The Chinese real estate group Evergrande looks like it is on the verge of withdrawing from the automobile business. According to a media report, the indebted group is looking into selling the division to other Chinese carmakers.
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Evergrande owns or has stakes in numerous EV companies. With numerous acquisitions, the Hong-Kong based Evergrande Group recently built up its own car business at break-neck speed. Now Evergrande is struggling to pay its debts after Beijing stepped up curbs on the real estate sector to contain the risks of a bubble.
With its first foray into the EV business, Evergrande initially invested in Faraday Future through its health division Evergrande Health. After Faraday Future proved problematic, Evergrande expanded its focus to become one of the largest producers of electric vehicles.
Up to now, Evergrande has mainly purchased know-how either by means of by partial entry as in the case of Koenigsegg, by means of joint ventures as in the case of Hofer or by cooperation as in the case of FEV Group, EDAG, IAV Group, AVL and Magna, or by means of a takeover as in the case of Swedish-based carmaker NEVS.
The group did not stop there. It also pursued its own plans and the first six electric cars were announced a year ago through the Hengchi brand. In spring this year, Evergrande New Energy Vehicle even surpassed Ford and GM in terms of stock market value. But the business model was still dependent on the Evergrande Group.
Until now, the Evergrande Group was able to finance its car plans from the flourishing real estate business in China. According to the CN EV Post, the previously lucrative real estate market in China has faltered, putting Evergrande in a difficult financial position as it expands. Hui Ka Yan, chairman of the real estate division, has apparently already had to leave Evergrande.
According to Reuters, Evergrande Auto had a market value of $12.5 billion on Thursday just passed. That compares with $87 billion at the end of April when the company’s stock market value was higher than Ford and GM.
As the ChinaStarMarket now reports, Evergrande could sell off its car business in the course of the debt crisis and the group is already in talks with several companies, including Nio, Xpeng and Xaiomi. The outcome of the talks is not yet certain. Neither Nio nor Xpeng and Xiaomi wanted to make a comment on the matter, according to Chinese media.
Reuters also reported that a Shenzhen government-backed investment firm is seeking to sell a portion of its 65 per cent stake in Evergrande Auto. As part of its efforts to reduce its debt, Evergrande is in discussions with what Reuters writes are “several independent third-party investors” interested in the proposed sale of certain assets, including stakes in Evergrande’s electric car businesses.
Evergrande debt crisis will affect the Swedish company NEVS, formerly called Saab. Evergrande acquired a 51 per cent stake in NEVS in January 2019 and had increased its stake to 82.4 per cent in November 2019 and bought up the final shares in June 2020. The complete takeover gave Evergrande full control over the facilities in Trollhättan. The former Saab plant, today the only Evergrande plant outside China, houses production facilities and NEVS’ development laboratories. A further NEVS plant was to be built in Shanghai.
According to Swedish media reports, the company has now laid off 300 of its 650 employees in Trollhättan as part of a restructuring. A NEVS spokesperson made it clear to the Swedish media that the financial situation at Evergrande has ramifications for the carmaker: “We have received signals from our owners that they are having difficulty continuing to finance our business at the current level, and that has, of course, had an impact on it,” NEVS spokesperson Jonas Hernqvist is quoted as saying. “It’s a decision that’s about that change, but it’s also about a decision to reduce costs in a shorter time.”
It remains to be seen whether the restructuring at NEVS will also affect the production of Sono Motors’ Sion. The Evergrande-owned Swedish company are to build the Sion from 2023 onwards; up to 43,000 vehicles per year are to be built.
In an update this morning, Sono Motors told our editorial team that the Sion production is “not affected” by the restructuring at NEVS. “Preparations of the production facilities for pre-series production in 2022 and Sion series production in the first half of 2023 are already running according to plan,” a company spokesperson said.
Update 27 August 2021
The share price of Evergrande New Energy Vehicle Group has continued to fall – by now the electric car subsidiary of the Chinese real estate group Evergrande has lost about 80 billion US dollars in stock market value. Since peaking at $87 billion at the end of April, Evergrande’s car division has lost 92 per cent of its value – the worst performance in the Bloomberg World Index.
The decisive factor for the recent 22 per cent slide in the share price: Evergrande New Energy Vehicle Group had reported a loss of around 740 million US dollars in the first half of 2021 on Thursday. There is no news on the rumours about a possible sale of the division (see above).
Update 24 September 2021
The debt crisis at the Chinese real estate group is now apparently having an impact on its electric car plans. As Bloomberg news agency has learned from insiders, Evergrande has not paid salaries for some employees of its electric car business and has also defaulted on payments to a number of suppliers for factory equipment. Most recently, it had been reported that Evergrande was looking into selling its electric car subsidiary.
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