Beijing Borgward, once billed as a rival to BMW, Mercedes-Benz and Audi, officially declared bankruptcy on November 29. The announcement explained that it was drained to pay off its outstanding debts but its current assets are not enough to settle the outstanding balances.
Founded in 1919, Borgward was once Germany’s third largest car manufacturer. Back in the 1960s, Borgward was declared bankrupt due to mismanagement and lay dormant for half a century. In 2014, Foton Motor acquired Borgward for 5 million euros, and subsequently established Beijing Borgward in 2016.
After the revival, Beijing Borgward has been promoted in the Chinese market with emphasis placed on the German brand name, manufacturing and craftsmanship. It once competed with the likes of luxury automobile manufacturers such as BMW, Mercedes-Benz and Audi.
BX7, the company’s first model released in 2016, achieved sales of 30,000 units within nine months after its launch. But due to the lack of research and development technology and frequent quality problems, sales fell sharply. The sales volume of the BX5 in the first month on the market was about 1500 units, and the BX6 and BXi7 failed to appeal to consumers. The company’s sales volume only reached 32,900 units in 2018.
Instead of helping Foton Motor shine in the passenger car market, Beijing Borgward dragged it into huge losses. According to the financial report, Foton Motor turned from a profit of 1.119 billion yuan ($158 million) in 2017 to a loss of 3.575 billion yuan in 2018.
In order to stop losses in time, Foton Motor transferred 67% of Beijing Borgward’s shares and 4.271 billion yuan loan to Changsheng Xingye, an asset management platform, at a price of 3.973 billion yuan.
Behind Changsheng Xingye is UCar, headed by Charles Lu, former chairman of Luckin Coffee. On March 18, 2019, UCar purchased 67% shares of Beijing Borgward for 4.109 billion yuan.
After the acquisition of Beijing Borgward’s equity, UCar launched a new retail platform, transforming the original 4S store model into a model combining brand flagship stores, authorized franchise stores and special sales points.
Lu applied Luckin Coffee’s retail model to Beijing Borgward, which subsequently caused turmoil within the company. In April 2019, more than 200 people left the marketing team and a number of dealers launched a rights protection campaign. More importantly, there has been no new model since Beijing Borgward was acquired. In 2020, UCar was implicated in Luckin Coffee’s financial fraud incident and could no longer provide support for Beijing Borgward. The sales volume of the vehicle company was only 8,740 units in 2020 but halved to 3,612 units in 2021.
In September 2021, Foton Motor said in an announcement that Beijing Borgward’s business situation had deteriorated and its production and operations were at risk. In January, Beijing Borgward had been put on hold because it could no longer operate due to a lack of funds.