has transformed into a high-end manufacturer with two core businesses: automotive components and advanced semiconductor packaging. It once supplied electric drive reducers for the NETA N01.

Previously, Shanzi Hi-Tech acquired Hebei Hongxing Auto to obtain passenger vehicle production qualifications. It also recruited Zhu Renjie, former Tesla Manufacturing Director, as CEO of its subsidiary Shanzi Youqian, planning to launch an ultra-cost-effective model priced below USD 10,000.

During this period, Shanzi Hi-Tech set up another subsidiary for the NETA takeover: Zhejiang Qianhe Auto Co., Ltd. Its name combines “Qian” from Shanzi Youqian and “He” from Hozon Auto, founded in December 2025. After the RMB 4.5 billion restructuring plan fell through, Shanzi Hi-Tech established Taiyi Shenlian instead. The new RMB 3 billion proposal marks another attempt.

Under the V17 project roadmap, three priorities will be delivered between 2025 and 2026: completing V17 vehicle development and launch, building an exclusive Tmall online sales channel, and rolling out mass offline deliveries. The V17 model targets the domestic market with online sales as its primary channel and is scheduled for production and delivery in 2026.

Meanwhile, NETA Auto will focus on overseas markets. In short, after taking over NETA, Shanzi Hi-Tech will complete dual domestic and overseas layout within the year.

Like NETA, Zotye has ramped up resumption efforts notably this year, especially in September. Its Shenkang body mold factory resumed production in March; new vehicle styling was finalized in June. In September, molds for new models were delivered and coating line renovation at the manufacturing base finished commissioning. Zotye announced its all-new A0-segment model had formally entered mass trial production.

Fueled by favorable policies for industrial restructuring and production resumption progress, Zotye’s stock repeatedly hit daily limit-ups. Haima Auto also saw share price volatility on September 14, reflecting capital market enthusiasm for restructuring stories of troubled automakers.

02 Triple Headwinds: Debt, Overseas Expansion and Supply Chain

Capital injection does not equal corporate rebirth. After restructuring plans are implemented, multiple hurdles persist: funding pressure, debt negotiations, intense overseas competition, and rebuilding trust across the supply chain.

The primary challenge lies in debt settlement and sustained capital input. Halted automakers generally carry heavy liabilities, including unpaid staff salaries, outstanding payments to component suppliers and bankruptcy-related costs. Production line restart, model iteration and channel development all require continuous new investment.

Take NETA Auto as an example. Under the Restructuring Plan (Draft), Taiyi Shenlian plans to inject RMB 3 billion of restructuring capital to acquire approximately 70.62% equity in Hozon New Energy. Of the funds, RMB 1.167 billion will settle claims and bankruptcy expenses related to retained assets, while RMB 1.833 billion will supplement working capital to support production restart.

Compared with declared claims totaling RMB 26 billion, the RMB 1.167 billion debt repayment fund looks insufficient. Still, mergers and reorganizations represent a lifeline for many enterprises bogged down by arrears. Particularly amid tough times for component suppliers with shrinking margins and stretched payment terms, restructuring offers partial relief for the auto supply chain.

Sustained long-term operation remains uncertain. Hozon New Energy’s development blueprint is divided into three phases: Phase 1: Resume production of the NETA X model mainly for overseas markets, targeting annual sales of 10,000 units. Phase 2: Launch vehicles tailored for Asia, Africa and Latin America with an annual output target of 300,000 units. Phase 3: Develop global intelligent vehicles, strive for RMB 40 billion annual revenue and prepare for an IPO.

Phase 1 is reasonably achievable. Though overseas competition is fierce, NETA has prior overseas deployment experience. The restructuring draft also states that the resumed NETA X has secured preliminary orders, making the 10,000-unit target relatively manageable.

By contrast, the feasibility of Phase 2 and Phase 3 remains questionable.

Leading OEMs have accelerated global expansion throughout 2025 and 2026. In 2025, Chery, SAIC, BYD, Changan, Great Wall, Geely and Dongfeng together exported over 5 million vehicles. Multiple automakers aim for million-unit overseas sales volumes in 2026.

With domestic market growth slowing, overseas markets account for nearly half of total sales in many OEMs’ long-term strategies, leaving shrinking room for mid-tier and marginal automakers.

NETA and Zotye will face steep costs to gain overseas traction. NETA’s previous collapse stemmed from weak core technologies and ill-advised high-end push; Zotye suffered from insufficient original R&D and poor quality & technology foundations. Both are plagued by fundamental technical weaknesses.

Technology and product iterations are rapid nowadays. The NETA X has already lost competitiveness. If the brand continues to rely on low pricing to attract consumers overseas, it will likely repeat past failures.

Moreover, both brands plan to launch entry-level compact models, a segment heavily contested by leading OEMs. Their products show no obvious highlights for now. Low-cost vehicles rely heavily on sales volume to amortize costs. Once sales fall short of expectations, the companies will easily slide back into a vicious cycle of losses and bankruptcy.

Lack of established overseas brand recognition further raises barriers. Resumed production will leverage existing domestic product lines and supply chains under a “manufacture in China, sell overseas” model, a strategy also adopted by joint ventures struggling in the home market. Yet compared with JVs, NETA and Zotye have minimal global awareness. NETA once built a factory in Thailand but failed to honor signed agreements, damaging its reputation and complicating its overseas journey.

Few Chinese independent brands focus purely on overseas markets. Stonex is one rare example, but it targets high-end segments with decent profit margins yet limited sales volume.

The mobile phone industry has a successful low-end overseas benchmark: Transsion, known as the “king of African phones”, posted RMB 35.4 billion operating revenue and RMB 1.773 billion net profit last year. However, automotive manufacturing is capital-intensive, with massive investment required for R&D, certification, production and aftersales. It is nearly impossible to replicate mobile players’ regional business model in automobiles.

Beyond market competition, rebuilding supply chain trust constitutes a hidden risk. Leveraging China’s complete automotive supply chain for overseas expansion is core to the restructuring strategy. Yet unpaid supplier dues and staff salaries during production halts have eroded trust among vendors and employees. Even with capital injection to restart manufacturing, stable component sourcing and workforce retention remain uncertain. If order volumes stay low, component suppliers will be reluctant to support production, potentially triggering supply panic.

The restructuring plan’s target of RMB 40 billion revenue and IPO preparation in Phase 3 has also sparked market doubts. Whether RMB 3 billion can support a business scaled to tens of billions — whether this is grounded industrial revitalization or speculative capital rotation — remains unclear.

This wave of industrial restructuring comes amid overcapacity and an overcrowded domestic OEM landscape, accelerating market exit for weaker players. Against this backdrop, the question remains whether long-halted automakers still hold viable industrial value.

Overall, policy-backed market-oriented automotive restructuring offers troubled automakers a precious opportunity to break through. Capital inflows, production resumption and overseas deployment have brought a glimmer of hope for NETA, Zotye and peers. Nevertheless, the trend of industrial consolidation is irreversible. Escalating overseas competition, core technical shortcomings, debt burdens and supply chain risks are all major hurdles these revived automakers must overcome.