China Evergrande’s electric-vehicle unit gets US$200 million from returning undeveloped land
- The Hong Kong-listed carmaker says the money will be used to fund construction projects and pay wages
- Its cash-strapped parent, China Evergrande, is hoping to transform its business focus from property development to car manufacturing
China Evergrande New Energy Vehicle Group returned several undeveloped land plots to the Chinese government in exchange for 1.28 billion yuan (US$200 million) to alleviate its cash crunch and keep operations afloat.
The proceeds – some which have been confiscated by the government – will be used to fund construction projects, pay wages to migrant workers, and pay for any unreturned land parcels, the Hong Kong-listed company, also known as Evergrande Auto, said in an exchange filing Friday night.
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The returned land, totalling 2.7 million square metres (28 million square feet), had been designated for seven industrial and residential property projects, Evergrande Auto said.
The funds provide a lifeline to the carmaker, which has so far unveiled nine EV models, none of which have progressed to mass production. The company said earlier that production would begin this month, with delivery slated for next year.
The survival of Evergrande Auto is also of significant importance to its cash-strapped parent, China Evergrande, which is aiming to shift its business focus from property development to EV manufacturing in 10 years, according to founder Hui Ka-yan.
Evergrande Auto unveiled a plan earlier this month to raise HK$500 million (US$64.2 million) through new shares to bankroll production of its EVs under the brand Hengchi, which means “ever running” in Chinese. The carmaker, which posted a loss of 4.8 billion yuan in the first half of the year, has filed for approval for the sales of its SUVs, government data showed.
Shares of Evergrande Auto fell 7.9 per cent to HK$4.06 on Friday, extending its decline to 55 per cent so far this year. The stock, dragged down by the debt crisis of China Evergrande, has vastly underperformed domestic rivals such as Xpeng and Li Auto.
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Meanwhile, Hui is ramping up efforts to bail out China Evergrande, which has racked up more than US$300 billion in liabilities. The founder sold 1.2 billion Evergrande shares for HK$2.7 billion on Thursday, lowering his stake from 77 per cent to 68 per cent, according to data from the Hong Kong stock exchange.
China Evergrande’s shares tumbled 10 per cent to HK$2.50 on Friday. The stock has lost 83 per cent of its value this year.
