Kaixin Auto(KXIN) - 2023 Q4 - Annual Report

Vehicle Sales and Market Presence - The company sourced, marketed, and sold approximately 1,814, 879, and 525 vehicles to customers across China in 2021, 2022, and 2023, respectively[226]. - The company operates three dealerships across three cities in China, focusing on premium brands such as Audi, BMW, and Mercedes-Benz[224]. - In 2023, the company operated three Dealerships, focusing on tier 2 and below cities to leverage favorable growth opportunities[231]. - The company sold approximately 1,814, 879, and 525 new and used vehicles in 2021, 2022, and 2023, respectively[332]. - The demand for premium passenger vehicles in China significantly affects the company's revenues, influenced by macro-economic conditions, urbanization, and household income levels[335]. Strategic Partnerships and Acquisitions - The company aims to establish a joint export trading platform for new energy vehicles with a target total transaction volume of USD 10.8 billion over the next five years[227]. - The company has entered into a strategic partnership with Beijing Bujia Technology Co., Ltd. for 5,000 new energy logistics vehicles, with a total order value of approximately RMB 1 billion (around USD 156 million)[227]. - The company completed the acquisition of Haitaoche, issuing 74,035,502 ordinary shares in exchange for 100% of Haitaoche's share capital, resulting in Haitaoche becoming a wholly-owned subsidiary[218]. - The acquisition of Morning Star Auto Inc. was completed on August 22, 2023, allowing the company to own all assets related to POCCO EVs[238]. - The company plans to establish strategic partnerships with platforms that have significant sales potential, targeting a total transaction volume of USD$10.8 billion in the next five years[343]. Financial Performance and Revenue - The company generated 100$253.8 million, which decreased to US$82.8 million in 2022 and further declined to US$31.5 million in 2023[345]. - Total revenues decreased from US$82.8 million in 2022 to US$31.5 million in 2023, primarily due to a decline in auto sales volume[364]. - The company reported total operating expenses of US$187.9 million in 2021, which decreased to US$48.6 million in 2022 and further to US$21.3 million in 2023[353]. - Net loss was US$84.6 million in 2022 and US$53.6 million in 2023[369]. Operational Changes and Corporate Structure - The company has streamlined its corporate structure by disposing of inactive shell companies and VIE structures, eliminating regulatory risks and maintenance costs[222]. - The company has terminated cooperation with underperforming dealerships, reducing its network to three[230]. - The company has developed a systematic evaluation process for selecting new Dealership locations, considering factors like population density and average disposable income[232]. - The company identified four material weaknesses in internal control over financial reporting, including inadequate technical competency of financial staff[392]. Marketing and Customer Engagement - The company has invested heavily in online sales channels, enhancing its competitive advantage over traditional and online-only competitors[250]. - Customer engagement is primarily through Dealerships, the company's website, mobile apps, and third-party advertising platforms, affecting the expansion of the customer base[337]. - The company anticipates future marketing expenses to focus on performance-based advertising, primarily in vertical automotive media and selected online channels[253]. - The company has a consultative approach to customer support, providing assistance throughout the car purchase process, which has led to strong customer referrals[254]. Regulatory Compliance and Legal Matters - The company is subject to various PRC regulations regarding used automobile trading, requiring verification of background information for sales[261][262]. - The Measures on Sales of Automobile require suppliers and distributors to provide timely after-sales services and ensure consumer rights[265]. - The company must comply with strict regulations regarding illegal fund-raising to avoid administrative and criminal liabilities[275]. - The Foreign Investment Law, effective January 1, 2020, replaced previous laws and aims to unify corporate legal requirements for foreign and domestic investments[278]. Financial Position and Future Outlook - The company expects to fund future growth through additional debt and/or equity financing from both Chinese and international investors[344]. - The company intends to obtain additional equity or debt financing to support business growth, but there is no assurance that financing will be available on acceptable terms[379]. - Cash and cash equivalents at the end of 2023 were approximately US$2.1 million[378]. - The company plans to reinvest all earnings from its PRC subsidiaries into business developments and does not plan to request dividend distributions[391].