The abrupt announcement formally made by Evergrande Auto, a division of the Evergrande Group, at noon on January 8 sent shockwaves as it revealed the detention of Liu Yongzhuo, an executive director, due to suspected illegal activities.
Liu Yongzhuo, presently holding positions as the Executive Vice President of Evergrande Group, President of Evergrande New Energy Automobile Group, Chairman of Evergrande New Energy Technology Group, and Director of the Vehicle Research Institute, has been a prominent figure within the conglomerate and its Hengchi brand of vehicles that launched in 2021.
This arrest marks a significant development in the ongoing legal issues surrounding the prominent figures within China Evergrande Group. Notably, Liu Yongzhuo, considered a key figure within the company, previously served as a crucial figure alongside Xu Jiayin, the chairman of China Evergrande Group. Liu Yongzhuo’s influence extended beyond the business realm; he was at the helm of the Guangzhou Evergrande Football Club during its ascent to dominance in Asian football, which has had its own series of controversies.
The arrest has added fuel to the fire at Evergrande Auto, which has already been navigating a series of setbacks, including suspension from trading, financial discrepancies, and the fallout from failed agreements with investors. The company’s attempt to secure a strategic investment of approximately 500 million USD from the Newton Group, intended to bolster its operations and production, ended in disappointment as agreements lapsed just days ago at the end of December 2023.
The company did announce in May 2023 the resumption of production of its Hengchi 5, and Mr. Liu was seen at a Hengchi customer delivery event just two weeks ago. However, 2023 saw dismal sales of less than 1000 units for the year. In 2021, Hengchi announced bold ambitions of selling 1 million units in 2025, a goal that seems extremely far off its current reality.
As Evergrande Auto grapples with these issues and the repercussions of key personnel controversies within the larger conglomerate, its future remains uncertain. The company’s ability to navigate these hurdles, stabilize its operations, and regain investor confidence amid a turbulent business environment will be crucial for its continued viability in the competitive automotive industry that has significantly heated up over the past few years.