Has the Hengchi brand from Evergrande Auto been saved?

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Shares of Evergrande Automobile today closed up 86% on the first days of trading on the Hong Kong Stock Exchange since shares were suspended on May 17. Yesterday Evergrande Automobile applied to resume trading after news broke that a mystery saviour intends to buy a 29% stake in the company.

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The company has been embattled for a long time partly due to problems of the parent Evergrande Group which is a property company and has been suffering due to the property market collapse in China. The company bet big on a number of new energy vehicle projects which culminated in in the creation of the Hengchi brand by Evergrande Auto. One of the biggest stands at the 2021 Shanghai Auto Show was from Hengchi and they showed now no fewer than 9 new cars, all allegedly production ready.

Despite already having huge financial problems one model, the Hengchi 5, did enter production in 2022. Interestingly Evergrande tried to sell the whole project to Xiaomi back in 2021. Since production began there have been a number of halts, the most recent since around the beginning of this year. Also on January 8 Evergrande NEV executive director Liu Yongzhuo was arrested due to illegal actions by the company.  

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The new deal concerns the block of Evergrande Auto shares controlled by China Evergrande Group (in liquidation), Evergrande Health Industry Group, and Acelin Global Limited. Between them they hold 6.348 billion shares which is about 58.5% of the total issued Evergrande Auto shares.

Under the agreement the as yet unknown third party will acquire 3,145,000,000 shares, amounting to 29% of Evergrande Auto immediately. The remaining 29.5% of shares owned by the three parties amounting to 3,203,000,000 will be subject to an exercisable option for a period of time after the sale and purchase agreement.

It’s understood that under the agreement the purchaser will extend Evergrande Auto a line of credit to support ongoing operations and facilitate development of the group’s EV business. It is not known whether this extends to a resumption of production. The Evergrande plant in Tianjin since production began in September 2022 is understood to have only produced 1,700 Hengchi 5 models up until the end of last year.

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Furthermore the financial report stated that as of 31 December 2023 the asses of Evergrande Auto amounted to 34.851 billion yuan (4.81 billion USD) while liabilities were 72.543 billion yuan (10.01 billion USD). On May 22 this year Evergrande announced that it was required to pay back 1.9 billion yuan (262 million USD) in subsidies due to breaches in agreement.

Editor’s note:

As previously written on the pages of Car News China the  fact that Evergrande ever managed in the first place to produce and sell any Hengchi cars was quite an achievement. Whether this latest deal will be enough to save the company remains to be seen and it comes just weeks after another mysterious deal to rescue an ailing Chinese EV producer. However, that deal to rescue HiPhi would seem to have far more potential as the company has a proven track record and three production cars. While Hengchi might have displayed 9 cars back in 2021 it is questionable how close many of them are to production and with time they have become an increasingly less competitive proposition.

Sources: Fast Technology, Zhengguan News

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  1. “….as of 31 December 2023 the asses of Evergrande Auto amounted to 34.851 billion…”

    That’s a seriously huge number of asse’s, but can they make cars too?


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