The house leakage happens overnight. Evergrande Auto, which lost its strategic investment not long ago, is now facing the situation of returning subsidies.
On the evening of May 22, Evergrande Auto (00708. HK) announced that its subsidiary Evergrande New Energy Vehicle Investment Holding Group Co., Ltd. and other parties had recently received letters from relevant local administrative departments, which showed that since April 29, 2019, Evergrande Auto had signed a series of investment cooperation agreements with relevant local administrative departments, Due to the failure to perform the contractual obligations as agreed in the relevant terms of the relevant agreements, the relevant local administrative departments, in accordance with the legal provisions, intend to require Evergrande Auto to terminate the relevant agreements and return the total amount of various awards and subsidies that have been issued to the local government departments to about 1.9 billion yuan, and the relevant subsidiaries shall bear joint and several liabilities for each other.
In this regard, Evergrande Automobile said that it plans to send a letter to relevant local administrative departments for coordination. Evergrande Auto also mentioned that if the above letter requirements are finally implemented, it will have a significant adverse impact on Evergrande Auto's financial situation and operation.
If the above subsidies are returned, Evergrande Auto, which has lost its war investment funds before, will undoubtedly face greater financial pressure.
In August 2023, Evergrande Auto signed an agreement with the electric vehicle company Newton Group, which will subscribe more than 6.177 billion shares of Evergrande Auto at a total price of about 3.89 billion Hong Kong dollars, and hold 27.5% of the total issued shares of Evergrande Auto after expansion.
Evergrande Auto originally planned to use the net amount of the subscription proceeds for vehicle research and development, production and sales, as well as repayment of support funds for the transition period. Among them, Newton Group will first provide an interest free transitional fund of 600 million yuan for the R&D, production and sales of Evergrande Auto.
Evergrande Auto also said that this time, it will effectively solve the financing problem faced by Evergrande Auto's development by joining hands with Middle East capital. In the future, we will fully promote the production and sales of Hengchi 5, and further promote the R&D and mass production of new models such as Hengchi 6 and Hengchi 7. Newton Group will also assist Evergrande Automobile in developing overseas markets and export 30000 to 50000 Hengchi cars to the Middle East market every year.
The transaction was originally planned to be completed in the fourth quarter of 2023, after which Evergrande Auto will no longer be a wholly-owned subsidiary of China Evergrande, a real estate company.
However, this transaction has a series of preconditions, including the completion of Evergrande Group's debt restructuring. During this period, Evergrande not only failed to advance the debt restructuring as scheduled, but also was ordered to liquidate by the High Court of Hong Kong on January 29 this year.
Affected by this, the above transaction was suspended for about half a year, during which the two parties held many consultations, but the transaction has never made effective progress. In April 2024, Evergrande Motors finally lost its investment in this war.
By the end of 2023, Evergrande Auto, a cross-border car maker, had accumulated losses of more than 110 billion yuan, including about 12 billion yuan in 2023.
However, it is also in 2023 that Evergrande Auto will achieve revenue of about 1.34 billion yuan, a sharp increase of 900.04% year on year. Although it is promoting the thorough transformation and crossover, the revenue of Evergrande Motors is still inseparable from the support of property sales. On the one hand, the significant growth of the above revenue comes from the sales of automobiles and auto parts from about 61 million yuan last year to 146 million yuan by the end of 2023; On the other hand, the income from property sales increased to 1.136 billion yuan.
By the end of 2023, Evergrande Auto had total assets of 34.851 billion yuan and total liabilities of 72.543 billion yuan, of which 26.484 billion yuan was borrowed; In the same period, Evergrande Auto's cash and cash equivalents were 129 million yuan, which was far from enough to cover borrowings. Evergrande Auto said that it would spare no effort to introduce strategic investors to actively raise funds to maintain the Group's survival and future development plans.
In terms of production and delivery, Evergrande Auto is also facing considerable pressure due to capital problems. In view of this, Evergrande Auto also arranged a holiday for some personnel, and the Tianjin factory suspended production. By the end of 2023, the Tianjin manufacturing base had produced Hengchi 5 according to the market demand. In September 2022, it had mass produced 1700 vehicles, which did not meet the relevant requirements. By the end of 2023, more than 1389 vehicles have been delivered accumulatively.
It is worth mentioning that on May 17, the share price of Evergrande Motors once soared by more than 70% in the red of real estate stocks, and then suspended trading, "pending the announcement of the Company on inside information". At present, this insider information has not yet been disclosed, and Evergrande will still suspend trading.
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