On September 5, the stock of China Evergrande New Energy Vehicle Group Limited (Evergrande Auto), a subsidiary of the Evergrande Group, suddenly halted trading on the Hong Kong Stock Exchange without explanation. Reports indicated that its Shanghai affiliate had recently been subject to a bankruptcy review. The company’s losses in the first half of the year far exceeded those of the entire year of 2023.
Shortly after the Hong Kong Stock Exchange opened at 9:30 am on the 5th, Evergrande Auto announced the suspension of trading in its stock within about 20 minutes, without providing a reason.
Prior to the trading halt, the stock price had dropped by 5.38%. Simultaneously, Evergrande Auto issued a brief notice to the exchange stating that trading would be temporarily suspended starting at 9:52 am that day.
According to Evergrande Auto’s semi-annual report, the company generated revenue of 383.8 million yuan in the first half of this year, a decrease of 75.17% compared to the same period last year’s 1.54 billion yuan. The decrease in revenue was mainly attributed to a decrease in sales of Evergrande’s Hengchi brand. In the first half of the year, Evergrande Auto incurred a net loss of 20.256 billion yuan, an increase of 133.8 billion yuan compared to the same period last year’s 6.873 billion yuan.
The losses incurred by Evergrande Auto in the first half of the year far exceeded those of the entire year of 2023. Regarding the reasons for the extended losses, Evergrande Auto previously stated that due to the winding-up order issued by the Hong Kong High Court against the Evergrande Group on January 29 of this year, the company prudently increased impairment provisions for receivables from affiliated and joint venture companies under the Evergrande Group. Approximately 16.737 billion yuan was set aside for provisions in the first half of 2024.
As of June 30, 2024, Evergrande Auto had total assets of 16.369 billion yuan and total liabilities as high as 74.35 billion yuan. Cash and cash equivalents were only 39 million yuan.
According to Securities Times, Evergrande Auto’s Evergrande New Energy Vehicle (Shanghai) Limited (Shanghai Hengchi) added a bankruptcy review case on September 4, with the petitioner being Chint Group, handled by the Shanghai Third Intermediate People’s Court.
Shanghai Hengchi, established in 2018, is a member of the Evergrande Auto Group.
Evergrande Auto’s parent company is the mainland Chinese real estate developer Evergrande Group. Evergrande Group was ordered to be liquidated by the court in Hong Kong due to its failure to repay debts. Companies under the group, including Evergrande Auto, are currently deeply mired in debt issues.
In June, Evergrande Auto announced that a local government in mainland China demanded the company return 1.9 billion yuan in subsidies, a move that would pose operational risks to Evergrande Auto. In addition, its subsidiary Tianjin Evergrande was ordered to halt production and sales of new energy vehicles.