Financial Risk Analysis of Sunwoda's RMB 2.3 Billion Quality Claim

Based on collected data and news information, I will provide you with a detailed analysis of the RMB 2.3 billion quality claim facing Sunwoda and its financial risk exposure.

---

On the evening of December 26, 2025, Sunwoda issued an announcement stating that its wholly-owned subsidiary, Sunwoda Power Technology Co., Ltd., was sued by Weirui Electric Vehicle Technology (Ningbo) Co., Ltd., a subsidiary of Geely Automobile (HK:0175) [1][2]. Weirui (51% owned by Zeekr Automobile, 49% owned by Geely Automobile) alleged that the battery cells supplied by Sunwoda Power between

had serious quality defects, leading to numerous battery quality issues in the Zeekr 001 WE86 models equipped with the relevant battery packs [3]. Weirui is therefore claiming in compensation [1][2].

Financial Indicator	Amount (RMB 100 Million)	Percentage of Claim Amount
RMB 2.3 Billion Claim Amount	23.14	100.00%
2024 Net Profit	11.50	49.70%
First-Half 2025 Net Profit	11.64	50.30%
Total Net Profit of Two Periods	23.14	100.00%

[3]. This means that if the full amount is paid, the company will lose all profits from the past two years.

Cash Flow Indicator	Amount (RMB 100 Million)	Risk Assessment
Latest Free Cash Flow (FCF)	-29.02	Severe Negative Value
Operating Cash Flow	Approx. 5-8 (Estimated)	Insufficient Coverage Capacity
Claim Amount / Free Cash Flow	79.74%	High Risk

Sunwoda’s latest annual free cash flow is

[0], which is in a net outflow state. The cash generated from the company’s operations is insufficient to cover capital expenditure expansion. The RMB 2.3 billion claim will further worsen its cash flow situation, and the company may need to use working capital or seek external financing.

After the release of the lawsuit announcement:

• On
  December 29
  , the stock plummeted
  15.97%
  at the opening and closed down
  11.39%
• The market value evaporated by approximately
  RMB 6.6 billion
  over
  three trading days
• As of January 11, 2026, the market value was approximately
  RMB 34.5 billion
  [0]

The claim amount accounts for approximately

of the current market value, making it a major risk event.

Solvency Indicator	Value	Industry Benchmark	Assessment
Current Ratio	1.07	1.5-2.0 (Healthy)	Weak
Quick Ratio	0.87	>1.0 (Healthy)	Low
Current Assets/Current Liabilities	107%	-	Limited Buffer Space

The company’s short-term solvency is weak, with a current ratio of only 1.07. This means that in the event of a large compensation payment, the company may need to use most of its current assets to make the payment, resulting in

[0].

According to the assessment of financial analysis tools, Sunwoda’s current debt risk is

, mainly due to the following reasons:

1. Profitability Under Pressure
   : The net profit margin is only
   2.71%
   , and ROE is
   6.84%
   , both at low levels [0]
2. Tight Cash Flow
   : Free cash flow remains negative, and the company’s cash-generating ability is insufficient
3. Leverage Level
   : Although the specific debt ratio has not been disclosed, the low current ratio indicates certain debt repayment pressure

Sunwoda just submitted its Hong Kong stock listing application in

. This lawsuit, [2], may cause its listing plan to fail. The Hong Kong stock market is highly sensitive to major lawsuits and quality issues, and regulators may require the company to fully resolve the lawsuit before proceeding with the listing.

• Zeekr car owners
  have requested free battery replacement, rather than replacement only after inspection [3]
• Li Auto
  prospective car owners have abandoned vehicle pickup due to battery supplier issues [3]
• Potential customers may turn to competitors (such as CATL)

This lawsuit marks that

[2]. In the future, clauses related to “recall cost sharing” and “full-life-cycle quality liability” in contracts between automakers and suppliers may become more stringent.

Scenario	Probability	Compensation Amount (RMB 100 Million)	Financial Impact
Most Optimistic	20%	0-5	Stock price stabilizes, no major impact on Hong Kong listing
Base Scenario	50%	10-15	Cash flow under pressure, need to raise capital via financing
Pessimistic Scenario	25%	20-23	Profits of the past two years are wiped out, liquidity crisis
Most Pessimistic	5%	>23	May affect normal operations, strategic adjustments required

In response to this crisis, Sunwoda is adopting the following defensive strategies [2]:

1. Strategic Transformation
   :
   • Shift from a pure electric battery cell supplier to the
     PHEV/EREV hybrid market
   • Become a core supplier of extended-range models for Li Auto, Leapmotor, Deepal, etc.
   • Vigorously develop
     energy storage system solutions

2. Business Focus
   :
   • Leverage the advantages of
     high-power small batteries
     accumulated in the consumer electronics sector
   • Avoid direct competition with CATL in the pure electric field

3. Cash Management
   :
   • Utilize the
     positive cash flow
     from consumer electronics business (supplier to Apple and Xiaomi)
   • “Inject capital” into the power business affected by the lawsuit

Risk Dimension	Risk Level	Description
Liquidity Risk	High	Free cash flow is negative, and compensation will exacerbate the situation
Litigation Risk	High	The RMB 2.3 billion claim amount is huge, and the outcome is uncertain
Listing Risk	High	Hong Kong stock listing plan may be hindered
Customer Churn Risk	Medium	Quality issues may affect new orders
Industry Competition Risk	Medium	The power battery industry continues to face cut-throat competition

---

The RMB 2.314 billion quality claim facing Sunwoda has a

impact on the company’s financial risk exposure:

1. Amount Perspective
   : It is equivalent to the sum of the company’s net profits over the past two years, which will deal a devastating blow to its profitability
2. Cash Flow Perspective
   : With negative free cash flow, the compensation payment will severely deplete the company’s cash reserves
3. Strategic Perspective
   : The Hong Kong stock listing plan faces uncertainty, and the company may be forced to make strategic adjustments
4. Operational Perspective
   : Short-term solvency is weak, and liquidity buffer space is limited

: Sunwoda’s financial risk exposure is at a . It is recommended that investors closely follow the progress of the lawsuit, the company’s cash flow situation, and the latest developments regarding its Hong Kong stock listing plan. It is advisable to maintain a cautious attitude until the outcome of the lawsuit is clear.

---

[1] 36Kr - “Sunwoda Hit with RMB 2.3 Billion Sky-High Claim, Exposing the ‘Quality Fester’ Under the Fierce Competition of the Battery Industry” (https://m.36kr.com/p/3628698496676613)

[2] 21st Century Business Herald - “Behind the RMB 2.3 Billion Sky-High Claim: Who Should Pay for the Defects, Zeekr or Sunwoda?” (https://www.21jingji.com/article/20260104/herald/4c8dc2cdf8ec5900a5e1dd2b9fe16050.html)

[3] Sina Finance - “Hit with RMB 2.3 Billion Claim, Sunwoda’s ‘Problem Battery Cells’ Escalate: Zeekr Owners Demand Battery Replacement” (https://finance.sina.com.cn/stock/t/2026-01-02/doc-inhewzat4626461.shtml)

[0] Jinling AI Financial Database - Company financial data, market data and technical indicators