Before debt woes, China Evergrande’s ambitious car making goals stunned industry
SHANGHAI/HONG KONG, Oct 18 (Reuters) – On the Shanghai Auto Present in April, the sales space for China Evergrande Group’s new power car (NEV) unit , was exhausting to overlook.
One of many largest exhibitions on the occasion, in a main spot reverse BMW , the property developer-backed unit confirmed off 9 idea car fashions beneath its model “Hengchi”, which interprets to “eternally dashing.”
“There has by no means been a automobile firm that has been in a position to ship such a diversified product line in such a brief period of time,” Daniel Kirchert, who joined Evergrande NEV days earlier than the auto present as vice chairman, advised business executives and reporters in a speech on the occasion.
Analysts and business executives say there have lengthy been questions on how Evergrande NEV, based in 2019, would meet its formidable targets – chairman Hui Ka Yan had declared that it wished to promote a million EVs a 12 months by 2025, a degree Tesla Inc is simply anticipated to hit this 12 months after 18 years of operation.
Six months after the auto present, the doubts are stronger than ever as the corporate’s guardian wrestles with greater than $300 billion in liabilities.
“These targets can be actually aggressive, almost inconceivable to attain even for established, well-managed automotive firms due to the capital and human sources required to even try executing on the plan,” stated Tu Le, an auto analyst at Sino Auto Insights.
Between 2019 to 2021, Evergrande’s NEV arm raised greater than 50 billion yuan ($7.78 billion) from its guardian, in addition to buyers resembling Sequoia Capital China, ride-hailing big Didi World Inc and Alibaba-linked fund Yunfeng Capital.
It has introduced 14 fashions and plans to have 10 factories throughout China and Sweden. Up to now, it has constructed or is developing six, together with one in Shanghai. A current Reuters go to there discovered about 20 Hengchi electrical autos for testing parked outdoors. However the firm has but to disclose a manufacturing mannequin or promote a single car.
As compared, Nio and Xpeng , two of China’s most profitable NEV startups by gross sales, struggled to boost cash of their early years, and raised a mixed $7.3 billion by way of inventory market listings and pre-IPO fundraising.
Nio has 4 fashions and is constructing its second manufacturing facility. Xpeng has three and is increasing manufacturing websites to 4 from present two. Tesla sells 4 fashions and has 4 automobile crops.
Evergrande NEV didn’t instantly reply to a request for remark.
‘CARS ON PAPER’
Lofty targets and investor bullishness in March helped push Evergrande NEV’s market capitalisation to over HK$700 billion ($89.99 billion) – a worth larger than that of Ford Motor Co . Its market capitalisation has since slumped to about HK$38 billion.
The corporate has managed to lure prime executives from auto giants, resembling designer Walter De Silva and battery scientist Junesoo Lee from SK. Kirchert had been chief govt at Byton, one other Chinese language EV startup struggling in a crowded sector. He didn’t reply to a request for remark.
However the speedy enlargement additionally prompted criticism from Beijing, together with Chinese language state information company Xinhua, which in March singled the corporate out for instance of the issues with the business.
“The huge market potential has given beginning to some ‘powerpoint automobile firms’ that ‘make automobiles’ on paper,” Xinhua stated in a report on the excessive valuations about electrical carmakers.
Evergrande NEV warned in inventory trade filings final month that it was nonetheless searching for new buyers and asset gross sales, and that with out both it’d wrestle to pay salaries and canopy different bills.
It additionally ended plans to difficulty shares in China’s mainland and stated in an trade submitting that it had didn’t pay some plant building suppliers. A memo seen by Reuters additionally confirmed that it has instructed contract employees to cease working at Shanghai manufacturing facility from September.
However three sources aware of the matter say the corporate shouldn’t be abandoning the venture, and is in talks with exterior buyers to pay for the venture, leveraging treasured manufacturing licenses it has obtained by way of an acquisition and land linked to the auto initiatives.
On Monday, it advised suppliers and native authorities within the coastal metropolis of Tianjin, the place it’s constructing a automobile plant, that administration would be certain it started mass manufacturing subsequent 12 months.
Final week, its Swedish car unit, Nationwide Electrical Automobile Sweden AB, advised Reuters it’s in talks with U.S. and European enterprise capital companies and industrial companions to search out new house owners. A supply aware of the scenario advised Reuters the unit might be valued at as a lot as $1 billion.
($1 = 6.4262 Chinese language yuan renminbi)
($1 = 7.7786 Hong Kong {dollars})
Reporting by Yilei Solar and Zhang Yan in Shanghai, Julie Zhu and Kane Wu in Hong Kong; enhancing by Brenda Goh and Gerry Doyle
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