China Evergrande Group in Negotiations to Sell Automobile and Property Management Businesses
Chinese real estate developer Evergrande Group is negotiating with both state-owned and private companies to sell stakes in the China Evergrande New Energy Vehicle Group and Evergrande Property Services Group, according to a source cited by Reuters in a Monday report.
Also on Monday night, Evergrande released a warning for its profits during the first half of 2021. It estimates to record a net loss of about 4.8 billion yuan ($740.5 million) in the first half of 2021, twice the net loss during the same period last year, which stood at 2.45 billion yuan.
The announcement says that the net losses incurred in the first half of this year are mainly attributable to the expansion of its new energy vehicle business. This Evergrande offshoot is now relying on investment, and the Group has had to paid more and more to purchase fixed assets and equipment, R&D and interests. Evergrande is to release an official performance report for the first half of the year at the end of August.
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Public information shows that Evergrande Health was renamed to China Evergrande New Energy Vehicle Group Limited in July 2020. The latter is listed on HKEX Main Board, and its main business covers the whole industrial chain of new energy vehicles.
However, as of the first half of this year, China Evergrande New Energy Vehicle Group, which made such a high-profile entry into new energy vehicles, has not yet sold even a single car, not to mention the mass production of car models.
Many analysts have concluded that China Evergrande New Energy Vehicle Group “is unlikely to recover from deficit within several years” because of the huge investment in R&D and the long return period typical in the early stages of entering the NEV industry. In particular, the company has postponed its trial production and mass production plan several times, and it is uncertain whether mass production can be carried out as scheduled.
However, Evergrande New Energy Vehicle Group has released nine NEV models under the Hengchi brand, collectively unveiling them at the Shanghai Auto Show in April 2021. Five trial-produced vehicles of Hengchi – 1, 3, 5, 6 and 7 – have been rolled off the production line, only one step away from mass production. Some analysts believe that with the full trial production of Hengchi in Q4 and large-scale delivery next year, Evergrande New Energy Vehicle Group will usher in a performance explosion.
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In late July, international rating agency S&P downgraded the ratings of China Evergrande and its subsidiaries yet again, lowering it and Tianji Holdings from B+ to B-, and with a negative outlook. On July 13, China Guangfa Bank applied to freeze 132 million funds of Evergrande Real Estate and its subsidary Yixing Hengyu Real Estate Co., Ltd., which pushed Evergrande in the teeth of the storm.
The spokesperson for Evergrande Group responded in July that the company deeply regretted and did not understand the downgrade. The spokesman also said that overseas short-selling institutions frequently create public opinion through internal and external joint efforts and maliciously short Evergrande shares, causing great panic across the capital market towards the conglomerate.