Evergrande Group filed for bankruptcy protection in New York, United States, less than a year after the application. Its subsidiaries Evergrande New Energy Automobile and Evergrande Smart Automobile (related affiliated companies) were petitioned for bankruptcy reorganization by creditors in court.
According to reports from the Daily Economic News and Financial Times, on the evening of July 28, Evergrande Automobile announced on the Hong Kong Stock Exchange that its subsidiaries Evergrande New Energy Automobile and Evergrande Smart Automobile (related affiliated companies) received notices from the relevant courts on July 26, 2024. Individual creditors of the related affiliated companies applied for bankruptcy reorganization on July 25, 2024. The above notice has had a significant impact on the production and operation activities of the company and its related affiliated companies.
As for the specific individual creditors, it is currently unknown.
Public information shows that Evergrande New Energy Automobile and Evergrande Smart Automobile are wholly-owned subsidiaries of Evergrande Automobile.
On the evening of June 27, Evergrande Automobile issued an announcement stating that Evergrande Health requested an immediate convening of a shareholders’ meeting by the board of directors and to hold the shareholders’ meeting within the time specified in Article 567 of the company’s articles of association to consider and pass resolutions to appoint Cai Weikang, Liang Jiajin, and Wang Kenan as directors, as well as resolutions to remove executive directors Liu Yongzhuo, Qin Liyong, and any other ordinary resolutions regarding their positions within the company, with immediate effect.
Liu Yongzhuo has been criminally detained by the authorities earlier this year.
This is not the first time Evergrande Automobile has faced negative news.
According to the Securities Times, on June 11 this year, Evergrande Automobile received two relevant notices from local government departments. One notice demanded that Evergrande Automobile and its subsidiary companies return incentives and subsidies totaling 1.9 billion yuan; and the other proposed stopping production, sales, and rectification of the main factory in Tianjin, which serves as Evergrande Automobile’s main production base.
Evergrande Automobile stated that if the above decisions are ultimately implemented, it will lead to the forced recovery of relevant factory land, with above-ground buildings and equipment being used to repay incentives and subsidies, posing a significant impact on the financial condition and operations of the company and its related affiliated companies. Currently, the related affiliated companies intend to apply for administrative reconsideration with the local municipal government.
According to the 2023 annual financial report, as of the end of last year, Evergrande Automobile’s total assets were 34.851 billion yuan, while total liabilities were as high as 72.543 billion yuan, with loans amounting to 26.484 billion yuan. Meanwhile, Evergrande Automobile’s cash and cash equivalents were only 129 million yuan, far from enough to cover the debts.
The Tianjin factory is one of Evergrande Automobile’s important car production bases. By December 31, 2023, the Tianjin manufacturing base had produced 1,700 units of the Everchic 5 based on market demand, with over 1,389 units delivered. Recently, due to funding issues, the group has arranged for some staff to take leave, leading to a temporary halt in production at the Tianjin factory.
In 2021, Evergrande Group faced a debt crisis, owing suppliers, creditors, and investors a total of over 1.96 trillion yuan. On August 17, 2023, Evergrande Group filed for bankruptcy protection in New York, United States. On September 28 of the same year, trading of Evergrande group companies including China Evergrande, Evergrande Automobile, and Evergrande Properties were suspended on the Hong Kong Stock Exchange. On the same evening, Evergrande announced that its founder and chairman Xu Jiayin had been taken into compulsory measures due to suspicion of illegal activities.