Evergrande Auto, one of the major publicly listed companies under the Evergrande Group, reported a staggering net loss of 20.257 billion Chinese yuan in the first half of this year, marking a significant 194.73% increase in losses compared to the same period last year. During the first half of the year, the entire vehicle manufacturing process came to a standstill with no new cars rolling off the assembly lines.
This bleak financial performance was unveiled as Evergrande Auto released its semi-annual report on August 30. The report revealed that the company’s revenue for the first half of 2024 amounted to 383.77 million yuan, down by 75.17% year-on-year. Of this revenue, only 5.54 million yuan was generated from sales of new energy vehicles and components, reflecting a drastic decline of over 95%. The gross profit plummeted to 2.433 million yuan, a decrease of 103.99%. The total net loss surged to 20.257 billion yuan, signaling a substantial deterioration of 194.73%.
Financial data indicated that during the first half of the year, Evergrande Auto delivered merely about 40 vehicles, and the entire vehicle production facilities remained inactive. The company’s factories in Tianjin, Shanghai, and Guangzhou were all suspended. Sales promotions and brand marketing activities were virtually halted. As of June 30, 2024, Evergrande Auto had 829 employees remaining, marking a reduction of 513 staff compared to six months before, and 768 fewer employees compared to a year ago.
The financial report disclosed that as of June 30, 2024, Evergrande Auto had total assets worth 16.369 billion yuan, while total liabilities amounted to a striking 74.35 billion yuan. This liability consisted of loans worth 26.59 billion yuan, trade payables and other outstanding dues of 46.695 billion yuan, and other debts totaling 1.065 billion yuan.
Within the reporting period, Evergrande Auto accumulated a net amount of approximately 58.844 billion yuan in current liabilities. Immediate and non-current borrowings stood at around 13.991 billion yuan and 12.599 billion yuan, respectively, with the company’s cash and cash equivalents amounting to only 39 million yuan.
Evergrande Auto has been embroiled in a series of negative developments recently. In early August, local courts ruled for two of Evergrande Auto’s subsidiary companies to enter bankruptcy reorganization proceedings. In June, due to the failure to meet contractual obligations outlined in agreements with local governments, Evergrande Auto was instructed to reimburse 1.9 billion yuan in incentives and subsidies. The company warned that if the decision were executed, it faced risks such as the compulsory reclaiming of factory lands and using on-site buildings and equipment to repay incentives and subsidies.
According to reports from The Paper on August 31, an independent auditor’s report commissioned by Evergrande Auto revealed that the mid-term financial information was prepared on a going-concern basis, its effectiveness hinging on the outcomes of these measures, which posed significant uncertainties. Given the substantial uncertainties surrounding the company’s future cash flows and its ability to continue operating, the report opined that while appropriate disclosures had been made regarding the mid-term financial information, sufficient audit evidence verifying the group’s ability to fulfill its financial obligations when due had not been obtained. The report concluded that the significant uncertainties related to the going concern had a potential material cumulative impact on the mid-term financial information, to the extent that the auditor did not express a conclusion.
The struggles of Evergrande Auto began in early 2023 when production came to a halt due to funding shortages.