CENN · Read the filing

Item 1A. Risk Factors.

Risks Related to Our Business

We have a limited operating history and face significant challenges in an emerging industry.

We began pilot production of our first-generation, U.S. Class 1 (0 - 6,000 lbs.), electric light-duty commercial vehicle, the Metro®, in 2018. Our revenues were approximately $18.1 million for the year ended

December 31, 2025. To date, we have derived our revenues principally from sales of the Metro®, LogistarTM series, TeemakTM, Avantier® series and iChassis100 models. We have a limited operating history on

which you can base an evaluation of our business and prospects. You should consider our business and prospects in light of the risks and challenges we face in an emerging industry with limited experience to date in high volume manufacturing

of electric commercial vehicles (“ECVs”), including challenges related to our ability to:

• design and manufacture safe, reliable and quality ECVs on an ongoing basis;

• maintain and improve our operational efficiency;

• protect our intellectual property; and

• navigate an evolving and complex regulatory environment.

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If we fail to address any or all of these risks and challenges, our business, financial condition, operating results and prospects may be materially and adversely affected. As we continue to grow

our business, we cannot assure you that we will be able to develop effective and cost-efficient manufacturing capabilities and processes, and maintain reliable sources of component supplies, that will enable us to meet the production demands

required to successfully sell our ECVs.

We have historically incurred losses from our operations and may not be profitable in the future.

We incurred losses from operations of approximately $59.0 million, and$47.5 million for the years ended December 31, 2025, and 2024, respectively. We have made

significant up-front investments in research and development, supply chain establishment, establishment of local assembly facilities and capacity, and channel partner development to develop and expand our business. We have spent approximately

$96.7 million in research and development activities related to our operations from our inception through December 31, 2025. We expect to continue to invest significantly in research and development, manufacturing and supply chain operations

to expand our business, and these investments may not result in profitability within our expected timeframe or at all.

We may not generate sufficient revenues to be profitable in the future and we may incur substantial losses for a number of reasons, including lack of demand for our ECVs and increasing

competition. In addition, we may incur unforeseen expenses, or encounter difficulties, complications and delays in market penetration or delivery for our products, generating revenue or achieving profitability. If we are unable to achieve

profitability, we may have to reduce the scale of our operations, which may impact our planned growth and adversely affect our business, financial condition, operating results and prospects.

Our ability to develop and manufacture ECVs of sufficient quality, on schedule and on a large scale is still evolving.

Our business depends in large part on our ability to execute on our plans to develop, manufacture and sell our ECVs. We began pilot production of the Metro® in 2018. We plan to manufacture ECVs in

higher volumes than we have historically and our production capabilities, including our facilities and those of our manufacturing partners, may not be able to handle the anticipated volumes in our business plan. Development and manufacturing of

our current and future ECVs, such as the Metro®, LogistarTM, LogiMax, iChassisTM, AvantierTM, Bison MotorTM, TeemakTM and Antric One are and will be subject to risks, including:

• compliance with environmental, workplace safety and similar regulations;

• quality controls;

Any of the foregoing could materially and adversely affect our business, financial condition, operating results and prospects.

Our future success depends on our ability to continue to introduce new models and we may experience delays in launching and ramping up production of our new

ECV models.

In 2025, we have introduced three new vehicle models, Avantier Ex, Avantier CX, BM860H. Avantier Ex and Avantier CX are targeting European markets and other markets outside of US markets while BM860H is mainly

targeting the US markets. In order to introduce new ECV models through 2025, we have to coordinate with our suppliers, manufacturing partners, channel partners and other third parties in order to ensure timely execution of the manufacturing

and assembly processes. If we fail to coordinate these efforts and achieve market introduction and acceptance of our new ECV model in a timely manner, our business, financial condition, operating results and prospects could be adversely

affected. In addition, we have limited experience to date in manufacturing and assembling each of our new ECV series, as well as limited experience building and ramping up multiple vehicle production lines across multiple factories (including

those of our manufacturing partners) in different geographies. In order to be successful, we will need to implement, maintain and ramp-up efficient and cost-effective manufacturing capabilities between our manufacturing partners, our own

facility in Changxing and our local assembly facilities. Manufacturing bottlenecks and other unexpected challenges may arise during our production ramp-up, and we must address them promptly. We may face delays in establishing and/or

sustaining production and timely delivery of our new ECV models. Any delay or other complication in ramping up the production of our current or future ECV models may harm our business, financial condition, operating results and prospects.

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Our operating results may be more volatile due to a shift from only a high concentration of sales in relatively few channel partners to establishing our own

distribution network.

For the years ended December 31, 2025, and 2024, our channel partners accounted for approximately 0.3%, and 2.1% of our sales, respectively. As of quarter one of 2022, the company made significant changes

regarding its few channel partners and shifted reliance away from select channel partners to its own distribution network through the establishment of local EV Centers. In 2022, we acquired TME inclusive of its assembly facility and

distribution network in the EU. Simultaneously, and based on decreasing sales we ended our relationship with two US distributors: Ayro and Tropos. This shift in our distribution model is uncertain, and if we are unable to establish effective

EV Centers that make-up for losses in revenue from our channel partners, our operating results could be materially and adversely affected.

Our reliance on our new hybrid distribution model to market, sell and service (and in certain cases, assemble and/or homologate) our vehicles is subject to

substantial risks because we do not maintain control over certain of our remaining channel partners and our newly established EV Center dealerships are relatively new.

Our EV Center dealerships and channel partners are responsible for different portions of the sale, marketing and servicing (and for our channel partners, assembly and/or homologation) of the ECV

products we sell. We do not control the actions of our channel partners. For example, we do not control how our channel partners market or sell assembled ECVs or the quality of their service on our ECVs and, with respect to the private label

channel partners, we do not oversee their assembly of our ECVs.

Our EV Centers are relatively new to the markets in which they are established and working with local dealers to sell our ECVs in the countries and regions in which they operate. If we are unable

to efficiently operate or manage these new EV Centers, they may not be successful in the markets in which they operate or fail to satisfy sales targets, meet customer service objectives, or experience adverse regulatory actions or other

operational challenges, we could experience a reduction in sales. If we decide to close or shift resources or operations from certain EV Centers at any time in the future, end-user customers of our ECVs may encounter difficulties in maintaining

their vehicles and obtaining satisfactory support, which may negatively impact our reputation.

Our channel partners are not subject to any minimum annual purchase requirements. In the event our channel partners are not successful in the markets in which they operate or fail to satisfy sales

targets, meet customer service objectives or experience adverse regulatory actions or other operational challenges, we could experience a reduction in sales. Furthermore, if any of our channel partners fail to successfully operate their

business or lack liquidity to support their operations, they may be unable to continue to purchase and sell our ECVs in the countries in which they operate, which could limit our sales to such market for an extended period and adversely affect

our business.

In addition, our ECVs are highly technical products that require maintenance and support, which we rely on our newly established EV Centers and certain of our channel partners to provide to our

customers. If our channel partners were to cease or cut back operations at any time in the future, end-user customers of our ECVs may encounter difficulties in maintaining their vehicles and obtaining satisfactory support, which may negatively

impact our reputation.

Disputes may occur between us and our channel partners or our channel partners and their customers, and we could be affected by adverse publicity related to such disputes, whether or not such

publicity is related to their collaboration with us. Our ability to successfully build and maintain our brand can be adversely impacted by perceptions about the quality of our channel partners’ servicing (and in some cases, assembly) processes.

Our arrangements with our channel partners typically specify general quality standards that the partners may meet, but do not provide us with any direct control or oversight over marketing and selling (and in some cases, assembly) behavior of

such channel partners. We rely on our channel partners to meet quality standards, but we cannot assure you that they will successfully maintain quality standards, which could adversely affect our reputation.

We may be unable to enter into new agreements or extend existing agreements with channel partners on terms and conditions acceptable to us or at all. In addition, even if we are able to expand our

channel partner network, it on average takes up to six months from the time we enter into an agreement with a new channel partner for them to be operational and selling our ECVs, depending on their familiarity with ECVs and the types of

services they will provide to us.

As of December 31, 2025, we shifted from relying only on channel partners to a hybrid model combines distribution between our wholly owned EV Centers with local established dealers and channel partners. We

currently have four EV Centers worldwide and anticipate the EV Centers will lead the distribution network, however if we were to close or dissociate one or more of our EV Centers due to performance, there is no assurance that we would be

able to establish a suitable replacement EV Center in the region to take up the role of marketing, distributing and after-market care our ECVs in the relevant market within a suitable timeframe or at all.

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The expense and time required to establish and train staff at our EV Centers so performance and service will be able to meet our quality standards and regulatory requirements, may be

greater than anticipated, or we may never establish a new operation after having invested significant resources on that local market. Any of the foregoing could adversely affect our business, financial condition, operating results and

prospects.

Our EV Center dealers and channel partners may reduce or cancel their orders at any time, which could adversely affect our business.

Our relationships with our dealers and channel partners are typically subject to definitive agreements we have with them. Under these agreements, our dealers and channel partners do not

have any minimum or binding purchase obligations. Because our sales are made pursuant to standard purchase orders, orders may be cancelled, reduced, or rescheduled with little or no notice. Our ECVs may not meet the expectations of our end

users or market requirements. In the future, our dealers or channel partners or their customers may decide to purchase fewer ECVs than they have in the past, may alter their purchasing patterns at any time with limited or no notice, or may

decide not to continue to purchase our ECVs at all. Cancellations of, reductions in, or rescheduling of orders could also result in the loss of anticipated sales without allowing us sufficient time to reduce our inventory and operating

expenses, as a substantial portion of our expenses are fixed at least in the short term. In addition, changes in forecasts or the timing of orders expose us to the risks of inventory shortages or excess inventory. Any of the foregoing events

could materially and adversely affect our business, financial condition, operating results and prospects.

Our EV Center dealers and channel partner network may not grow or develop as we currently expect, in current markets in which we sell ECVs or

penetrate new markets, our revenue and financial condition would be adversely affected.

Substantially all of our revenue for the years ended December 31, 2025, and 2024 was derived from sales of our ECVs in North America, Europe and Asia. As of December 31, 2025, we have maintained relationships

with several distributors in the European and Asian market and operated four EV centers in Spain, New Jersey and California in the US, and China.

Moving forward, we aim to increase the size of our dealership network in our target markets through establishing EV Centers and identifying dealerships partners when warranted, which is

necessary for our expansion in both existing and new markets. If we fail to successfully establish new EV Centers in these key markets, our expected expansion could be materially impacted, which could adversely affect our business, financial

condition, operating results and prospects. Furthermore, our future revenue growth will depend in part on our ability to penetrate new geographic markets by establishing EV Centers in those markets. Each new geographic market presents

distinct and substantial challenges and risks and, in many cases, requires us to develop new customized solutions to address the particular technical and regulatory requirements of that market. Meeting the technical and regulatory

requirements in any of these new markets will require a substantial investment of our time and resources. We cannot assure you that we will be able to establish EV Centers in these new markets, or that we will achieve meaningful revenue from

sales in these markets. If any of these markets do not develop as we currently anticipate, our business, financial condition, operating results and prospects could be adversely affected.

We do not provide charging solutions for our channel partners or their customers.

Our ECVs have two ways to charge - slow charging from a regular power outlet and fast charging from a public EV charging station. Though we plan to establish charging infrastructure and

stations in select regions, we do not currently install charging stations in the markets in which our ECVs are sold through our channel partners. As such, we rely on our channel partners or other third parties in such markets to ensure

charging solutions are available for end-user customers. If a market in which our ECVs are sold has few options for charging, the customers of our channel partners may need to rely on their own power supply for charging, which may make our

vehicles less attractive in such markets.

The battery capacity of our ECVs will decline over time, which may negatively influence purchasing decisions by our channel partners and end-users.

Our ECVs can experience battery capacity and performance loss over time depending on the use of the battery. We anticipate the battery capacity in our ECVs will decline over time as the

battery deteriorates. We currently expect the vehicle battery pack capacity to decrease by up to 20% over six years under normal use conditions. Other factors such as usage, time and stress patterns may also impact the battery’s ability to

hold a charge, which would decrease our ECVs range before needing to recharge. Such battery deterioration and the related decrease in range may negatively influence purchase decisions by channel partners and end-users.

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Our business is subject to the risk of disruption in our supply chain.

We depend on suppliers for the sourcing of ECV components and principal raw materials. Our suppliers (and those they depend upon for materials and services) are subject to risks, including

labor disputes or constraints, financial liquidity, inclement weather, natural disasters, significant public health and safety events, supply constraints or shortages, and general economic and political conditions that could limit their

ability to provide us with components and raw materials. Our business and operations would be adversely affected if any of our key suppliers were to experience significant disruption affecting the price, quality, availability or timely

delivery of parts they supply to us or if any one or more or our key suppliers discontinued operations. Furthermore, if we experience significant increased demand, or need to replace our existing suppliers, there can be no assurance that

additional suppliers of component parts will be available when required on terms that are favorable to us, or at all, or that any supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a

timely manner. The partial or complete loss of these suppliers, or a significant adverse change in the sourcing of ECV components, could result in lost revenue, added costs and distribution delays that could harm our business and channel

partner relationships. In addition, concentration in our supply chain can exacerbate our exposure to risks associated with the termination by key suppliers of our supply-chain arrangements or any adverse change in the terms of such

arrangements, which could adversely affect our business, financial condition, operating results and prospects.

We may be unsuccessful in our continuous efforts to source less expensive suppliers for certain parts, redesign certain parts to make them less expensive to produce and negotiate with

existing suppliers to obtain cost reductions and avoid unfavorable changes to terms. Any of these occurrences may harm our business, prospects, financial condition and operating results. We cannot assure you that we will be able to maintain

our existing relationships with our suppliers and continue to be able to source key components we use in our ECVs on a stable basis and at reasonable prices or at all. For example, our suppliers may increase the prices for the components we

purchase and/or experience disruptions in their production of the components.

We are dependent on our suppliers, certain of which are single-source suppliers, and the inability of these suppliers to continue to deliver, or their

refusal to deliver, necessary components of our ECVs at prices and volumes acceptable to us could have a material adverse effect on our business, prospects and operating results.

Historically, we have generally obtained components from multiple sources whenever possible, similar to other automotive manufacturers. However, a small number of our components used in our

ECVs are purchased from a single source. We refer to these component suppliers as our single-source suppliers. For example, while several sources for the airbag module for the Metro® are available, we currently have only one supplier for

these components.

We generally do not maintain long-term agreements with our single-source suppliers. Any disruption in the supply of airbag modules from our single-source supplier, for instance, could

temporarily disrupt production of our ECVs. While we believe that we may be able to establish alternate supply relationships for our single-source components and can obtain or engineer replacement components, we may be unable to do so in the

short term or at all at prices or costs that are favorable to us. The loss of any single or limited source supplier or the disruption in the supply of components from these suppliers could lead to delays in vehicle deliveries to our channel

partners, which could hurt our relationships with them and their end-user customers and also materially adversely affect our business, prospects and operating results.

In the long-term, we intend to establish supply chain relationships in North America and the European Union to support our manufacturing and assembly needs in these markets, thereby

reducing the time in transit and potentially the duties associated with importing our components and spare parts from China. We believe that our deep supply chain development know-how will provide us significant advantages; however,

substantially all of our supply chain experience is limited to China. If we are unable to effectively manage the sourcing of our components and the responsiveness of our supply chain in areas outside of China, our business and results of

operations may be harmed. It is also likely that in the early stages of our supply chain expansion, we can expect most component sources will be single-source suppliers.

Changes in international trade policies, tariffs and rising political tensions, particularly between the U.S. and China, may adversely impact our

business and operating results.

In recent years, China and the United States have implemented certain increasingly protective trade measures with continuing trade tensions, including significant tariff increases, between

these countries. Most recently, on March 4, 2025, U.S. president, Donald J. Trump, announced that the U.S. would impose an additional 20% tariff on Chinese imports starting March 4, 2025. The additional tariffs imposed by the U.S. government

on certain products imported from China may impact our supply chain and cost structure. Additionally, the U.S. government continues to signal that it may alter trade agreements and terms between China and the United States, including limiting

trade with China, and may impose additional tariffs on imports from China and other countries from which we import goods. Although the United States and China previously, successfully reached an interim trade deal in January 2020 that

de-escalated the trade tensions with both sides rolling back tariffs, the extent to which this trade deal, or potential future trade deals, will be successfully implemented is unpredictable. A decrease in the level of imports to and exports

from China could adversely affect our business, operating results and financial condition.

Rising trade and political tensions could reduce levels of trades, investments, technological exchanges and other economic activities between China and other countries, which would have an

adverse effect on global economic conditions, the stability of global financial markets, and international trade policies. It could also adversely affect the financial and economic conditions in the jurisdictions in which we operate, as well

as our global expansion, our financial condition, and results of operations.

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Moreover, the imposition of tariffs and trade restrictions as a result of international trade disputes or changes in trade policies may adversely affect our sales and profitability. For

example, the U.S. government recently imposed and proposed, among other actions, new or higher tariffs on specified imported products originating from China in response to what it characterized as unfair trade practices, and China responded

by imposing and proposing new or higher tariffs on specified U.S. products. There can be no assurance that a broader trade agreement will be successfully negotiated between the United States and China to reduce or eliminate these tariffs.

These tariffs, and the related geopolitical uncertainty between the United States and China, may cause decreased demand for our products or increase cost of components used in our products, which could have a material adverse effect on our

business and results of operations. For example, certain of our foreign customers may respond to the imposition of tariffs or threat of tariffs on products we produce by delaying purchase orders or purchasing products from our competitors.

Ongoing international trade disputes and changes in trade policies could also impact economic activity and lead to a general contraction of customer demand. In addition, tariffs on components for our ECVs that we may import from China or

other nations will adversely affect our profitability unless we are able to exclude such components of our ECVs from the tariffs or we raise prices for our products, which may result in our products becoming less attractive relative to

products offered by our competitors. Future actions or escalations by either the United States or China that affect trade relations may also negatively affect our business, or that of our suppliers or customers, and we cannot provide any

assurances as to whether such actions will occur or the form that they may take.

The resulting environment of retaliatory trade or other practices or additional trade restrictions or barriers, if implemented on a broader range of products or raw materials, could harm

our ability to obtain necessary raw materials and product components or sell our ECVs at prices customers are willing to pay, which could have a material adverse effect on our business, prospects, results of operations, and cash flows.

Relatedly, trade policies could lead to an increasing number of competitors entering the United States, thereby creating more competition. For example, other foreign companies could begin manufacturing vehicles in Mexico in order to take

advantage of the United States-Mexico-Canada Agreement that could allow the free flow of trade into the United States and Canada. To the extent that our sales or profitability are negatively affected by any such tariffs or other trade

actions, our business and results of operations may be materially adversely affected.

We rely on third parties to manufacture substantially all of our components and vehicle kits for each of our new series of ECV models. Our qualified

suppliers and manufacturing partners may fail to deliver components and vehicle kits, respectively, according to schedules, prices, quality and volumes that are acceptable to us.

We have shifted substantially all component manufacturing processes for our new vehicles to qualified suppliers. The continuous and stable supply of components needed in the manufacture and

assembly of our ECVs that meet our standards will be crucial to our operations and production. Unexpected changes in business conditions, materials pricing, labor issues, wars, governmental changes, tariffs, natural disasters, health

epidemics such as the global COVID-19 pandemic, trade and shipping disruptions and other factors beyond our or our suppliers’ control could affect their ability to deliver components to us and expose us to component shortages.

The unavailability of any component or supplier could result in production delays, idle manufacturing facilities, product design changes and loss of access to important technology and tools

for producing and supporting our products. Moreover, significant increases in our production or product design changes by us may require us to procure additional components in a short amount of time. Our suppliers may not be willing or able

to sustainably meet our timelines or our cost, quality and volume needs, or to do so may cost us more, which may require us to replace them with other sources. While we believe that we will be able to secure additional or alternate sources or

develop our own replacements for most of our components, there is no assurance that we will be able to do so quickly or at all.

As part of our light-asset distributed manufacturing business model and methodology, vehicle kits (and in some instances, fully-assembled vehicles) for our new ECV series are manufactured

by third-party manufacturing partners. From time to time, these manufacturing partners may experience production problems or delays and may not be able to meet our demand for vehicles. We may be required to retain additional third-party

manufacturing partners to assure continuity in production, but finding additional manufacturing partners in a timely and cost-effective manner may be difficult. Any delays in the manufacture of our vehicle kits could cause the loss of sales,

and harm our brand, all of which could adversely affect our business, financial condition, operating results or prospects.

If our suppliers, channel partners or manufacturing partners fail to use ethical business practices and comply with applicable laws and regulations,

our brand image and business could be harmed due to negative publicity.

Our core values, which include developing high quality ECVs while operating with integrity, are an important component of our brand image, which makes our reputation sensitive to

allegations of unethical business practices. We do not control our independent suppliers, channel partners or manufacturing partners or their respective business practices. Accordingly, we cannot guarantee their compliance with ethical

business practices, such as environmental responsibilities, fair wage practices, and compliance with child labor laws, among others. A failure in compliance could lead us to seek alternative suppliers, channel partners or manufacturing

partners, which could increase our costs or result in delayed delivery of our products, product shortages or other disruptions of our operations.

Violation of labor or other laws by our suppliers, channel partners or manufacturing partners or the divergence of an independent supplier’s labor or other practices from those generally

accepted as ethical in the markets in which we do business could also attract negative publicity for us and our brand. This could diminish the value of our brand image and reduce demand for our ECVs if, as a result of such violation, we were

to attract negative publicity. Any negative publicity that results from unethical practices by third parties could harm our brand image, business, financial condition, operating results or prospects. If other manufacturers in our industry

encounter similar problems with their third-party partners, any negative publicity with respect to the ECV industry could negatively impact us.

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We heavily rely on our third-party logistics service providers for international shipping of our products, and if disruptions in our transportation

network continue to occur or our shipping costs continue to increase, we may be unable to sell or timely deliver our products, and our gross margin could decrease.

Our success is dependent on our ability to transport our ECVs (whether as vehicles kits or fully assembled vehicles) from China to markets in the North America, Europe and Asia in a timely

and cost-effective manner. We rely heavily on third parties, including ocean carriers and truckers, in that process. The global transportation industry is experiencing ocean shipping disruptions, trucking shortages, increased ocean shipping

rates and increased trucking and fuel costs, and we cannot predict when these disruptions will end.

In recent years, the global transportation industry has experienced higher volatility in shipping rates from the trans-Pacific Ocean carriers due to various factors, including limited availability of shipping

capacity, and geopolitical tensions. Our primary shipping routes originate from Shanghai and serve the United States West Coast and European markets. Trans-Pacific shipping rates experienced substantial swings in 2025, driven in part by

shippers frontloading imports ahead of U.S. tariff increases, followed by a significant softening in demand in the second half of the year. On Asia-Europe lanes, elevated freight costs persisted into 2025 as a result of ongoing geopolitical

disruptions, with routing conditions and carrier capacity deployment remaining subject to change. These conditions have had, and if persistent, may continue to have a negative impact on our vehicle production costs, gross profit margins,

product delivery timelines, and revenue recognition. We expect such incidence causing rising shipping rates volatility to continue for the foreseeable future.

The commercial viability of our Cenntro iChassis relies on third-party hardware and software that may not be available, which could render our product

less marketable and negatively impact our business, prospects and operating results.

The commercial viability of our Cenntro iChassis depends in large part on third-party developers utilizing hardware and software that is required for autonomous driving. The Cenntro

iChassis is an open-platform and programmable chassis product, designed to act as a basic and core execution unit of an automated or autonomous driving vehicle. An automated system typically runs within a well-defined set of parameters and is

restricted in what tasks can be performed. In contrast, an autonomous system learns and adapts to dynamic environments, and evolves as the environment around it changes. To be driven autonomously, the Cenntro iChassis requires hardware and

software that we do not produce, such as detection devices and decision-making software. The Cenntro iChassis can only be utilized if such hardware and software is otherwise available and third parties are willing to integrate such technology

with the Cenntro iChassis. To the extent our competitors develop and market a fully integrated autonomous EV, we may be at a commercial disadvantage. The marketability of the Cenntro iChassis is dependent on the willingness of third-party

autonomous driving vehicle producers to adopt our programmable chassis technology rather than adopting other similar technologies or developing their own proprietary programmable chassis, as well as the willingness of end-users to purchase

autonomous driving vehicles from such third parties. If any of these factors is not present then the marketability of our Cenntro iChassis will suffer, which could negatively impact our business, prospects and operating results. Furthermore,

there are many uncertainties relating to the homologation of autonomous driving vehicles, and we are unable to predict when the market for autonomous driving vehicles will develop more fully.

Our business depends substantially on the continuing efforts of our executive officers, and our business may be severely disrupted if we lose their

services.

Our future success depends substantially on the continued services of our executive officers, especially our CEO and Chairman, Mr. Peter Z. Wang. We do not currently maintain key man life

insurance on any of our executive officers. If any of our executive officers are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. Therefore, our business may be severely

disrupted, and we may incur additional expenses to recruit and retain new officers. In addition, if any of our executive officers joins a competitor or forms a competing company, our business, financial condition, operating results or

prospects could be harmed.

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Our facilities or operations could be damaged or adversely affected as a result of disasters or unpredictable events.

We maintain manufacturing and assembly facilities in Changxing and Yangzhong, China, and local assembly facilities in Freehold, New Jersey and Barstow, California in the United States, and also rely on

third-party OEM manufacturing partners in China for the production of vehicle components and fully assembled units. If major disasters such as earthquakes, fires, floods, hurricanes, wars, terrorist attacks, computer viruses, pandemics, or

other unpredictable events including cyber-attacks, occur that impact our facilities or those of our manufacturing or distribution partners, we may be required to stop or delay production and shipment of our ECVs, which could materially and

adversely affect our business, financial condition, operating results and prospects. If major disasters such as earthquakes, fires, floods, hurricanes, wars, terrorist attacks, computer viruses, pandemics (such as COVID-19) or other

unpredictable events, such as cyber-attacks, occur that impact our facilities or the facilities of our channel and manufacturing partners, we may have to stop or delay production and shipment of our ECVs, and our operations may be seriously

damaged. We may incur expenses relating to such delays or damages, which could materially and adversely affect our business, financial condition, operating results and prospects.

Global economic conditions could materially and adversely affect our business, financial condition, operating results and prospects.

The global macroeconomic environment is facing challenges, and the uncertain state of the global economy continues to impact businesses around the world, including as a result of COVID-19.

If global economic and financial market conditions do not improve or further deteriorate, our business, financial condition, operating results and prospects may be materially and adversely affected. Some of the factors that could materially

and adversely affect us include:

Our financial results may vary significantly from period-to-period due to the seasonality of our business and fluctuations in our operating costs.

Our operating results may vary significantly from period-to-period due to many factors, including seasonal factors that may have an effect on the demand for our ECVs. Demand for vehicles in

the automotive industry in general typically decline over the winter season, while sales are generally higher during the spring and summer months. Our limited operating history makes it difficult for us to judge the exact nature or extent of

the seasonality of our business. Also, any unusually severe weather conditions in some markets may impact demand for our vehicles. Our operating results could also suffer if we do not achieve revenue consistent with our expectations for this

seasonal demand.

We also expect our period-to-period operating results to vary based on our operating costs which we anticipate will increase significantly in future periods as we, among other things,

design and develop additional ECVs and components, establish new channel partners relationships, establish new local assembly facilities and technology support and research and developments centers, and increase our general and administrative

functions to support our growing operations. In addition, our channel partner network includes companies that have in the past, and may in the future, experience financial difficulty and, in some instance, have been unable to pay amounts owed

to us on a timely basis, or at all. This has led us to from time to time recognize provision for doubtful accounts that vary from period to period and are difficult to anticipate. As a result of these factors, we believe that period-to-period

comparisons of our operating results are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance.

Our distributed manufacturing methodology and channel partner network model is different from the predominant current distribution model for

automotive manufacturers, which makes evaluating our business, financial condition, operating results and prospects difficult.

Our distributed manufacturing model allows us to focus our efforts on the design of ECV models and related technologies while outsourcing various portions of the manufacturing, assembly and

marketing of our vehicles to qualified third parties, allowing the Company to operate with lower capital investment than traditional vertically integrated automotive companies. For the last several years, we relied substantially on “private

label” channel partners to assemble the Metro® from vehicle kits that we manufactured in our facilities. With the introduction of our new ECV models, we have begun the process of shifting the manufacturing of our vehicle kits, and in some

cases fully assembled vehicles, to third party OEM manufacturing partners and, in the case of vehicle kits, assembling in our own facilities in North America and Europe. This model of vehicle distribution is relatively new and unproven and

subjects us to substantial risk. For example, our success depends in large part on our ability to effectively establish and maintain successful relationships with manufacturing partners and channel partners and for them to implement

successful processes for manufacturing our vehicles or marketing, sales, and servicing, respectively.

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Our business model is subject to numerous significant challenges and uncertainties, some of which are outside of our control, and we may not be successful in addressing these challenges.

For instance, we have limited control or oversight over our manufacturing partners and channel partners. To the extent a manufacturing partner or channel partner is not conducting its business in an ethical manner or is not performing to the

required standards, we have limited recourse. Our manufacturing partner and channel partner networks are based solely on contractual arrangements and such contractual arrangements do not currently, and may not into the future, provide us with

adequate oversight over our channel partners to protect our reputation.

Additionally, in certain markets we intend to increase direct sales to dealers, upfitters, enterprises and government organizations, which will require that we add overhead and business

structures to service a direct sales business model that we do not currently have in place.

Our business plans require will additional capital in the future, which may not be available to us on acceptable terms or at all.

Our business plans will require additional capital in the future, including to strengthen the selling and marketing functions of our EV Centers and to develop our distribution centers for

parts backed by the PARDISYS system. However, we expect to have a constrained cash outlay throughout 2025, and plan to focus on internally generated cash flow rather than on relying on the expectations of future external capital financing. To

support this goal, no we do not plan to invest in any production facilities in the near future unless necessary and plan to improve our existing EV Center networks so they may be more efficient. We expect that our level of capital

expenditures may be relatively lower in 2025 but may be affected by the profitability and cash generating capacities of our recently established EV Centers around the global markets. The fact that we have a limited operating history means we

have limited historical data regarding the demand for our products and services and our future capital requirements. As a result, our future actual capital requirements may be uncertain and actual capital requirements may be materially

different from those we currently anticipate.

We may seek equity or debt financing to finance a portion of our capital requirements in the future. Such financing might not be available to us in a timely manner or on terms that are

acceptable, or at all. Our ability to obtain the necessary financing to carry out our business plans is subject to a number of factors, including general market conditions and investor acceptance of our business plans. These factors may make

the timing, amount, terms and conditions of such financing unattractive or unavailable to us. If we are unable to raise sufficient funds, we will have to significantly reduce our spending, and delay or cancel our planned activities.

As we shift component and vehicle kit manufacturing to qualified suppliers and manufacturing partners, we may have to shorten the useful lives of any

equipment to be retired as a result, and the resulting acceleration in our depreciation could adversely affect our financial results

We have invested in what we believe is state of the art tooling, machinery and other manufacturing equipment, and we depreciate the cost of such equipment over their expected useful lives. However, throughout

2023 and well into 2024, we continued to shift procurement of vehicle component, and semi-knocked-down kit manufacturing to qualified suppliers. Continuing into 2025, we have also outsourced vehicle kit manufacturing (and, in some

instances, vehicle assembly) to qualified manufacturers for our new ECV series to manufacturing partners to reduce our capital expenditure requirements. As we shift component and vehicle kit manufacturing of our new ECV series to our

qualified suppliers and manufacturing partners, respectively, we may have to shorten the useful life of any equipment we retire as a result, which would require that we accelerate the depreciation on such equipment. Any such accelerated

depreciation on our equipment, to the extent we own such equipment, could adversely affect our results of operations.

We may not be able to accurately estimate the supply and demand for our vehicles, which could result in a variety of inefficiencies in our business

and hinder our ability to generate revenue. If we fail to accurately predict our manufacturing requirements, we could incur additional costs or experience delays.

We may have limited insight into trends that may emerge and affect our business. This may result in our inability to accurately estimate the supply and demand for our vehicles. Beginning in

the fourth quarter of 2021 and continuing into the first quarter of 2022, we introduced into the market the Neibor® and LogistarTM series of ECVs as well as the TeemakTM off-road ECV. We cannot predict whether these new ECV models will be

readily adopted by channel partners and end-users in their respective markets. We may need to provide forecasts of our demand to our suppliers several months prior to the scheduled delivery of products to our channel partners. Currently,

there is limited historical basis for making judgments on the demand for our planned or existing vehicles or our ability to develop, manufacture, and deliver vehicles, or our profitability in the future. If we underestimate our requirements,

our suppliers may have inadequate inventory, which could interrupt manufacturing of our products and result in delays in shipments and revenues. In addition, lead times for materials and components that our suppliers order may vary

significantly and depend on factors such as the specific supplier, contract terms and demand for each component at a given time. If we fail to order sufficient quantities of product components in a timely manner, the delivery of vehicles to

our channel partners could be delayed, which would harm our business, financial condition and operating results.

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Our ECVs use lithium-ion battery cells, which have the potential to catch fire or vent smoke and flame and may lead to additional concerns about

batteries used in automotive applications.

The battery packs in our ECVs use lithium-ion cells, and we intend to use lithium-ion cells in our future ECV products. On rare occasions, lithium-ion cells can rapidly release the energy

they contain by venting smoke and flames in a manner that can ignite nearby materials as well as other lithium-ion cells. Extremely rare incidents of laptop computers, cell phones and EV battery packs catching fire have focused consumer

attention on the safety of these cells.

These events have raised concerns about batteries used in automotive applications. To address these questions and concerns, a number of battery cell manufacturers are pursuing alternative

lithium-ion battery cell chemistries to improve safety. The battery packs used in our ECVs may need to be redesigned, which would be time-consuming and expensive. Also, negative public perceptions regarding the suitability of lithium-ion

cells for automotive applications or any future incident involving lithium-ion cells such as a vehicle or other fire, even if such incident does not involve us, could seriously harm our business.

The majority of the battery packs we use in our ECVs are shipped in a “just in time” fashion so that we are generally not housing them for a long period of time. Nonetheless, we may in the

future store lithium-ion cells at our facilities from time to time. Any incident involving battery cells may cause disruption to the operation of our facilities. While we have implemented safety procedures related to the handling of the

cells, we cannot assure you that a safety issue or fire related to the cells would not disrupt our operations. Such damage or injury could lead to adverse publicity and potentially a safety recall. Moreover, any type of battery failure in

relation to a competitor’s ECV may cause indirect adverse publicity for us and our ECVs. Such adverse publicity could negatively affect our brand and harm our business, financial condition, operating results and prospects.

We have identified a material weakness in our internal control over financial reporting that could materially harm our company. If we fail to

remediate the material weakness, or if we experience material weaknesses in the future, we may not be able to accurately and timely report our financial condition or results of operations, which may adversely affect investor confidence in us.

Historically Cenntro had not retained a sufficient number of professionals with an appropriate level of accounting knowledge, training and experience to appropriately analyze, record and

disclose accounting matters under U.S. GAAP. Similarly it does not retain certain a sufficient number of professionals which to address its internal control over financial reporting in accordance with requirements applicable to public

companies.

A material weakness is a deficiency, or a combination of control deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material

misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. During the preparation of its 2021 and 2022 financial statements, Cenntro’s management identified a material weakness in

its internal control over financial reporting. Specifically, Cenntro did not historically have adequate accounting staff generally in its finance and accounting department, particularly with respect to (i) the preparation of financial

statements prepared in accordance with U.S. GAAP and the inclusion of proper disclosures in the related footnotes, and (ii) the design, documentation and implementation of internal controls surrounding risk management and financial reporting

processes. During the preparation of the Company’s consolidated financial statements for the year ended December 31, 2025, management reassessed the Company’s internal control over financial reporting. Although controls and supervision over

risk management and financial reporting processes have improved, management has concluded that the Company continues to have this material weakness in its internal control over financial reporting.

Management has taken and is continuing to take actions to remediate this material weakness and is taking steps to strengthen our internal control over financial reporting and risk

management. Our Financial Controller for North America joined us in January 2022 and she is a CPA license holder. As of the date of this Annual Report, we have a total of four professionals on our Finance team in the United States including

two certified public accountants (CPAs) and one staff accountant who has passed the CPA exams with public accounting experience. We intend to hire additional professional accountants with greater familiarity with U.S. GAAP and SEC reporting

requirements. We strive to continue to take measures to improve compliance with our overall financial reporting process by (i) further developing and implementing formal policies, processes and documentation procedures relating to our

financial reporting as well as (ii) addressing the accounting function’s staffing needs and training and strengthen our internal control processes. This material weakness will not be considered remediated until management completes the design

and implementation of the measures described above and the controls operate for a sufficient period of time and management has concluded that these controls are effective.

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To the extent we are unable to remediate this material weakness or identify future material weaknesses in our internal control over financial reporting, such material weakness could

severely inhibit our ability to accurately report our financial condition or results of operations and could cause future investors to lose confidence in the accuracy and completeness of our financial reports, we could become subject to

litigation from investors and shareholders, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to

implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Risks Related to Our Industry

The unavailability or reduction of government and economic incentives or the elimination of regulatory policies which are favorable for ECVs could

materially and adversely affect our business, financial condition, operating results and prospects.

Our business depends significantly on government subsidies, economic incentives and government policies that support the growth of new energy vehicles generally and ECVs specifically. Any

reduction, elimination or discriminatory application of government subsidies and economic incentives because of policy changes, the reduced need for such subsidies and incentives due to the perceived success of ECVs, fiscal tightening or

other factors may result in the diminished competitiveness of the alternative fuel vehicle industry generally or our ECVs in particular. Any of the foregoing could materially and adversely affect our business, financial condition, operating

results and prospects.

Our future growth is dependent upon end-users’ willingness to adopt ECVs.

Our growth is highly dependent upon the adoption by national and local governments and the commercial vehicle market of, and we are subject to a risk of any reduced demand for, alternative

fuel vehicles in general and ECVs in particular. The market for alternative fuel vehicles (including ECVs) is relatively new and rapidly evolving, characterized by rapidly changing technologies, price competition, additional competitors,

evolving government regulation and industry standards, frequent new vehicle announcements and changing consumer demands and behaviors. If the market for ECVs in North America, Europe, Asia or elsewhere does not develop as we expect, or

develops more slowly than we expect, our business, financial condition, operating results and prospects will be harmed. Other factors that may influence the adoption of alternative fuel vehicles, and specifically ECVs, include:

• concerns about electric grid capacity and reliability;

• improvements in the fuel economy of the internal combustion engine;

• the availability of service for electric vehicles;

• the environmental consciousness of end-users;

• perceptions about and the actual cost of alternative fuel; and

• macroeconomic factors.

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Any of the factors described above may cause our channel partners and their customers not to purchase our ECVs. If the market for ECVs does not develop as we expect or develops more slowly

than we expect, our business, financial condition, operating results and prospects will be adversely affected.

Continued elevated levels of inflation could adversely impact our business and results of operations.

Adverse and uncertain economic conditions and, in particular, the impact of global general price inflation, may negatively impact our business and operating results. We have experienced,

and expect to continue to experience, price increases from, among other things, our component suppliers. Sustained inflation, combined with key component shortages, may require us to raise the prices of our ECVs in order to offset cost

increases, which may negatively impact the demand for our vehicles. As a result, our channel partners may become more conservative in response to such conditions and seek to reduce their inventories. Conversely, to the extent inflation or

other factors increase our business costs, it may not be feasible to pass price increases on to our channel partners, which will adversely affect our profitability. Our results of operations depend upon, among other things, our ability to

maintain and increase sales volume with our channel partners, our ability to attract new channel partners, the financial condition of end-consumers in the commercial ECV market and our ability to provide ECVs that appeal to our channel

partners and other direct customers at a competitive upfront cost. Unfavorable macroeconomic conditions may lead our channel partners to reduce, delay, curtail or cancel proposed or existing contracts, decrease the overall demand for our ECVs

or otherwise adversely affect our results of operations. The duration and severity of the current inflationary period cannot be estimated with precision.

We could experience cost increases or disruptions in the supply of raw materials or components used in our vehicles, and a shortage of key components,

such as semiconductors, can disrupt our production of ECVs.

We incur significant costs related to the procuring of raw materials and components required to manufacture our vehicles. Our ECVs use various raw materials including aluminum, steel, carbon fiber,

non-ferrous metals such as copper, lithium, nickel and cobalt, as well as key component inputs such as semiconductors. The prices for these raw materials fluctuate depending on factors beyond our control, including market conditions and

global demand for these materials, and could adversely affect our business and operating results. In particular, the automotive industry is currently facing a significant shortage of semiconductors. The global semiconductor supply shortage

is having wide-ranging effects across multiple industries, particularly the automotive industry, and it has impacted multiple suppliers that incorporate semiconductors into the parts they supply to us. As a result, the semiconductor supply

shortage has had, and will continue to have, a negative impact on our vehicle production. To date, we have experienced price decreases compared to the rising market prices in 2022, which resulted in higher vehicle costs. The market in 2025

was favorable for the entire new energy industry in terms of vehicle costs. For example, semiconductor shortage that previously constrained vehicle production had largely subsided, and the prices of batteries, motors and electronic controls

continued fallen.

Increases in the cost, disruptions of supply or shortages of lithium-ion batteries could harm our business.

Our business depends on the continued supply of battery cells for our vehicles. Battery cell manufacturers may refuse to supply battery cells to electric vehicle manufacturers to the extent

they determine that the vehicles are not sufficiently safe. We are exposed to multiple risks relating to availability and pricing of quality lithium-ion battery cells. These risks include:

Any disruption in the supply of battery cells could temporarily disrupt the planned production of our ECVs until such time as a different supplier is fully qualified. Furthermore, strong

growth in sales of our ECVs may in some instances outpace the production and availability of lithium-ion batteries, which could result in substantial increases in the price of batteries used in our vehicles. Substantial increases in the

prices for lithium-ion batteries would increase our operating costs, and could reduce our gross margins if we cannot recoup the increased costs through increased ECV prices.

Developments in alternative technologies or improvements in the internal combustion engine may materially and adversely affect the demand for our

ECVs.

Significant developments in alternative technologies, such as advanced diesel, ethanol, hydrogen fuel cells or compressed natural gas, or improvements in the fuel economy of the internal

combustion engine, may materially and adversely affect our business, financial condition, operating results and prospects in ways we do not currently anticipate. Any failure by us to develop new or enhanced technologies or processes, or to

react to changes in existing technologies, could materially delay the development and introduction of new and enhanced ECVs, which could result in the loss of competitiveness of our vehicles, decreased revenue and a loss of market share to

competitors.

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The automotive market is highly competitive, and we may not be successful in competing in this industry.

Both the automotive industry generally, and the ECV segment in particular, are highly competitive, and we will be competing for sales with both ICE commercial vehicles and other ECVs. Many of

our current and potential competitors have significantly greater financial, technical, manufacturing, marketing and other resources than we do and may be able to devote greater resources to the design, development, manufacturing, distribution,

promotion, sale and support of ECVs. We expect competition for ECVs to intensify due to increased demand and a regulatory push for alternative fuel vehicles and consolidation in the worldwide automotive industry. Factors affecting competition

include product quality and features, innovation and development time, pricing, reliability, safety, fuel economy, customer service, and financing terms. Increased competition may lead to lower vehicle unit sales and increased inventory, which

may result in downward price pressure and adversely affect our business, financial condition, operating results, and prospects.

If we are unable to keep up with advances in electric vehicle technology, we may suffer a decline in our competitive position.

We may be unable to keep up with changes in ECV technology, and we may suffer a resulting decline in our competitive position, which would materially and adversely affect our business,

financial condition, operating results and prospects. Our research and development efforts, as well as our manufacturing and supply chain capacity, may not be sufficient to adapt to changes in ECV technology. As technologies change, we plan to

upgrade or adapt our ECVs and introduce new models in order to continue to provide our ECVs with the latest technology, including battery cell technology. However, our ECVs may not compete effectively with ECVs manufactured and marketed by our

competitors if we are not able to develop and integrate the latest technology into our ECVs.

Risks Related to Legal and Regulatory Matters

Our business is subject to substantial regulations, which are evolving, and unfavorable changes or the failure by us or our channel partners to comply

with these regulations could materially and adversely affect our business, financial condition, operating results and prospects.

Motor vehicles are subject to substantial regulation under U.S. federal, state and local laws as well as the laws of each of our target markets. We incur significant costs to comply with

these regulations, including obtaining required vehicle certifications in the jurisdictions in which our ECVs are sold, and we may be required to incur additional costs related to any changes to such regulations. Any failures by us or our

channel partners to comply with existing or future regulations could result in significant expenses, vehicle recalls, delays or fines. We and our channel partners are subject to laws and regulations applicable to the supply, manufacture,

import, sale and service of automobiles internationally. For example, in countries outside of the United States, we or our channel partners are required to meet standards relating to vehicle safety and testing, fuel economy, battery safety,

transportation, testing and recycling and greenhouse gas emissions, among other things, that are often materially different from requirements in the United States, thus resulting in additional investment into the vehicles and systems to ensure

regulatory compliance in those countries. This process may include official review and certification of our vehicles by foreign regulatory agencies prior to market entry, as well as compliance with foreign reporting and recall management

systems requirements. See “Business-Governmental Regulations.”

To the extent U.S. or international laws change, some or all of our vehicles may not comply with any new applicable international, federal, state or local laws, which would have an adverse

effect on our business. Compliance with changing regulations could be burdensome, time consuming, and expensive. To the extent compliance with new regulations is cost prohibitive, our business, prospects, financial condition and operating

results will be adversely affected. Similarly, compliance with various regulations pertaining to ECVs in our various target markets may limit our ability to sell certain of our ECV models in such markets.

Our ECVs may be subject to product liability claims or recalls which could cause us to incur expenses, damage our reputation or result in a diversion

of management resources.

As manufacturer of record of our ECVs (except in the case of vehicles assembled by our private label channel partners), we may be responsible for product liability claims or costs associated

with product recalls. We may be subject to lawsuits resulting from injuries associated with the use of the ECVs that we design, manufacture and sell to our channel partners. We may incur losses relating to these claims or the defense of these

claims. Our ECVs may also be subject to recalls if any of our ECV designs prove to be defective, or our channel partners may voluntarily initiate a recall or make payments related to such claims as a result of various industry or business

practices or the need to maintain good customer relationships. Such a recall would result in a diversion of resources and could damage our reputation with both our channel partners and their customers. Any claims or recalls associated with our

ECVs could exceed our insurance coverage and materially and adversely affect our business, financial condition, operating results and prospects.

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We face risks associated with our global operations and expansion, including unfavorable regulatory, political, legal, economic, tax and labor

conditions, and with establishing ourselves in new markets, all of which could harm our business.

We currently have international operations and subsidiaries in various countries and jurisdictions, and we expect to expand and optimize our channel partner network internationally and to

invest in new manufacturing and assembly facilities in various jurisdictions as part of our growth plan. Accordingly, we and our products are subject to a variety of legal, political and regulatory requirements and social and economic

conditions over which we have little control. For example, we may be impacted by trade policies, political uncertainty and economic cycles involving geographic regions where we have significant sales or operate.

We are subject to a number of risks associated with international business activities that may increase our costs, impact our ability to sell our ECVs and require significant management

attention. These risks include:

• challenges in attracting channel partners;

• compliance with foreign government taxes, regulations and permit requirements;

• fluctuations in freight rates and transportation disruptions;

• fluctuations in the values of foreign currencies;

• compliance with certification and homologation requirements; and

• preferences of foreign nations for domestically manufactured products.

In many of these markets, long-standing relationships between potential customers and their local partners and protective regulations and disparate networks and systems used by each country

will create barriers to entry.

We are currently selling our ECVs in North America, Europe and Asia, and, as a result, we are subject to laws and regulations in those jurisdictions that are applicable to the import and/or

sale of electric vehicles. For example, we are required to meet vehicle-specific safety standards that are often materially different across markets, thus resulting in additional investment into the vehicles and systems to ensure regulatory

compliance. For each of the markets in which we sell our ECVs, we must obtain advanced approval from regulatory agencies regarding the proper certification or homologation of our vehicles to enter into these markets. This process necessitates

that regulatory officials in each market review and certify our vehicles prior to market entry. Any delay in the homologation process could adversely impact our ability to introduce any of these ECV models in their respective markets on our

planned timeframe, which could adversely affect our business, financial condition and operating results and harm our reputation.

Our business will be adversely affected if we are unable to protect our intellectual property rights from unauthorized use or infringement by third

parties.

Any failure to adequately protect our intellectual property rights could result in the weakening or loss of such rights, which may allow our competitors to offer similar or identical

products or use identical or confusingly similar branding, potentially resulting in the loss of some of our competitive advantage, a decrease in our revenue or an attribution of potentially lower quality products to us, which would adversely

affect our business, financial condition, operating results and prospects. Our success depends, at least in part, on our ability to protect our core technology and intellectual property. To accomplish this, we rely on a combination of

patents, patent applications, trade secrets (including know-how), employee and third-party nondisclosure agreements, copyright protection, trademarks, intellectual property licenses and other contractual rights to establish and protect our

intellectual property rights in our technology. Our registered patents are under PRC law and have not been given reciprocal treatment and protection under the laws of either the United States or the European Union. We may be unable to

adequately protect our proprietary technology and intellectual property from use by third parties.

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The protection provided by patent laws is and will be important to our business. However, such patents and agreements and various other measures we take to protect our intellectual property

from use by others may not be effective for various reasons, including the following:

• our pending patent applications may not result in the issuance of patents;

• our patents may not be broad enough to protect our commercial endeavors;

Existing trademark and trade secret laws and confidentiality agreements afford only limited protections. In addition, the laws of some foreign countries do not protect our proprietary

rights to the same extent as do the laws of the United States and policing the unauthorized use of our intellectual property is difficult. For example, historically the implementation and enforcement of PRC intellectual property-related laws

have been limited. Accordingly, protection of intellectual property rights in China may not be as effective as in the United States or other countries.

Some of the components in our supply chain are co-designed with third-party vendors, who are generally restricted from selling parts that are co-designed with us to other parties. However,

in the event we discontinue our purchases of such co-designed components from our vendors, these vendors may no longer be restricted from selling such co-designed components to third parties.

We may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and could cause us to incur substantial

costs.

Companies, organizations or individuals, including our competitors, may hold or obtain patents, trademarks or other proprietary rights that would prevent, limit or interfere with our

ability to make, use, develop or sell our vehicles or vehicle kits, which could make it more difficult for us to operate our business. From time to time, we receive notices from holders of patents or trademarks regarding their proprietary

rights. Companies holding patents or other intellectual property rights may bring suits against us alleging infringement of such rights or otherwise assert their rights and seek licenses. Even if we are successful in these proceedings, any

intellectual property infringement claims against us could be costly, time-consuming, harmful to our reputation, and could divert the time and attention of our management and other personnel or result in injunctive or other equitable relief

that may require us to make changes to our business, any of which could have a material adverse effect on our financial condition, cash flows, results of operations or prospects. In addition, if we are determined to have infringed upon a

third party’s intellectual property rights, we may be required to do one or more of the following:

• pay substantial damages;

• redesign our vehicles or other goods or services.

In the event of a successful claim of infringement against us and our failure or inability to obtain a license to the infringed technology or other intellectual property right, our

business, financial condition, operating results and prospects could be materially adversely affected. In addition, any litigation or claims, whether or not valid, could result in substantial costs and diversion of resources and management

attention.

In addition, we have agreed, and expect to continue to agree, to indemnify our channel partners for certain intellectual property infringement claims regarding our products. As a result, if

infringement claims are made against our channel partners, we may be required to indemnify them for damages (including expenses) resulting from such claims or to refund amounts they have paid to us.

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Compliance with environmental regulations can be expensive, and noncompliance with these regulations may result in adverse publicity and potentially

significant monetary damages and fines.

Our business operations may generate noise, wastewater, end-of-life batteries, gaseous byproduct and other industrial waste. We are required to comply with all applicable national and local

regulations regarding the protection of the environment. We believe we are in compliance with current environmental protection requirements and have all necessary environmental permits to conduct our business. However, if more stringent

regulations are adopted in the future, the costs of compliance with these new regulations could be substantial. Additionally, if we fail to comply with present or future environmental rules or regulations, we may be liable for cleanup costs

or be required to pay substantial fines, suspend production or cease operations. Any failure by us to control the use of, or to adequately restrict the unauthorized discharge of, hazardous substances or comply with other environmental

regulations could subject us to potentially significant monetary damages and fines or suspensions to our business operations. Additionally, as we expand our local assembly capabilities in our target markets, our expansion will necessarily

increase our exposure to liability with respect to environmental regulations and the fines and injunctive actions related thereto and require us to spend further resources and time complying with complex environmental regulations in such

jurisdictions.

Contamination at properties currently or formerly owned or operated by us, and properties to which hazardous substances were sent by us, may result in liability for us under environmental

laws and regulations, including the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). The U.S. government can impose liability on us under CERCLA for the full amount of remediation-related costs of a

contaminated site without regard to fault. Such costs can include those associated with the investigation and cleanup of contaminated soil, ground water and buildings as well as to reverse impacts to human health and damages to natural

resources.

Pursuant to the Environmental Protection Law of the PRC, which was adopted on December 26, 1989, and amended on April 24, 2014, effective on January 1, 2015, any entity which discharges

pollutants must adopt measures to prevent and treat waste gas, waste water, waste residue, medical waste, dust, malodorous gas, radioactive substances generated in manufacturing, construction or any other activities as well as environmental

pollution and hazards such as noise, vibration, ray radiation, electromagnetic radiation etc. Environmental protection authorities impose various administrative penalties on entities in violation of the Environmental Protection Law, including

warnings, fines, orders to rectify within a prescribed period, cease construction, restrict or suspend production, make recovery, disclose relevant information or make an announcement, or seize and confiscate facilities and equipment which

cause pollutant emissions, the imposition of administrative action against relevant responsible persons, and orders to shut down enterprises. In addition, pursuant to the Civil Code of the PRC, which was adopted on May 28, 2020, and became

effective on January 1, 2021, in the event of damage caused to others as a result of environmental pollution and ecological destruction, the actor will bear tortious liability. In the event a party, in violation of laws and regulations,

intentionally pollutes the environment or damages the ecology, thereby causing serious consequences, the infringed party is entitled to claim appropriate punitive damages. Any violations of the Environmental Protection Law or the Civil Code

of the PRC could expose us to liabilities including fines and damages that could impact our business, prospects, financial condition and operating results.

China has implemented several regulations, policies and measures to regulate the batteries used in ECVs, which cover the security standards, recycling activities and other specifications.

For example, the Interim Measures for the Management of the Recycling of Power Battery in New Energy Vehicles (“PRC Battery Measures”) regulate the recycling and disposal of end-of-life batteries for new energy vehicles. The PRC Battery

Measures provide that manufacturers of new energy vehicles must take primary responsibilities of the recycling of batteries and are required, for instance, to transfer batteries that have been damaged during manufacturing to vendors that

provide recycling services, and to maintain records of the vehicles they have manufactured, the identification codes of the batteries incorporated into the vehicles, and the owners of the vehicles. The batteries used in our ECVs are also

subject to a number of national standards in China, including functional safety requirements and testing methods for the battery management system of electric vehicles.

The EU has specific regulations on batteries and the disposal of batteries to minimize the negative environmental effects of batteries and hazardous waste. The EU Battery Directive

(2006/66/EC) (the “EU Battery Directive”) is intended to cover all types of batteries regardless of their shape, volume, weight, material composition or use. It is aimed at reducing mercury, cadmium, lead and other metals in the environment

by minimizing the use of these substances in batteries and by treating and re-using old batteries. This directive applies to all types of batteries except those used to protect European Member States’ security, for military purposes, or sent

into space. To achieve these objectives, the EU Battery Directive prohibits the marketing of some batteries containing hazardous substances. It establishes processes aimed at high levels of collection and recycling of batteries with

quantified collection and recycling targets. The directive sets out minimum rules for producer responsibility and provisions with regard to labeling of batteries and their removability from equipment. Product markings are required for

batteries and accumulators to provide information on capacity and to facilitate reuse and safe disposal. We currently ship our ECVs pursuant to the requirements of the directive. Our current estimated costs associated with our compliance with

this directive based on our current market share are not significant. However, we continue to evaluate the impact of this directive as European Union member states implement guidance, and actual costs could differ from our current estimates.

In December 2020, the European Commission adopted a proposal to revise the EU Battery Directive. The proposal is designed to modernize the EU’s regulatory framework for batteries to secure

the sustainability and competitiveness of battery value chains. It could introduce mandatory requirements on sustainability (such as requiring responsible sourcing of raw materials, restrictions on the use of hazardous substances, carbon

footprint rules, minimum recycled content targets, performance and durability criteria), safety and labelling for the marketing and putting into service of batteries, and requirements for end-of-life management including to facilitate the

repurposing of industrial and electric-vehicle batteries as stationary energy storage batteries. The proposal also includes due diligence obligations for economic operators as regards the sourcing of raw materials.

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The EU Restriction of Hazardous Substances Directive 2002/95/EC (the “RoHS Directive”) places restrictions on the use of certain hazardous substances in electrical and electronic equipment.

All applicable products sold in the European Union market after July 1, 2006 must comply with EU RoHS Directive. While this directive does not currently affect our ECVs in any meaningful way, should any changes occur in the directive that

would affect our ECVs, we will need to comply with any new regulations that are imposed.

Our noncompliance with any of these regulations may materially and adversely affect our operations or financial condition.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and noncompliance with such

laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition,

prospects and reputation.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct

activities, including the U.S. Foreign Corrupt Practices Act, or FCPA and other anti-corruption laws and regulations. The FCPA prohibits us and our officers, directors, employees and business partners acting on our behalf, including agents,

from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA

also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. A violation of these laws or regulations

could adversely affect our business, results of operations, financial condition, prospects and reputation.

We have direct or indirect interactions with officials and employees of government agencies and state-owned affiliated entities in the ordinary course of business. These interactions

subject us to an increased level of compliance-related concerns. We are in the process of implementing policies and procedures designed to ensure compliance by us and our directors, officers, employees, representatives, consultants, agents

and business partners with applicable anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations. However, our policies and procedures may not be sufficient, and our directors,

officers, employees, representatives, consultants, agents, and business partners could engage in improper conduct for which we may be held responsible.

Noncompliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage,

investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial

condition, prospects and reputation. In addition, changes in economic sanctions laws in the future could adversely affect our business and investments in our shares.

Risks Related to Information Technology, Data Security, and Privacy

We seek to continuously expand and improve our information technology systems and use security measures designed to protect our systems against

breaches and cyber-attacks. If these efforts are not successful, our business and operations could be disrupted, and our operating results and reputation could be harmed.

We seek to continuously expand and improve our information technology systems, including implementing new internally developed and/or external industry standard enterprise resource planning

systems (“ERP systems”), to assist us in the management of our business. We maintain information technology measures designed to protect us against intellectual property theft, data breaches and other cyber-attacks. The implementation,

maintenance and improvement of these systems require significant management time, support and cost. Moreover, there are inherent risks associated with developing, improving and expanding our core systems as well as implementing new systems,

including the disruption of our data management, procurement, manufacturing execution, finance and supply chain processes. Despite network security and back-up measures, our information technology systems are potentially vulnerable to

physical or electronic break-ins, computer viruses and similar disruptive problems. Despite precautionary measures to prevent unanticipated problems that could affect our information technology systems, sustained or repeated system failures

that interrupt our ability to generate and maintain data could adversely affect our ability to manage our data and inventory, procure parts or supplies or manufacture, sell, deliver ECVs, or achieve and maintain compliance with, or realize

available benefits under, tax laws and other applicable regulations.

We cannot assure you that any of our new information technology systems or their required functionality will be effectively implemented, maintained or expanded as planned. If we do not

successfully maintain our information technology or expand these systems as planned, our operations may be disrupted, our ability to accurately or timely report our financial results could be impaired, and deficiencies may arise in our

internal control over financial reporting, which may adversely affect our ability to certify our financial results. Moreover, our proprietary information could be compromised or misappropriated, and our reputation may be adversely affected.

If these systems or their functionality do not operate as we expect them to, we may be required to expend significant resources to make corrections or find alternative sources for performing these functions.

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Data collection is governed by restrictive regulations governing the use, processing, and cross-border transfer of personal information.

International jurisdictions have their own data security and privacy legal framework with which companies or their customers must comply. The collection, use, storage, transfer, and other

processing of personal data regarding individuals in the European Economic Area is governed by the General Data Protection Regulation (“GDPR”), which came into effect in May 2018. It contains numerous requirements and changes from previously

existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. Among other things, the GDPR regulates transfers of personal data subject to

the GDPR to countries outside of the European Union that have not been found to provide adequate protection to such personal data, including the United States. The European Data Protection Board has issued draft guidance requiring additional

measures be implemented to protect EU personal data from foreign law enforcement, including in the U.S. These additional measures may require us to expend additional resources to comply.

The GDPR also introduced numerous privacy-related changes for companies operating in the European Union, including greater control for data subjects, increased data portability for EU

consumers, data breach notification requirements and increased fines. Fines of up to 20 million Euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain GDPR

requirements. Such penalties are in addition to any civil litigation claims by customers and data subjects. The GDPR requirements apply not only to third-party transactions but also to transfers of information between us and our subsidiaries,

including employee information.

The collection and processing of electronic communications data in the EU is regulated by the ePrivacy Directive (2002/58/EC), which applies to the confidentiality of communications, the

use of tracking technologies (such as cookies), and direct marketing practices. Unlike the GDPR, which focuses on personal data protection, the ePrivacy Directive regulates the privacy of communications and metadata, including data collected

from connected devices, such as our ECVs. The directive has been implemented inconsistently across EU member states, leading to fragmented compliance requirements. A proposed ePrivacy Regulation intended to replace the directive and create a

uniform legal framework was withdrawn in February 2025, leaving uncertainty regarding future reforms. Compliance with varying national implementations of the ePrivacy Directive may require additional operational adjustments and could result

in regulatory fines or enforcement actions if found noncompliant.

Scheduled to take effect on September 12, 2025, the EU Data Act introduces new regulatory requirements for data access, sharing, and portability, extending beyond personal data to include

non-personal data. This legislation aims to facilitate data sharing among businesses and with governments, but its broad scope and evolving implementation may create uncertainties and compliance challenges for our operations. The Act imposes

obligations on data holders-which could include companies managing connected devices such as our Electric Commercial Vehicles (ECVs)-to provide access to certain data upon request under regulated conditions. Compliance with these requirements

may necessitate modifications to our data management systems, contractual agreements, and security protocols. Non-compliance could result in regulatory enforcement actions, penalties, and increased operational costs, particularly as EU member

states implement and enforce the Act in different ways. Additionally, the evolving regulatory landscape in the EU could create uncertainties regarding data monetization, competitive practices, and cross-border data transfers, potentially

impacting our business model and operations.

Following the United Kingdom’s (the “UK”) exit from the European Union, the GDPR was transposed into UK law (“UK GDPR”) as supplemented by the UK Data Protection Act 2018. As a result, the

UK GDPR will not automatically incorporate any changes made to the GDPR going forward (which would need to be specifically incorporated by the UK Government). At present, the GDPR and the UK GDPR are broadly similar and have parallel regimes,

which have not yet diverged significantly. However, the UK Government has launched a public consultation on proposed reforms to the data protection framework in the UK. This may lead to future divergence and variance between the two regimes.

In addition, China has laws relating to the supervision of data and information protection. The Cybersecurity Law regulates the activities of “network operators,” which include companies

that manage any network under PRC jurisdiction. As such, certain of our PRC subsidiaries may be regarded as network operators under the Cybersecurity Law, since our ECVs are fitted with networking devices. The Cybersecurity Law requires that

the collection of personal data is subject to consent by the person whose data is being collected.

On June 10, 2021, China enacted the Data Security Law of the PRC (“DSL”), which became effective as of September 1, 2021. The DSL introduces several changes and new features to data

security regulation and a comprehensive data security regime, which authorizes national departments to conduct stricter supervision of data in China. For example, the PRC government will establish a catalogue of crucial data categories and

promulgate stricter regulations over the protection of such crucial data listed in the catalogue. The DSL also will introduce the concept of “National Core Data,” which refers to data related to, among other topics, national security, the PRC

economy, and significant public interests, and provides that stricter regulations may be imposed on such National Core Data. The cross-border transfer of domestic data as required by non-PRC judicial or enforcement authorities is also subject

to the approval of competent Chinese authorities.

Effective January 1, 2025, China’s Network Data Security Management Regulations introduce enhanced requirements for data security and privacy, particularly concerning personal information

protection, data localization, and cross-border data transfers. These regulations impose stricter compliance obligations on data handlers, including requirements to conduct regular data security risk assessments, implement classified data

protection measures, and obtain governmental approval for certain cross-border data transfers. Additionally, companies processing large volumes of “important data” or “national core data” may face heightened scrutiny and stricter regulatory

oversight. Failure to comply with these regulations could result in significant financial penalties, operational disruptions, revocation of business licenses, or restrictions on cross-border operations. As a result, we may be required to

adjust our data handling practices, enhance internal compliance measures, and allocate additional resources to meet evolving regulatory requirements in China.

Compliance with the GDPR, the UK GDPR, the ePrivacy Directive, as well as the Cybersecurity Law, DSL and enhanced regulations in China, may involve substantial operational costs or require

us to change business practices. While we have not had a substantial presence in the European Union historically, in January 2022, we opened our European Operations Center in Dusseldorf, Germany and, in March 2022, we acquired a 65% equity

interest in Tropos Motors Europe GmbH (“TME”), a “private label” channel partners that assembles and distributes branded ECVs based on our Metro® called the ABLE and one of our largest customers since 2019. As a result, we may be required to

comply with certain provisions of the GDPR. As a result, we may need to undertake an update of certain of our business practices, including (i) updating internal records, policies and procedures; (ii) updating publicly facing privacy notices

and consent mechanisms, where required; (iii) implementing employee privacy training; (iv) appointing an individual responsible for privacy compliance; (v) implementing an inter-group data transfer agreement; (vi) reviewing/updating contracts

with vendors that process data on our behalf, and (vii) implementing an audit framework. Furthermore, if we begin selling our ECVs directly to end-users in the European Union, UK or China, we would likely be required to comply with additional

regulatory requirements. To the extent we become subject to any such regulations, our noncompliance could result in proceedings by governmental entities, customers, data subjects or others and may result in fines, penalties, and civil

litigation claims.

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Our ECVs are fitted with a networking device connecting the vehicle to our proprietary cloud-based software, which enables end-users to collect data about vehicle configuration, vehicle

status and user efficiency through a system of digitally enabled components, which we sometimes refer to as “smart components.” With the permission of the end-users of the vehicles, we received data collected from approximately 950 Metro®

units that we put into service through a company affiliated with our former parent company, CAG Cayman, in the Chinese market. This data included vehicle-specific data collected for operational analysis, which we used to make improvements in

the quality and durability of such components. We enable end-users to collect, store and analyze data using tools that we have developed but we do not have access to this end-user collected data unless we request and receive access from the

end-user. We do not currently collect, use or store any vehicle-specific or driver-specific data in any region and do not intend to do so in the future.

These laws, rules, and regulations are constantly evolving and may be interpreted, applied, created, or amended in a manner that could harm our current or future business and operations and

may result in ever increasing regulatory and public scrutiny and escalating levels of enforcement and sanctions. Any significant changes to applicable laws, regulations, or industry practices regarding the use, transfer, or disclosure of

individual data, or regarding the manner in which the express or implied consent of individuals for the use and disclosure of such data is obtained - or in how these applicable laws, regulations, or industry practices are interpreted and

enforced by state, federal, and international privacy regulators - could require us to modify our services and features, possibly in a material and costly manner, may subject us to legal claims, regulatory enforcement actions and fines, and

may limit our ability to develop new services and features that make use of the data that individuals share with us, should we begin to collect such data.

To the extent we are required to comply with regulations under the GDPR, the UK GDPR, the ePrivacy Directive, the Cybersecurity Law, the DSL and China’s enhanced regulations (collectively,

the “Data Security Regulations”), any non-compliance could adversely affect our business, financial condition, results of operations and prospects. Compliance with Data Security Regulations may be a rigorous and time-intensive process that

may increase our cost of doing business or require us to change our business practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm in connection with any future

activities.

Any unauthorized control or manipulation of our ECV’s information technology systems could result in loss of confidence in us and our ECVs and harm

our business.

Our ECVs are equipped with complex information technology systems. For example, our ECVs are designed with built-in data connectivity to improve their functionality. We have designed,

implemented and tested security measures intended to prevent unauthorized access to our information technology networks, our ECVs and their systems. However, hackers may attempt in the future to gain unauthorized access to modify, alter and

use such networks and ECV systems to gain control of, or to change, our ECVs’ functionality, user interface and performance characteristics, or to gain access to data stored in or generated by our ECVs. In addition, there are limited

preventative measures that we can take to prevent unauthorized access to our information technology network by an employee that is knowledgeable about our information technology network and its various safeguards. We encourage reporting of

potential vulnerabilities in the security of our ECVs, and we aim to remedy any reported and verified vulnerability. However, there can be no assurance that vulnerabilities will not be exploited in the future before they can be identified, or

CENN US Equity

CENN · 10-K · period ended 2025-12-31

Item 1A. Risk Factors.

CENN US Equity☆

CENN · 10-K · period ended 2025-12-31

Item 1A. Risk Factors.

CENN US Equity