Evergrande Auto Makes Late Night Announcement on Delays in Paying Suppliers and Projects

Evergrande Auto, also known as China Evergrande New Energy Vehicle, announced on Friday night at the Hong Kong Stock Exchange that, as disclosed in its interim report, constrained by poor liquidity, there has been a delay in paying suppliers and projects in the group’s Evergrande Elderly Care Valley and new energy vehicles, and some projects were in suspension. As of the announcement, no significant progress had been made in the resumption of work for some projects.

The announcement says Evergrande is contacting potential strategic investors and trying to attract new sources of funding. Evergrande is still in the process of due diligence and negotiation as of the announcement date.

Also as of that date, Evergrande Auto had not signed any legally effective agreement with investors. So, it remains uncertain whether the sale can be realized.

If the above strategic investment or the sale of potential assets do not make any progress in the short term, Evergrande Group will lack more capital. Such a situation would be detrimental to the daily operation of the group, the wages of employees, other expenses and the R&D of NEVs. Significant negative impacts could hamper the mass production of its NEVs.

Evergrande Auto also admitted a serious shortage of funds as of the announcement date. Pressed by poor liquidity, the group has suspended payment of some daily expenses and the supply from related enterprises.

The interim report warns of the risk of a shutdown. Evergrande Auto said that while the mass production of its “Hengchi” cars is in the final stage, the group is still short of cash. Without capital investment in the short term, the mass production schedule of NEVs might be postponed.

It should be noted that on September 24, Evergrande Auto’s share price fell by over 23%, with the latest share price of HK$2.23 and a market value of HK$21.785 billion.

So far, Evergrande Auto’s share price has plummeted nearly 97% from its peak of HK$72.45 within the year. Furthermore, its market value has evaporated, falling from over 680 billion yuan ($105 billion) to 21.8 billion yuan.

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National Business Daily reported that Evergrande Auto Group, which has settled in Shenzhen for four years, has reportedly moved back to Guangzhou, its city of registration. If so, Evergrande Auto is now located in a different city from the Evergrande Group headquarters.

One person close to Evergrande Auto has confirmed the news.

Some analysts, however, hold that considering Evergrande Auto’s many  factories and offices in Guangzhou, the relocation of nearly 1,000 employees to the city could lower office costs and improve work efficiency.