Qoros, Israel Corporation's (TASE: ILCO) Chinese auto venture, continues to require major investments that have already reached double the amount of money Israel Corporation lost on the Better Place electric car venture, which collapsed.
The second quarter financial reports published today by Israel Corporation, controlled by Idan Ofer, show that since the venture was founded, the company has invested $600 million in Qoros (compared with $300 million invested in Better Place). The company has injected $122 million into Qoros this year in accordance with the venture's business plan.
Israel Corporation says it has fulfilled all of its investment obligations to Qoros under the business plan except for $4 million, but adds that given the situation, Qoros is evaluating its business plan, "and additional sources of financing may be necessary beyond those included in the business plan."
Qoros's second quarter loss doubled to $78 million, and its first half loss was up 115% to $137 million. The negative trend is not expected to change in the foreseeable future, and is even liable to worsen, with Israel Corporation stating, "Qoros expects a significant rise in costs," due to the planned launching of new vehicles this year.
Despite Qoros's losses, the Israel Corporation, managed by Nir Gilad, reduced its second quarter loss by almost 80% to $20 million, and its first half loss by 37% to $82 million. The trend is attributed mainly to the activity of Zim Integrated Shipping Services Ltd. and Oil Refineries Ltd. (TASE:ORL).
The main contribution to Israel Corporation's profits continues to come from fertilizer producer Israel Chemicals Ltd. (TASE: ICL), which made a $106 million profit in the second quarter, down 36%, compared with the corresponding quarter last year. Also standing out on the positive side was electricity producer IC Power, which increased its revenue, profit and the amount of electricity it produces. It contributed $25 million to Israel Corporation's results, 79% more than in the corresponding quarter last year.
"It won't make a profit in 2014-2015"
Qoros, a joint venture of Israel Corporation and Chinese company Chery (50% each), develops and markets motor vehicles, hybrid vehicles, and electrical vehicles in the Chinese and global markets. Israel Corporations says, "As a result of sustained significant costs, Qoros is not expected to make a profit in 2014-2015," adding, "Qoros believes that it will continue to accumulate losses until substantial vehicle sales begin, as is usual for beginning companies."
In Qoros's regular activity, the Israel Corporation reports that 2,540 cars have been sold to date. The venture began selling its first vehicle, the Qoros 3 Sedan, in late 2013, and launched its second model, the Qoros 3 Hatch, in the second quarter of 2014.
Car sales generated $54 million in revenue in the first half of 2014, with cost of sales amounting to $48 million. Israel Corporation notes that at present, the company is concentrating on building the Qoros brand name, saying, "Due to delay in deploying a network of agents, sales did not significantly increase from the first to the second quarter."
Published by Globes [online], Israel business news - www.globes-online.com - on August 27, 2014
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