In the Asian market, electric vehicles are set to see massive growth, with revenue projected to reach $671 billion by 2028. Going further left, in South America, the revenue is set to grow to $3.45 billion. Rest assured, as demand grows, it helps to have an early mover advantage.
It’s just one of the reasons why electric automobiles company Vmoto (ASX: VMT) has spent $16.9 million on land and construction to build its manufacturing facilities and tap into growing demand in Asia and South America.
On May 2, 2023, it acquired industrial land in Nanjing China for $2.9 million. Vmoto paid the sum from its existing cash reserves, in consideration for the acquisition of the 30,045 square meters of state-owned land on a 45-year leasehold basis. The land is strategically located approximately 500 metres from Vmoto’s existing manufacturing facilities, and will be used to construct state-of-the-art manufacturing facilities.
To make the most of this newly-acquired land, the Company has signed a construction agreement with Jiangsu Yuxi Construction Co, Ltd, a reputable Nanjing-based construction company, to build the new 32,856 square meters manufacturing facilities with total estimated construction costs of $14 million. The construction costs will be paid in nine phases linked to construction progress from September 2023 to September 2026, subject to the satisfactory completion of each phase. Jiangsu Yuxi was established in 2007 and has since built a number of significant projects in China.
The new manufacturing sites are set to finish construction in September 2024 and should be up and running by the end of the same year. When these facilities are finished, Vmoto’s total manufacturing space will more than double, reaching 62,977 square meters. Additionally, its production capacity will go from a maximum of 150,000 units per year to a potential 300,000 units per year.
Vmoto’s Managing Director, Charles Chen, said, “The new industrial land acquisition and construction of new manufacturing facilities is a strategic move and in line with the Company’s long term international growth strategy. We expect it will bring a number of benefits to the Company, with minimal downside risks, and will allow Vmoto to continue to move towards its goal of becoming a world class e-mobility solution provider.”
The initial funding for construction will come from the Company’s cash reserves. Vmoto plans to secure bank financing for up to half of the construction expenses and also take advantage of government subsidies, which could amount to as much as $1.4 million.
Presently, China has a business environment where it’s easier to get credit, and interest rates for loans are low, around 3.3% based on the current rates offered by the Industrial and Commercial Bank of China. Given Vmoto’s strong track record and the fact that it owns manufacturing facilities without any outstanding debts, it is confident that it can obtain funding through Chinese banks to cover a portion of the construction costs.
As the transport industry transitions to net zero carbon, the scope for electric vehicles is quite massive. With these new facilities, Vmoto is not only increasing its power to build more but is also growing its in-house research and development team to stay ahead of the eco-curve.
Alinda is a Business Reporter for The Sentiment
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