(Yicai Global) Aug. 13 -- Chinese car and motorcycle maker Lifan Industry Group has filed for rehabilitation bankruptcy as it struggles with a mountain of debt and a 95 percent drop in its passenger car business.

Controlling shareholder Chongqing Lifan Holding has applied for judicial restructuring at a local court which will give the automaker a chance to get back on its feet through the restructuring of assets and avoid liquidation and a possible delisting, the Chongqing, southwestern Sichuan province-based firm said in a statement on Aug. 11.

Lifan’s car sales plunged 95 percent in the first half from the same period last year to 978 autos. Sales of its new energy vehicles and motorbikes were down 56 percent and 29 percent respectively to 549 and 213,500 units.

An obsolete product series and a lack of investment are the biggest reasons behind Lifan's financial difficulties, said Cui Dongshu, secretary general at the China Passenger Car Association.

With CNY18.3 billion (USD2.6 billion) worth of assets and CNY15.7 billion worth of debts, the firm has an asset-liability ratio of 85.93 percent, according to its first-quarter earnings report. It currently has liabilities of CNY13.7 billion.

The firm reported a net loss of CNY191 million (USD27.5 million) in the first quarter on an operating revenue of CNY564 million, down 74.88 percent from the year before.

Founder Yin Mingshan is one of the country’s earliest private entrepreneurs and was once the richest man in Chongqing. His granddaughter is now Vice Chair of the business.

Lifan's share price [SHA:601777] closed down 1.62 percent today at CNY4.24 (USD0.61).

Editor: Kim Taylor