HAAH gives up on Chinese cars, will file for bankruptcy

HAAH has raised money over the years from dealers and financial institutions, but the next critical step of finalizing a joint venture with Chery required a big infusion of cash, Hale said. Chery was making its own investments by preparing the vehicles for the U.S., Hale said, but HAAH would need to buy them.

“We always had the responsibility to raise big money — it was north of $200 million,” Hale said. “We had already raised some of the money through our bank, through our dealers, but not nearly enough to get the deal done.”

Hale, a longtime U.S. auto executive who has worked at Mazda and Volvo, started HAAH in 2014 when prospects for better relations between the U.S. and China were looking up.

The U.S. auto tariff on Chinese vehicles was 2.5 percent in the mid-2010s, and several Chinese automakers were looking at the U.S. market.

But U.S.-Chinese relations declined during the Trump administration, which imposed an extra 25 percent tariff on a variety of Chinese goods, including cars.

The trade situation worsened with the onset of the coronavirus pandemic. And now under the Joe Biden administration, the U.S. has pressed China on human rights concerns and security matters while maintaining the Trump tariffs.

“I’m not blaming Biden; I’m not blaming Trump. I’m just saying that the state of affairs is not good,” Hale said. “I can’t control the U.S.-China relationship and the effect it’s having on big investors in the deal. There’s nothing I can do.”

In HAAH’s most recent business plan, the company expected to purchase finished vehicles from Chery through a joint venture and distribute them to U.S. dealers. The retailers would pay HAAH a flat rate depending on the model and trim, then sell the vehicles to consumers at a no-haggle price.

But as the venture shuts down, dozens of prospective dealers who had signed up for about 135 sales points across the U.S. will lose their deposits, which ranged from $100,000 to $175,000 per point, depending on the market, Hale said. Most dealers had one or two sales points, but a few had as many as five.