On August 5th, 2024, China’s Evergrande New Energy Vehicle Group (Evergrande Auto) announced that its two subsidiaries – Evergrande New Energy Vehicle (Guangdong) Co., Ltd. and Evergrande Smart Vehicle (Guangdong) Co., Ltd. have entered into bankruptcy reorganization proceedings.
The announcement was made by Evergrande Auto on the Hong Kong Stock Exchange website, stating that the relevant local court held a hearing on August 2nd regarding the bankruptcy reorganization of the two subsidiaries, with the court ruling that they should enter the bankruptcy reorganization process.
Earlier on July 28th, Evergrande Auto had announced that both Evergrande New Energy Vehicle (Guangdong) Co., Ltd. and Evergrande Smart Vehicle (Guangdong) Co., Ltd. had received notification letters from the relevant local court on July 26th. Individual creditors of the subsidiaries had applied to the court on July 25th for the bankruptcy reorganization of the subsidiaries.
Evergrande Auto indicated that the notification letters have had a significant impact on the production and operation activities of the company and its subsidiaries.
According to Reuters, following the announcement by Evergrande Auto about creditors applying for the bankruptcy reorganization of the subsidiaries, Evergrande Auto’s stock price plummeted by 7% the next day (July 29th).
Both Evergrande New Energy Vehicle (Guangdong) Co., Ltd. and Evergrande Smart Vehicle (Guangdong) Co., Ltd. are indirectly 100% owned subsidiaries of Evergrande Auto, with registered capital of 5 billion yuan and 2.5 billion yuan respectively, engaging primarily in the sale and manufacture of smart vehicles.
As reported by “China Fund News,” as of December 31, 2023, Evergrande Auto had accumulated losses amounting to 110.841 billion yuan, with a loss of about 12 billion yuan in 2023 alone. By the end of 2023, Evergrande Auto’s total assets stood at 34.851 billion yuan, while total liabilities were at 72.543 billion yuan, including loans of 26.484 billion yuan. During the same period, Evergrande Auto’s cash and cash equivalents amounted to only 129 million yuan, far from sufficient to cover its borrowings.
Evergrande Auto is a subsidiary of the mainland property giant Evergrande Group. Following Evergrande Group’s debt crisis and being ordered for liquidation by the Hong Kong court, Evergrande Auto and others have also found themselves in dire straits.