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Evergrande's electric vehicle unit admits there is no certainty it can pay debt

2021-09-25 00:00:00.0 海峡时报-亚洲原网页

SHENZHEN (BLOOMBERG) - China Evergrande Group's electric vehicle unit says there is no guarantee it can meet its financial obligations as it continues to look for strategic investors to inject much-needed capital.

"The group is encountering a serious shortage of funds," the Hong Kong-listed entity said in an exchange filing late on Friday (Sept 24). "In view of the liquidity pressure, the group has suspended paying some of its operating expenses and some suppliers have suspended supplying for projects."

The statement confirmed an earlier report by Bloomberg News that China Evergrande New Energy Vehicle (NEV) had missed salary payments to some of its employees and fallen behind on paying a number of suppliers for factory equipment.

Those cash flow difficulties mean the carmaker, which had ambitions to take on Mr Elon Musk's Tesla in the electric vehicle sector, will likely miss its target to start mass deliveries next year.

Evergrande NEV said on Friday that it is negotiating with potential investors about selling some of its eldercare projects and overseas assets to "improve the group's overall efficiency and to supplement working capital".

The company added, however, that it "remains uncertain as to whether the group will be able to consummate any such sale".

Officially created when Evergrande Health changed its name to China Evergrande NEV in July last year, the company bills itself as a carmaker but most of the money it does bring in still comes from its community health service business and nursing home facilities.

Last month, Evergrande NEV reported a 4.8 billion yuan (S$1 billion) loss for the six months to June 30 and a revenue of 6.92 billion yuan, the vast majority of that - 6.89 billion yuan - from the group's health and aged-care business.

The electric vehicle unit is a relatively small part of Evergrande's sprawling empire, which includes financial services and a bank, but is primarily reliant on residential apartment sales.

Shares in Evergrande NEV tumbled as much as 25.8 per cent on Friday, bringing losses for the year to 93 per cent.

In February, when the stock was at its peak, Evergrande NEV, which has not mass produced a single car, was valued at more than Ford Motor and General Motors.