The collapse of the electric vehicle unit spells many problems for the parent company.
China Evergrande New Energy Vehicle Group Ltd (HKG: 708) closed the Hong Kong market on Monday, September 27, trading at HK$ 2.020, down 9.42%. The dip was much higher during the trading hours, almost 26%, but managed to retract at the closing time. Notably, the huge dip has directly been attributed to a warning issued of a serious shortage of funds. Consequently, the China Evergrande EV stock market has dropped by approximately 90%, 93%, 92%, and 66% in the past year, YTD, three months, and one month respectively through Monday.
The sustained losses have seen the firm’s market cap fall below Ford Motor Company ( NYSE: F) in recent times. Notably, the firm had a reported market valuation of approximately $84 billion but has since dropped to approximately HK$21.78 billion. Ford on the other hand has a reported market valuation of approximately $55.05 billion.
According to Bloomberg, the company partly suspended paying for its operating expenses, thereby prompting some suppliers to cut services short. The same media outlet had previously reported that the firm has missed salary payments to some of its employees. Additionally, a notable number of its suppliers are said not to have received payment for services and products delivered.
The reported cash shortage diminishes dreams of the company ever mass producing its electric vehicle. Hereby leaving its competitors including Tesla Inc ( NASDAQ: TSLA), and Xpeng Inc (NYSE: XPEV) which command a significant share of the Chinese market.
EV Unit Collapse and Other Challenges for China Evergrande
As a subsidiary of China Evergrande Group (Hong Kong: 3333), the collapse of the EV unit spells many problems for the parent company. Earlier this month, the parent company was faced with the challenges of repaying its debts on time. Although the company promised that all debt repayments will be made on time, the company seems to have more problems to solve.
The parent company’s stock market, ostensibly, closed the market on a positive note. According to MarketWatch, the China Evergrande Group stock market closed the Hong Kong market on Monday trading at HK$ 2.550, up 8.05%.
However, its stock market has lost almost a similar percent as its EV unit. According to market analytics provided by MarketWatch, the parent company’s stock market is down approximately 84%, 82%, 75%, and 41% in the past year, YTD, three months, and one month respectively through Monday.
The EV unit further exaggerated its imminent collapse after reporting that it will not proceed with a planned issue of yuan-denominated shares on the Science and Technology Innovation Board of the Shanghai Stock Exchange.