HARMONY AUTO (03836) plans to sell a 45% stake in its overseas new energy vehicle business to its controlling shareholder Feng Changge for 330 million yuan.

HARMONY AUTO (03836) announced that the company (as the seller), EGL (a company fully owned by Feng Changge, as the buyer), and Feng Changge (as the guarantor of the buyer) signed an agreement after the trading session on May 23, 2025. According to this agreement, the company conditionally agreed to sell to EGL: (i) the shares for sale, representing 45% of the restructured capital of the selling company (iCar Group Limited), at a price of RMB 250 million; and (ii) the loans for sale, representing 45% of the convertible securities issued by the selling company, at a price of RMB 80 million. The total price of RMB 330 million will be offset in full against the CS loan principal amount owed to EGL by the company upon completion of the sale. To facilitate the sale and separate the responsibilities and liabilities for the priority loans after the sale is completed, the company plans to implement a capital restructuring. As a precondition for the completion of the sale, the main steps include: (a) the paid-up capital of the selling company will increase to approximately RMB 555.6 million; (b) part of the shareholder loans of approximately RMB 385.4 million will be converted into priority loans; and (c) the remaining shareholder loans of approximately RMB 177.8 million will be converted into convertible securities issued by the selling company to the company. As of the date of this announcement, the selling group owns 42 subsidiaries engaged in distributing new energy vehicles and providing after-sales services in overseas markets of the selling company. The group began operating overseas new energy vehicle business in 2023. The selling group has successfully partnered with BYD COMPANY Limited (one of China's leading car manufacturers) to distribute two new energy vehicle brands (BYD Company Limited and Denza) and provide after-sales service through distribution networks and service centers established in several regions outside of mainland China. As of April 30, 2025, the selling group has 45 4S centers, 34 showrooms, and 4 service centers in locations including Hong Kong, Cambodia, the Philippines, Singapore, Japan, Indonesia, Thailand, Malaysia, Australia, the UK, France, and Poland. As of the date of this announcement, the selling group is the exclusive primary authorized distributor of BYD Company Limited's new energy vehicles in Hong Kong and the authorized national distributor in Cambodia. The rapid growth of the overseas new energy vehicle market presents significant business opportunities, but also requires substantial operating funds and initial investments to enter the market, including establishing distribution and after-sales networks. In 2023, the company began discussions with Feng Changge on jointly investing in the development of overseas new energy vehicle business through the selling group. The contracting parties agreed that the joint investment would be made by the company and Feng Changge in proportions of 55% and 45%, respectively. To expedite market entry and gain a competitive advantage, Feng Changge initially provided funds in the form of CS loans to enhance the group's operating fund position and support the rapid launch of the selling group's business. The formal joint investment structure plan will be implemented in a later stage. After a full fiscal year of operation, it is evident that the long-term development and expansion of the selling group's overseas new energy vehicle business will require continuous and substantial operating funds and investments, particularly for purchasing new energy vehicle inventory and establishing distribution networks and service centers in multiple overseas regions and markets. Therefore, given these funding requirements, the company and Feng Changge have agreed to continue implementing the joint investment structure to establish a clear framework for future fund-raising, operating responsibilities, and profit and loss sharing. As the selling group is still in the growth stage and profitability may take time to achieve due to initial operating and market penetration costs, the company believes that reducing its equity interest in the selling group to diversify and mitigate the financial risks of the group is a prudent move. This strategic partnership is expected to provide the selling group with financial flexibility and operational resilience, enabling it to better respond to market challenges and pursue long-term growth.