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The debt is insolvent! Evergrande Automobile Plant stops production

2024-05-27 Update From: AutoBeta NAV: AutoBeta > News >


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On March 27, Evergrande released its 2023 results. During the reporting period, Evergrande's revenue was 1.34 billion yuan, an increase of 900.03% over the same period last year. Shareholders accounted for a loss of 11.995 billion yuan, reducing losses by 56.64% over the same period last year. Among them, the termination of business (that is, divestiture of real estate projects) lost 1.061 billion yuan, asset disposal, asset impairment and other non-operating losses of 6.384 billion yuan, operating losses of 4.55 billion yuan. As of December 31, 2023, the cumulative losses and shareholders' losses of Evergrande were 110.841 billion yuan (98.906 billion yuan in 2022) and 37.693 billion yuan (68.651 billion yuan in 2022) respectively.

As of December 31, 2023, Evergrande has total auto assets of 34.851 billion yuan and liabilities of 72.543 billion yuan, including 26.484 billion yuan of loans, 43.012 billion yuan of trade and other payables and 3.047 billion yuan of other liabilities. In other words, Evergrande has become insolvent. As of December 31, 2023, Evergrande's cash and cash equivalents are 129 million yuan, and the cash flow is expected to last at least 12 months. It is worth mentioning that despite years of huge losses at Evergrande, Chairman Sean and Vice Chairman Liu Yongzhao received huge salaries, totaling more than 100 million yuan in 2021 and 2022.

Evergrande said that due to external and internal factors, production and sales fell short of expectations, the company was facing operational difficulties, and business activities such as research and development, production and sales, as well as the stability of the workforce were affected. As of December 31, 2023, the Tianjin manufacturing base produced Hengchi 5 according to market demand, with a total production of 1700 vehicles and a total delivery of more than 1389 vehicles. Recently, due to financial reasons, the group arranged for some personnel to have a holiday and Tianjin factory suspended production.

Evergrande said in its financial report that the group will spare no effort to introduce strategic investors to actively raise funds to maintain the group's survival and future development plans. On January 1 this year, Evergrande announced that the share subscription agreement and debt-for-equity swap agreement with Newton Group, originally scheduled to expire on December 31, 2023, have expired on January 1, 2024. However, Evergrande also stressed in the announcement that although the agreement has expired, Evergrande, Newton and other interested parties are still negotiating the key terms of these deals, indicating that the two sides may still reach a new agreement or amend the original agreement. It is understood that the Newton Group is an electric car company located in Dubai, United Arab Emirates, and was previously an enterprise in Tianjin, China. Its founder Wu Nan, who is also from China, established Tianjin Tianqi Group Co., Ltd. in 2016, and its controlling shareholder is Econic (Tianjin) Investment Co., Ltd. In 2018, Econic New Energy vehicle settled in Zhaoqing, Guangdong Province. In 2019, seven concept models were unveiled at the Shanghai Auto Show, and in the same year, nearly 870 million yuan was spent on the acquisition of Tianqi Meiya to obtain the car-building qualification. According to Econic's earlier plans, its first product, the Econic 7 Series, will be launched in 2019, and two new cars built on the same platform as the Econic 7 Series will be launched in 2021 and 2022, respectively. However, due to the epidemic and financing problems, there has been little news about the brand after 2019.

In addition, Liu Yongzhao, president and executive director of Evergrande Automobile, was arrested. On January 8, Evergrande issued a notice saying that executive director Liu Yongzhao had been criminally detained in accordance with the law on suspicion of breaking the law and committing a crime. According to the data, Liu Yongzhao began to serve Evergrande in 2003 and was in charge of Guangzhou Evergrande Taobao Football Club, Evergrande Cultural Industry Group, Evergrande Agriculture and Animal Husbandry Group, Evergrande Internet Finance Group, Evergrande High-tech Group and other businesses. now he serves as executive vice president of Evergrande Group, president of Evergrande Automobile and chairman of Evergrande New Energy Technology Group, and president of vehicle Research Institute.

As the main person in charge of Evergrande, Liu Yongzhao once said that "the big sale of Hengchi is a foregone conclusion", but from the data, the performance of Evergrande's first production model, Hengchi 5, is not entirely satisfactory. Terminal sales data show that Hengchi sold a total of 980 vehicles in 2023.

At present, the competition in the new energy vehicle industry is extremely fierce, and many multinational joint venture brands are struggling, not to mention the heavily indebted real estate cross-border car companies, while returning to the product itself, Hengchi 5 positioning compact pure electric SUV is not expensive compared with the same class of models, and the product configuration is not very poor, but Hengchi has not formed its own advantages. Hengchi 5's power, range, auxiliary driving and so on can only be regarded as regular, and it is difficult to show enough competitiveness compared with BYD, Tesla and other brand products. Most crucially, at present, China Evergrande is heavily in debt and Evergrande cars are insolvent. How to persuade consumers to buy such a company's products is another big problem.

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