China’s Evergrande’s EV unit admits there’s no guarantee it’ll be able to pay its debts: Evergrande NEV’s stock fell as high as 25.8% on Friday, increasing the company’s year-to-date losses to 93%. Evergrande NEV, which hasn’t mass built a single automobile, was valued at more than Ford Motor Co. and General Motors Co. in February when the stock was at its high.
Evergrande is China’s biggest financial concern right now, and it’s quickly spreading beyond the country’s borders. In a nutshell, real estate developers with $300 billion in debt are expected to default on bond payments.
Over 1,300 projects in over 280 cities are owned by the firm. Its impact, however, extends far beyond the construction of houses.
Hui Ka Yan, the company’s wealthy owner, has his fingers in a variety of pies, including electric vehicles, media production, mineral water, and soccer.
Evergrande’s EV unit has stated that it cannot guarantee that it will be able to pay its financial obligations while looking for strategic investors to inject much-needed funds.
“The group is encountering a serious shortage of funds,” the Hong Kong-listed entity said in an exchange filing late Friday. “In view of the liquidity pressure, the group has suspended paying some of its operating expenses and some suppliers have suspended supplying for projects.”
China Evergrande’s EV unit had skipped wage payments to some of its employees and had fallen behind on paying a number of suppliers for plant equipment, according to a Bloomberg News article.
Due to cash flow issues, the carmaker that aspired to compete with Elon Musk in the electric vehicle market would most likely miss its aim of starting mass deliveries next year.
Evergrande NEV announced on Friday that it is in talks with investors about selling some of its aged car projects and abroad assets in order to “improve the group’s overall efficiency and to supplement working capital.”
The company added, however, that it “remains uncertain as to whether the group will be able to consummate any such sale.”
Evergrande NEV was officially founded in July of last year when Evergrande Health changed its name to Evergrande NEV. The firm advertises itself as an automaker, but the majority of its revenue still comes from its community health services and nursing care facilities.
Evergrande’s problems began in 2020, when the business allegedly submitted a letter to Guangdong’s provincial government, alerting officials of a potential cash crisis.
Evergrande later questioned the letter’s legitimacy, but the crisis was averted when a group of investors agreed to relinquish their right to demand a $13 billion refund.
However, there is still a lot of debt due, and rating agencies consider default as a possibility.
For the six months ended June 30, Evergrande NEV recorded a loss of 4.8 billion yuan ($742 million) on sales of 6.92 billion yuan, with the majority of that coming from the group’s health and aged-care segment (6.89 billion yuan).
Evergrande’s broad conglomerate, which encompasses financial services and a bank but is mostly based on residential apartment sales, includes the EV unit.
