China Evergrande’s carmaking unit says it is suspending some new energy vehicle projects due to fund shortage
- Evergrande Auto’s share price plunged 23 per cent on Friday, down 97 per cent from its peak in February
- The company’s parent Evergrande, the world’s most indebted developer, has US$300 billion in total liabilities
“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,” said China Evergrande New Energy Vehicle Group, also known as Evergrande Auto.
Before the Hong-Kong listed carmaker issued the warning, its share price plummeted 23.37 per cent to close at HK$2.23 on Friday – down 97 per cent from its peak in February. Investors rushed to dump their shares after mainland media reported that some suppliers withdrew from the company’s factories in Shanghai and Guangzhou because they did not receive payment on time.
Evergrande Auto, which is developing the Hengchi car brand, also warned there could be worse to come: if it is unable to get fresh capital from potential new investors or asset sales soon, it may not be able to pay employee wages and daily operating expenses.
“[The lack of sufficient capital] will, at the same time, impede the research and development progress of new energy vehicles and have a material adverse impact on the group’s mass production of new energy vehicles,” the company added.
The group has been seeking additional capital from new investors, with due diligence and negotiations still in progress, said Evergrande Auto. It also wants to sell some of its Elderly Care Valley projects and overseas assets, but no agreement has been made so far.