REPORT: Private Chinese investors sought to fund $6 billion auto plant in Mississippi
Hybrid Kinetic Automotive Corp. rendering - click above to enlarge
The headline is attention-grabbing. A former Chinese auto executive is proposing a $6 billion plant in economically-distressed north Mississippi that will employ 25,000 people and produce one million cars a year.
Automotive News' story is both intriguing and complicated – and not just because three players are named Wang, one is named Yang – so buckle up for the short-and-sweet Autoblog version.
Yang Rong was once China's third-richest man as the CEO of Brilliance China Automotive Holdings Ltd. But after some disagreements with a Chinese government official in 2002, Yang fled the country and settled in Los Angeles.
Cars are only one of the reasons Yang wants to build $6.5 billion plant in Mississippi (that's six times the cost of Toyota's Mississippi plant, by the way). Another is green cards. When Yang left China, he also left his fortune and has apparently been unable to recoup any of it. It's a scary scenario that many wealthy Chinese fear: upset the government, lose your money. But the U.S. government makes it easy for Chinese residents to both invest their cash in America, as well as move here. Invest a minimum of $500,000 in an economically distressed region of the U.S., creating at least 10 jobs, and you get permanent resident status.
Vincent Wang, an associate of Yang's, says Italdesign Giugiaro is designing the new venture's cars, and documents show Porsche AG providing "our car's engineering design." Giugiaro confirms it has talked with the group, Porsche essentially says it has no comment. Such a controversial car must be powered by something just as unusual, right? Oh, yeah. The CEO of the project, C.T. Wang, tells Automotive News, the cars will be "powered by a combination of gasoline, electric, hybrid and compressed-natural-gas powertrains."
Yang calls his project, Hybrid Kinetic Automotive Holdings, Ltd. One of Yang's former associates has split from the group and also plans to build an automotive plant. That company is now called GreenTree Automotive, after being forced to change its name from Hybrid Kinetic Automotive Corp. Yeah. 'Cause that would have just been too confusing.
And where in Mississippi would someone go to gamble $6.5 billion on an automotive plant? Tunica County, of course. Home to nine of the Hospitality State's approximately 30 casinos.
[Source: Automotive News – subs. req.]
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Reader Comments (Page 1 of 2)
waiownsyou 5:34PM (8/31/2009)
So that's where all that money I used at Wal-mart went...
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Motor_Yakuza 6:31PM (8/31/2009)
Yep, boycot Wal mart.
Will 7:27PM (8/31/2009)
Manufacturing in China is actually extremely low margin. The money is in the branding, not the product itself. You think Wal-Mart products are cheap? They are sold by the factories for a very small percentage of even that, most of the money end up in the Walton family.
The whole China-relying-on-export assumption is a myth. Counting profit instead of revenue, export consists of less than 10% of its GDP, because the other 90+% are made by the foreign distributors with offices in China. Most of the money the Chinese get to keep were made domestically, which is not surprising, considering they have a market of 1.3 billion people and a rising middle class.
Part of the reason is that the Chinese make so little is that they are absolutely terrible at advertising, marketing, and exterior design. The same product after being slapped on a brand is sold for ridiculously high margin. That's why even though Nike shoes are so cheap to make, their price tags are still not significantly lower compared to the old days.
nrb 11:45PM (8/31/2009)
"Manufacturing in China is actually extremely low margin."
Somebody is making a mint off of it. There's no reason a three square foot pad for my dog needs to cost $30. It's a piece of foam, wrapped in cloth, and made in China. I refuse to believe it can't be made (profitably) here for that kind of money.
the4thheat 2:51AM (9/01/2009)
nrb:
Oh it could be made in the US for $30 except as others pointed out the money isn't really in the manufacturing or the materials.
For example, those electric space heater radiators you buy for $80 at Target/Walmart/etc. actually cost $5 to buy in China. I mean literally, for $5 you can buy the same thing in China-not wholesale or anything, I mean at full retail at a store. I have no idea what the wholesale cost is but it's gotta be lower than that.
The cost comes from having to pay a (often American) shipping company to drag your heater across the pacific. Then you pay the longshoremen to drag the crate off the boat. Then you pay the truck driver to drive the box to Walmart's distribution center. Then you pay for the Walmart trucks to drive it to the store. Then there's the people who work at the store, the people who built the store, the people who work for the gas company that sold the gas needed to move all this, the people at the electric company that power the Walmart distribution center and store, and about a bazillion other people in between.
Oh and let's not forget the brand name company based in the US that marked it up a bazillion percent. Or the advertising firm they paid for the shiny brand and ads that convince you to go buy it for $80.
Which is why if you made it here for $30 by the time it got to the store it'd end up costing $90, since the cost would get multiplied up with every little step.
Another thing you have to think about is unsold inventory-the store buys a ton of these things but in reality it's unlikely that they'll sell every single one at full price so a lot of the time they're relying on the few sales to cover the cost of making a lot of them. Meaning that if you made it in the USA and your product doesn't sell you just went bankrupt, whereas if you made it in China and you sell only half your inventory you might still have made a tidy profit.
James 5:38PM (8/31/2009)
"Home to nine of the Hospitality State's approximately 30 casinos.."
Must be...Pai gow heaven!
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geo.stewart 6:21PM (8/31/2009)
buy one of the casinos and get the employee salaries back. it will turn into a voluntary servanthood.
Taylor. Yes, Taylor. 5:43PM (8/31/2009)
So it was still unclear to me if he'd be able to get his money. Is he allowed to access the funds if he's doing it for an investment like this, or was the point of this venture to just make new money?
Sucks that someone could lose such an awesome fortune for angering a government. Even though he is filthy rich (or at least was, if he wasn't able to keep even a portion of it), I feel bad for the guy.
-Taylor
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madgamer 5:53PM (8/31/2009)
It sounded to me like he WAS rich, but lost it all and doesn't get to get it back anytime soon (or ever). He is doing this as a new venture, and as a way to get himself and his friends full citizenship in the US, as well as hopefully rich. He has ran an auto company before so he is hoping that those in China who still do have access to their cash will back his venture before moving here. That was my take anyway.
James 5:56PM (8/31/2009)
Yang Rong had other plans too prior to the Mississippi one...like making green cars in China.
"Yang Rong planning green car investment"
http://www.chinadaily.com.cn/cndy/2009-07/11/content_8414737.htm
So far, no word on said above venture...
Wonder if the US investment is but a ruse...just to get green cards for his "investor" minions.
Buffalo Bill 6:06PM (8/31/2009)
He could've gotten greencards for $500,000 a piece by opening a few McDonald's or something, that would've been the least hassle. But based on his experience, managing burger joints probably would've bored him to death.
He probably wants to build cars, though the figures are likely inflated. Why would you spend six times as Toyota building limited volume high performance vehicles?
the4thheat 2:55AM (9/01/2009)
He would spend that much because he's used to using government backed funds to build stuff-how do you think the guy made "his" billions?
Seriously this guy is in way over his head having to raise private capital and having to actually make money to stay in business. Over there if you don't make money the government won't shut you down because the workers will protest like crazy (see recent insane worker protests in China), so he could have spent whatever he felt like on overkill factories.
Anyhow I'm under the impression that he took a lot more than $500K out of China so don't feel too bad for the guy-$500K is just the minimum to get over here but this guy managed to get a LOT more money out.
BrianFL 6:12PM (8/31/2009)
Speaking of China and there communist trade polices, there was an article on the Yahoo.com home page in the news section about another new GM plant being built over in China costing 300 million dollars. Of course millions of NON-auto enthusiasts read it threw a total fit about "oh god how can GM take our money and create jobs there" and blah blah blah its the end of the world. :( Of course I had to comment on the article. I tried explaining the world wide auto industry as a whole, about how the money probably already came from GMs already dominating China market buisness, about how most money generated in China is allowed to leave the country and must be reinvested, and that every other automaker in the world including Toyota also have factories in China. Well as you can guess most people still didn't understand a word I had said and basically through a fit. I am thankful for a site like Autoblog.com that I can have an intelligent debate about the auto industry with people who actually know what there talking about. Even though everybody doesn't agree all the time.
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Motor_Yakuza 6:32PM (8/31/2009)
There must be something fishy about all of this.
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Kunikos 7:24PM (8/31/2009)
I bet that it is a combination of some of those powertrain technologies not necessarily all of them that will make it into potential production cars. I would hazard a guess that the first model would be a plug-in electric / gasoline hybrid. What's unfortunate is that diesel is not listed anywhere there, because a plug-in electric / diesel would be interesting due to having more off-the-line pep and economy.
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mktnb 8:19PM (8/31/2009)
Rong, on so many levels. I wish him well, but it all seems so familiar like a Chinese remake of "Gung Ho" (http://www.imdb.com/title/tt0091159/).
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aekimchee2 9:21PM (8/31/2009)
Familiar, yeah, but my first thought was, ¨John DeLorean!!¨
The Hit 11:48PM (8/31/2009)
Wang, Wang, Yang & Wang?
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XJ 1:54AM (9/01/2009)
I got an email from Yang. In it, he states he is a multi billionaire businessman but he has fled his country of China due to political reasons, and all his funds are presently trapped in that country. He was looking for an overseas partner so that he could transfer the sum of US$6,500,000,000.00 dollars. 30% of it is to be held for tax purposes, but the remaining 70% would be divided evenly between us. He also states that this is 100% safe. All he needed was for me to wire $3000 to get the process started.
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AVP 2:24AM (9/01/2009)
will it hurt to be less racist? This guy is trying to build a business in the USA, generating job in the USA. He's basically building an AMERICAN business. Just because he's Chinese you guys are still going to ridicule him? How about you start a venture building green cars in the states? Or only whites are qualified to make cars in the US?
Whenever anything related to Asia pop up here, this blog turns into a racist paradise like the Free Republic or something.
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