ZAP, the Santa Rosa, Calif.-based developer of low-speed electric vehicles and scooters, says it has closed a deal to buy a 51 percent stake in China’s Zhijiang Jonway Automobile Co. for $29.03 million in cash.
The deal, according to ZAP executives, also includes an exclusive contract to distribute Jonway’s electric vehicles (mostly motorcycles) “on a forever basis” under the new company Zap Jonway — a contract acquired with 31.5 million shares of ZAP common stock.
According to ZAP’s release today, the stock was valued at $1 per share for the purposes of the agreement, although in reality it’s a “penny stock” that has traded for more than a year at under $0.50 per share in the over-the-counter market.
Previously, ZAP and Jonway (a subsidiary of manufacturer Jonway Group) had agreed to jointly market and sell electric vehicles built by Jonway Auto with an electric drive system licensed from ZAP. Now it seems the parent company is handing the keys to ZAP for electric models, while hanging onto its business in gas motorcycles (the only Jonway Auto vehicles that ZAP says it won’t be selling).
Priscilla Lu, chair of ZAP’s board of directors, told us in an interview that the company expects to acquire the remaining 49 percent of Jonway Auto within the first three months of 2011. There’s certainly an incentive to stick with that time frame, since this new agreement says ZAP will be able to buy the other half of the company shares at the same valuation as in this month’s transaction only if the deal is completed before the end of March.
Jonway Auto currently cranks out both gas and electric vehicles (about 1,000 per month, according to ZAP). It has some $60 million-worth of physical assets, generated about $40 million in revenue in 2009 and recorded around $20 million in revenue during the first quarter of this year, with around 5 percent net profit, said Lu.
ZAP has been working to produce electric vehicles in China with Jonway since January of this year. “All of our focus for the last year has been on this merger,” said ZAP CEO Steve Schnieder, adding that this latest move gives Zap 850 new employees, distribution channels in China and Europe, and “what every auto company wants and can’t get,” including a “dream factory to build in China with a partner who understands quality.”
Schneider said ZAP has now delivered more than 117,000 electric vehicles in 65 countries over the last 16 years, including about 1,000 units of the Xebra line in 2009. The company plans to request a jaw-dropping $450 million in loans under the Department of Energy’s Advanced Technology Vehicles Manufacturing program to set up manufacturing of the long promised Zap Alias in California.
“We obviously very much want to be in the U.S. for manufacturing,” said Schneider. “But for China they are giving us subsidies and land to build factories.”
Despite the upbeat announcement, Zap has had a long history of over promising and under delivering its electric vehicles. Back in 2008 Wired Magazine skewered the company with the cover story, “Eco Hype: ZAPS’s No-Show Green Cars,” which centered on how Zap was more focused on delivering press releases than delivering vehicles and noting its SEC investigations. While ZAP has routinely made promises to start selling the Zap Alias (like in this release) the Alias is still only available “for reservation,” and the DOE loan that the company now hopes will support this project is quite far from a sure thing.
Jonway Auto is also not Zap’s first partner in China. Zap previously announced a joint venture with Chinese automaker Youngman Automotive Group called Detroit Electric that had a plan to launch an electric transit bus, the ZAP Alias, and two family sedans as early as the summer of 2009, according to releases back then. But the deal between Detroit Electric and Zap fell through soon after the announcement. While declining to name a specific partner, Schneider told us he believes ZAP has made mistakes in the past by entering into a joint venture “where visions haven’t been 100 percent aligned,” but that the “odds of surviving are increased measurably” for Zap Jonway compared to previous partnerships.
Images courtesy of Jonway Auto and Zap
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