China's Evergrande may delay electric cars amid capital crunch

[BEIJING] CHINA Evergrande Group's electric-vehicle unit said it might have to delay car production unless it can secure more capital in the short-term.

The company said in a statement to the Hong Kong stock exchange on Monday: "The mass production of Hengchi vehicles has entered the final stretch; nonetheless the group is still facing challenges on its cash flow. If the group lacks further capital contribution in the short term, the mass-production timetable of new-energy vehicles may have to be delayed."

The Hong Kong-listed unit, China Evergrande New Energy Vehicle Group Ltd, reported a 4.8 billion yuan (S$998.2 million) loss in the six months to June 30, it said earlier on Monday, confirming a profit warning from the parent company last week.

Revenue came in at 6.9 billion yuan, with the vast majority of that from the group's health and aged-care business.

More than two years have now passed since Evergrande's billionaire chairman Hui Ka Yan pledged to overtake Elon Musk's Tesla Inc as the world's biggest EV maker within three to five years. That is looking increasingly impossible as Tesla ships record volumes, while Evergrande has only teased the market with video of EVs undergoing testing in Mongolia and a lavish display of nine models at this year's Shanghai Auto Show.

Of greater concern to investors, and Mr Hui, is the unit's cratering share price. The stock has slumped 92 per cent from its February high, wiping out more than US$80 billion in market value from what was once the property developer's most valuable listed asset.

Evergrande's subsidiaries are being punished on concern the world's most indebted developer will need to sell assets at a steep discount amid mounting pressure from Beijing.

Castor Pang, head of research at Core Pacific-Yamaichi International H.K. Ltd, said before Evergrande's announcement: "Now that the parent company has a liquidity problem, it's impossible for Evergrande New Energy to meet previous targets for car production."

BLOOMBERG

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