China Evergrande Group ’s carmaking unit is struggling to keep its production plan alive, after a capital crunch forced it to suspend part of its electric vehicle (EV) projects. Hong Kong-listed China Evergrande New Energy Vehicle Group, also known as Evergrande Auto, is making an all-out effort to kick off production of its Hengchi-branded cars, trying to keep talent and looking for new funding even as its operations have been walloped by the debt woes of its parent, according to two sources with ties to the carmaker. The carmaker, which briefly topped the century-old Ford Motor in market capitalisation in February after raising HK$10 billion in a top-up stock sale in Hong Kong a month earlier, is yet to deliver a single car. Nevertheless, it is still hopeful that it could obtain fresh funds from new investors soon because of the bullish outlook of China’s EV sector. While it has stopped paying nearly all suppliers and some of its employees because of the cash squeeze, existing staff have been told to get the assembly line ready to produce its first model. “Evergrande’s EV assets remain valuable,” said Gao Shen, an independent analyst in Shanghai. “It has potential investors but one of the sticking points now is how to price the assets.” Evergrande Auto’s shares have lost 96 per cent in value since their February high, wiping out US$88 billion in capitalisation. The stock jumped 44.4 per cent to HK$3.35 on Wednesday, on expectations that a white knight investor could come to its rescue. The company did not reply to a request for comment. At Evergrande Auto’s factory in Songjiang district outside Shanghai, a gigantic plant stretching for half a kilometre, appeared to be complete, while several buildings nearby stood half built. A few workers milled around, but there was otherwise little activity in what was to be Evergrande’s grand entry into China’s bare-knuckle industry of making electric cars. That is hardly surprising as the carmaker said in an exchange filing last week that it halted some of its EV projects after failing to pay its suppliers. Evergrande NEV also reported a 4.8 billion yuan (US$742 million) loss for the six months to June 30, confirming a profit warning from the parent company. Acknowledging challenges on cash flow, the EV start-up said it faced risks of defaulting on its loans and disputes outside normal business. It will continue efforts to discuss the sale of assets with potential investors and closely monitor the capital expenditure of the EV business. The start-up had 12.5 billion yuan of cash buffer at the end of June, compared with 13.3 billion yuan of borrowings and 73 billion yuan of trade payables due within a year. On September 21, the company announced that a total of 323.72 million share options were granted to three independent non-executive directors and around 3,180 employees. The company is using options as an incentive to retain engineers and technicians as the capital crunch is likely to result in a delayed salary payment over the coming months, the sources said. In August when Evergrande was reportedly in talks with smartphone maker Xiaomi over the sale of a stake in the EV unit, two prototypes of its Hengchi cars were seen by the South China Morning Post at the plant when they were conducting a road test. Evergrande Auto aimed to build a million electric vehicles a year by 2025 and had ambitions of becoming the world’s largest EV maker. Earlier this year, it set a goal of delivering 100,000 units in 2022. In August 2020, the company unveiled six Hengchi-branded EV models followed by another three in February this year. However, none of the nine models have reached the assembly stage yet, with the company saying they would hit the market either in the second half of this year, or the first half of 2022. At the beginning of this month, Evergrande Auto said a fleet of 53 cars comprising the Hengchi 1, 3, 5, 6 and 7 models had completed a 70-day road test covering 500,000km. The announcement came three days after the carmaker warned in its interim earnings report that production might be delayed because of a cash squeeze. Its debt-ridden parent China Evergrande Group, controlled by tycoon Hui Ka-yan, currently has US$300 billion in liabilities, compared with 2.38 trillion yuan (US$368 billion) in assets. Hui is desperate to save his property empire from collapsing via asset sales after Evergrande missed several interest payments this month to contractors, suppliers and lenders. More deadlines are approaching on its local and offshore bond obligations.