Recently, China’s Evergrande New Energy Vehicle Group Co., Ltd. (Evergrande Auto) was asked by local authorities in China to return a total of 1.9 billion yuan in rewards and subsidies that had been granted to the company.
On May 22, Evergrande Auto issued a public announcement titled “Receipt of Request from Relevant Local Administrative Departments and Continuation of Suspension of Trading,” stating that some of its affiliated companies had signed a series of investment cooperation agreements with local administrative departments starting from April 29, 2019. However, due to the company’s failure to fulfill its contractual obligations, the affiliated companies were asked to terminate the agreements and return approximately 1.9 billion yuan in rewards and subsidies that had been distributed, with joint and several liability.
Evergrande Auto stated that the return of the 1.9 billion yuan in rewards and subsidies “will have a significant adverse impact on the financial condition and operations of the company or its relevant affiliated companies.”
The announcement also mentioned that trading of the company’s stocks on the Hong Kong Stock Exchange had been suspended since 10:56 a.m. on May 17, 2024, and trading would continue to be suspended until further notice.
Evergrande Auto expressed its current plan to communicate with the relevant local administrative departments to coordinate the situation.
According to reports from “First Financial,” if the aforementioned subsidies are to be returned, Evergrande Auto, which has already lost investment funds, will undoubtedly face even greater financial pressure.
Financial reports show that in 2023, Evergrande Auto’s revenue was 1.34 billion yuan, an increase of 900.04% year-on-year. The revenue increase was mainly attributed to sales of automobiles and automobile parts, which grew from 60.63 million yuan by the end of 2022 to 1.46 billion yuan in the reporting period; property sales revenue increased by 1.136 billion yuan. In 2023, Evergrande Auto’s net loss totaled 11.995 billion yuan, a decrease of 56.64% compared to the previous year. The loss included 1.061 billion yuan from discontinued operations (i.e., real estate projects divested), 6.384 billion yuan from non-operating losses such as asset disposal and impairments, and 4.5 billion yuan in operating losses, resulting in a total loss of approximately 37.692 billion yuan.
As of December 31, 2023, Evergrande Auto’s accumulated losses and shareholder losses amounted to 110.841 billion yuan (comparing to 98.906 billion yuan in 2022) and 37.693 billion yuan (compared to 68.651 billion yuan in 2022), respectively.
By the end of 2023, Evergrande Auto’s total assets were 3.4851 billion yuan, total liabilities were 7.2543 billion yuan, including loans of 2.6484 billion yuan; meanwhile, Evergrande Auto’s cash and cash equivalents were only 129 million yuan, far from covering its borrowings.
Due to financial problems, Evergrande Auto is facing immense pressure. The company has arranged for some employees to take leave, and production at its Tianjin factory has been temporarily suspended.
Netizen “Disney Security on the Run” commented on this, asking: “With things going from bad to worse, does Evergrande Auto still have a chance for a comeback?”