Suda Electric Vehicle Company: Private Equity Investment In China Case Solution & Answer

Suda Electric Vehicle Company: Private Equity Investment In China Case Solution


Michael D Ding-man was thinking of making a personal investment in Suda Vehicle Company in the fiscal year 2013. Suda was the fastest developing electric bicycle producer in the China(Chaplinsky & Hoang, 2017). The Chinese market was flooded with people, as people had migrated towards the urban areas from rural, in search of better job opportunities, resulting in cities being overcrowded and representing a long distance between the employers and workers. Such urbanization and industrialized led towards a crowded and an inefficient transportation system and causing the cities to have higher level of pollution. The rise of e-bikes proved to be an effective factor as the bike was cost and energy efficient. Ships ton had been observing on makingan investment in Suda with due thoroughness, and had come up with an investment of RMB 37.8 ($ 6m) in exchange for a 10% share of the company’s sales.

Investment Hypothesis

Ships-ton Group is connected in investing 37.8 RMBs ($ 6m) in exchange for a 10% share in the sales of the firm. Since no other firm has financing in the bicycle industry; all the competitors are looking for developing markets to finance. Now, Wang wants to be sure of his investment-related option that the return on investment will be more than the required 20% gain. What are the risks and benefits associated with financing and what leaving options are available for the firm.

Market Review

Suda was owned by the People’s Republic of China, an e-bike industry. China’s e-bike is one of the biggest manufacturing companies, with an approximate of 150 m bicycles on the road. Orders for E-bikes has increased due to many factors as well as high-level fuel value and an increased population in China. E-bikes also provided solutions to the difficulties faced by the residents in the country. E bikes are very popular due to their convenience and accuracy characteristic and are very well-known means of personal commute. E-bikes are specially designed to decrease the economic oil’s deficiency and they are estimated to reduce 1885 m barrels of oil orders every year. In addition, the government is dealing with the problem of environmental pollution and e-bikes are better organized in the heat, as they discharge a much smaller amount of carbon as compared to other heavy vehicles.

Moreover, the demand for e-bikes was also created by an increase in the number of people moving towards urban areas, which was because of the fact that due to the heavy migration of people from rural to urban areas created a dense population in the urban cities, making the cities majorly overcrowded. As the population in the cities increased so did the demand of e-bikes, as they were much efficient, affordable and suitable for not just newly migrated people in the cities but also the cities’ previous residents, as e-bikes made the conveyance much easier and faster than the cars. Due to the lack of development in public transport; the value for e-bikes was expected to reach from CNY 32 b in 2006 CNY99 b by 2015. (See Appendix 1). The main reason for such an increased growth in the sales of e-bikes was the increase in per capita income, which was expected to grow by 9-10% annually. Finally, the demand for e-bikes went along with the growing number of people within the firm as offices were located in remote areas, which led to an increase in the demand for e-bikes.

Inherent Risks in Investment

Apart from the increasing demand for e-bikes; there were-some risks within the PRC market, which tended to affect the investment decision. These risks are described below:………………….

This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.

Share This