When a company has done something wrong, and is named and shamed by Chinese authorities, the best response is probably to accept the penalty, correct the mistakes and move on.
That is exactly what Suzhou Kinglong is doing. The e-bus maker was one of those nailed last month for defrauding the government for new energy car subsidies.
Last year, it applied for subsidies for more than 1,600 e-bus units that it had not finished making.
For that it was asked to return about 500 million yuan (US$73.68 million) of subsidies and pay a fine equivalent to 50 percent of that amount.
Also, the company won’t be eligible for future subsidies, until it has revamped its operations to the regulators’ satisfaction. But at least it gets to keep its e-vehicle production license.
The company decided not to appeal, according to 21st Century Business Herald, and said it will cooperate with the authorities and clean up its operations in order to get back on the subsidy scheme as soon as possible.
Suzhou Kinglong is one of China’s top e-bus makers, with a market share about 7 percent, according to Morgan Stanley.
It is one of the most important subsidiaries of Xiamen King Long Motor Group Co. (600686.CN) by revenue and profit contribution.
As such, the penalty and the disruption to the company’s operation are expected to deal a heavy blow to the listed parent this year.
The subsidy saga shows that even when an investment theme, like new energy vehicles, sounds perfectly valid and solid, picking the right company to bet your money on is still a challenge.
Some investment banks are suggesting the penalty announcement could turn out to be a good buying opportunity.
The worst is over for Xiamen King Long, the newspaper said, citing a China International Capital Corporation report.
There might be some truth in this advice. As the Chinese saying goes, great opportunities are often embedded in a crisis.
Xiamen King Long has lost almost 40 percent of its value over the past one year, and is down about 60 percent from its peak in 2015, so valuation-wise, it is now much lower.
If the group can use this setback to strengthen its e-bus operations, and take advantage of China’s eagerness to grow the new energy vehicle industry, there is no doubt that it will be able to regain its qualification for subsidy application.
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