What’s new : The electric vehicle (EV) unit of debt-ridden property developer China Evergrande Group was hit by a fresh blow after creditors of two of its subsidiaries asked a court to start bankruptcy proceedings.
Evergrande New Energy Vehicle (Guangdong) Co. Ltd. and Evergrande Smart Automotive (Guangdong) Co. Ltd. received a joint notice from a local court regarding a bankruptcy and reorganization application covering both companies that was submitted by their creditors on July 25, their parent said in a stock exchange filing dated Sunday.
The pair are subsidiaries of Hong Kong-listed China Evergrande New Energy Vehicle Group Ltd. (Evergrande NEV), whose shares plunged 9% Monday.
The creditors’ application “has a material impact on the production and operating activities” of Evergrande NEV, the filing said.
The background: Founded in 2019, Guangdong-based Evergrande NEV once boasted of its ambition to become the world’s biggest EV-maker. At its peak valuation in April 2021, it was worth more than Ford Motor Co. and General Motors Co., even before sales started. It began delivering electric sport utility vehicles in late 2022. Its Tianjin plant only produced 1,700 Hengchi 5 EVs in 2023.
But the carmaker halted production in early 2023 due to a liquidity crunch as its parent’s debt crisis deepened. Evergrande, one of China’s largest developers, has been mired in a debt crisis since 2021. In January this year, a court in Hong Kong ordered the company to be liquidated after it failed to come up with a debt restructuring plan that offshore bondholders would agree to.
In May, Evergrande Auto said that a potential buyer was considering taking a 29% stake in the company and might also extend a new line of credit. The company said its Tianjin plant has been idle since early 2024.
In June, it was ordered by Chinese authorities to repay about 1.9 billion yuan ($262.2 million) in government subsidies due to its failure to meet contractual obligations.
Contact reporter Ding Yi (yiding@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)
