NIO Founder Fang Yunzhou and Former CEO Zhang Yong Hit with $2.4M Equity Freeze as Company Grapples with Operational and Debt Crisis

On May 27, 2024, Shanghai Zheao Industrial Co., Ltd. added two new equity freeze records. The parties subject to enforcement are Fang Yunzhou, founder and chairman of Neta Auto, and Zhang Yong, co-founder and former CEO. Fang Yunzhou’s equity worth RMB 16.815 million was frozen, while Zhang Yong’s equity amounting to RMB 855,000 was also frozen, totaling RMB 17.67 million. Both freezes have a three-year term and were ordered by the Changning District People's Court of Shanghai. Shanghai Zheao Industrial Co., Ltd. was established in July 2014, with Fang Yunzhou as its legal representative. The company has a registered capital of RMB 28.7878 million and engages in businesses including import and export of goods and technology, as well as business consulting services. Fang Yunzhou holds a 58.1402% stake, Zhang Yong holds 2.97%, and Fang is the actual controller. Previously, due to failure to fulfill payment obligations stipulated in effective legal documents, the company was subjected to consumption restrictions in September 2023, involving an amount exceeding RMB 46.97 million. Additionally, it has two tax arrears notices on record, with newly incurred tax arrears totaling RMB 29,570. On March 13, 2024, Fang Yunzhou, Zhang Yong, and Yichun Langling Enterprise Management Consulting Center (Limited Partnership) were listed as dishonest judgment debtors by the Changning District People’s Court of Shanghai for having the ability to perform but willfully refusing to comply with obligations set forth in effective legal documents. Their performance status remains “completely unfulfilled.” In December 2023, relevant parties had already been subjected to enforcement actions involving approximately RMB 226,800. Hozon New Energy Automobile Co., Ltd., the parent company of Neta Auto, reported cumulative net losses of RMB 18.3 billion from 2021 to 2023. In 2022, Neta Auto sold 152,100 vehicles, ranking first among China’s emerging EV makers; however, sales have since continuously declined. Starting October 2024, the company became embroiled in public controversies over layoffs, salary cuts, and delayed payments to contractors. On December 6 of the same year, Zhang Yong stepped down as CEO and assumed an advisory role, while Fang Yunzhou took over as CEO and issued a company-wide letter acknowledging operational difficulties and outlining a reform plan. The plan includes achieving positive gross margins by 2025, overall profitability by 2026, and advancing toward an IPO. However, on June 12, 2024, the Intermediate People's Court of Jiaxing City ruled to accept Hozon New Energy’s bankruptcy reorganization application. Meanwhile, its smart manufacturing base in Yichun Economic Development Zone, Jiangxi Province—inaugurated in 2021 and covering over 600 mu (approximately 100 acres)—has been idle. The project had a total investment of RMB 5 billion, most of which was raised by the Yichun Economic Development Zone Management Committee. Local state-owned asset supervision and administration commission (SASAC) and finance bureau-affiliated platform companies invested nearly RMB 2 billion to acquire equity stakes, and another nearly RMB 300 million was spent via state-owned enterprise platforms on land acquisition and factory construction. Reports indicate that certain investment promotion terms may have violated or circumvented relevant policies and regulations, exposing local investments to significant risk of non-recovery. As of now, Fang Yunzhou is associated with 66 enterprises, 64 of which remain active; Zhang Yong is linked to 37 enterprises, 33 of which are still operating. Both individuals continue to maintain ties with core entities such as Hozon New Energy Automobile Co., Ltd.