Monday, January 24

Evergrande EV unit soars after Hui vowed to turn business around

China’s electric vehicle unit Evergrande Group jumped into Hong Kong operations after the president of the indebted real estate giant said making such cars would become its main business within a decade.

Shares of China Evergrande New Energy Vehicle Group Ltd. rose as much as 17% on Monday, the most in three weeks. Evergrande rose 6% before erasing the gain to trade 1.1% lower at 1:39 p.m. The Securities Times reported Friday that Evergrande Chairman Hui Ka Yan said he plans to cut real estate deals to focus on new energy vehicles.

The reported shift to the electric car business will be a challenge given that Evergrande has yet to deliver a single vehicle, despite Hui’s ambitions to take on industry giants like Tesla Inc.The world’s most indebted developer is struggling with a cash crisis that has led to considering the sale of stakes in units including Evergrande NEV.

Evergrande NEV was up 9.2% in afternoon trading, but remains 95% below its February peak. Last month, the company warned of a “severe shortage of funds” and said there was no guarantee that it would be able to meet its financial obligations. The liquidity shortage caused it to stop paying some operating expenses and some of its suppliers to leave.

The company’s first electric car, “Hengchi,” will roll out of its Tianjin factory early next year, according to an Oct. 11 statement on Evergrande’s website, which also referred to a “three-month war.” to address the main challenges. in electric vehicles. In August, the firm warned it might have to delay mass production of cars unless it can secure more capital in the short term.

Evergrande, which also has operations ranging from a soccer club to mineral water, was recently criticized by China’s central bank for “not managing its business well.” In a generally harsh comment, the People’s Bank of China official Zou Lan said earlier this month that the developer “expanded and diversified blindly” in recent years, rather than operating prudently amid conditions. changing markets.

Evergrande spent more than $ 3.7 billion on a variety of electric vehicle-related companies after announcing in 2019 that it wanted to be the world’s leading manufacturer of green cars. That has yet to pay off, as Evergrande NEV reported a 4.8 billion yuan ($ 752 million) loss in the first half of this year. In September, the unit scrapped a Nasdaq-style listing proposal on the Shanghai Star directory.

In principle, Evergrande will not buy any land for the next 10 years, Hui told an internal meeting, according to the Securities Times report. Annual real estate sales will fall to about 200 billion yuan in 10 years from 700 billion yuan in 2020, he said. Evergrande declined to comment.

Evergrande said construction of more than 40 projects in Guangdong province is progressing smoothly and houses will be delivered. The developer owes more than $ 300 billion to banks, bondholders, suppliers, and investors. It pulled back from the brink of default last week, paying a $ 83.5 million bond coupon just before the deadline.

The project collateral “is a sign that it seeks to ease investors’ nerves,” said Lisa Zhou, an analyst at Bloomberg Intelligence. “Liquidity problems still loom, which it can address by ditching its investment properties and listed shares of subsidiaries, despite plans to downsize its real estate operations by taking a 10-year hiatus from buying land.”

© 2021 Bloomberg

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