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Evergrande’s auto arm said its electric vehicle suppliers were experiencing some delays. In addition, the unit also revealed that it suspended some projects across the group, and is looking for new investors.
Embattled Chinese real estate company Evergrande announced plans to start manufacturing electric cars in 2022. This news was enough to cause a 4.5% increase in the shares of Evergrande’s auto unit, after initially surging 10%. The property developer met with suppliers and the local government in China’s port city of Tianjin, where it also has its production base. At the meeting, Evergrande doubled down on its commitment to roll out the vehicles at the stipulated time. Furthermore, Tianjin’s local government also pledged to lend a helping hand to the debt-laden real estate giant in vehicle production. The local district’s top official said it planned to achieve this by working in tandem with various financial institutions.
China Evergrande New Energy Vehicle Group Ltd (HKG:708) is venturing into a highly competitive market for electric cars in China. The auto unit will inevitably tussle with some other upstarts such as Nio (NYSE: NIO) and Xpeng (NYSE: XPEV) for market share. As a matter of fact, Xpeng announced on Monday that it built 100,000 within six years of its existence. Apart from the aforementioned startups, China Evergrande New Energy Vehicle Group Ltd also has more established players to contend with. They include Chinese manufacturing company BYD, and the Elon Musk-led Tesla Inc (NASDAQ: TSLA).
Evergrande Electric Cars Face Challenges
Evergrande’s auto arm said its electric vehicle suppliers were experiencing some delays. In addition, the unit also revealed that it suspended some projects across the group, and is looking for new investors. An official statement from the automaker reads:
“In light of the adverse effects on the liquidity of the group, there were delays in payments to suppliers and construction fees in the group’s Evergrande Elderly Care Valley and new energy vehicle living projects, which resulted in the suspension of work on certain relevant projects of the group.”
China Evergrande New Energy Group Ltd is targeting annual production and sales of up to 1 million ‘Hengchi’ cars by 2025. This lofty ambition holds sway despite the fact that its parent company is grappling with a massive $300 billion debt.
Evergrande Group has already defaulted on several bond payments, and confidence in the firm is at an all-time low. The property developer even had to resort to selling $1.5 billion worth of stake in the Chinese bank Shengjing Bank at some point. Shenyang Shengjing Finance Investment Group was the buyer of said shares at 5.70 yuan per share.
The Evergrande Group crises had a domino effect across much of the markets for a significant period last month. Everything from digital assets to shares of other institutions was impacted by the fallout from China’s real estate sector. The situation got so bad that at some point, investors were wondering if or when the Chinese government would intervene.