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September 29, 2021

Evergrande New Energy Vehicle Group shares plummet

Parent company debt woes have hit the value of the EV unit.

By Graeme Roberts

Hong Kong-listed Evergrande New Energy Vehicle Group saw its share price plunge to below HK$2 on Monday from a 2021 high of over HK$68 in April, as concerns grew about its parent company’s ability to meet its debt obligations.

The electric vehicle company had scrapped plans to list its shares on Shanghai’s Science and Technology Innovation Board, according to a filing to the Hong Kong exchange over the weekend after the company stated in a separate exchange filing on Friday that its parent company’s cash crisis would have a “material adverse impact” on its vehicle production plans.

The electric vehicle startup stated further a “serious shortage of funds” had forced it to suspend “paying some of its operating expenses and some suppliers”.

Evergrande group, China’s second-largest property developer, was on the brink of bankruptcy under the weight of an estimated US$300bn debt mountain after it missed payments to some overseas bondholders last week. It was unclear whether the Chinese government would step in to protect investors if the company failed to attract a strategic investor. The group directly employs 200,000 people, with a further 3.8m estimated to be employed indirectly, and generated revenues of CNY507bn in 2020.

Evergrande New Energy Vehicle Group had been put up for sale along with other key assets, as the group needs to generate liquidity to service its debts. Smart phone giant Xiaomi was reported to have held acquisition talks for the electric vehicle subsidiary last month, but had so far not made an offer.

Evergrande New Energy Vehicle Group in January said it had raised CNY26bn (US$4bn) in a share placing, while also unveiling six electric vehicle prototypes under its Hengchi brand including sedans, MPVs and SUVs. These had yet to be put into production.

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