- Evergrande, China’s second-largest real estate developer, aims to beat Tesla.
- It announced nine different models of electric cars and said it would sell 1 million by 2025.
- But the real estate giant is now $ 305 billion in debt and still hasn’t sold a single car.
In 2020, real estate giant Evergrande presented itself with a daring plan: it was going to conquer Tesla.
The real estate developer has unveiled six models of electric cars, ranging from sedans to minivans to SUVs. He boasted that his cars would have “cockpits” that rival aerospace vehicles and use a new intelligent operating system built into drivers’ homes. Reports have revealed that its vehicles were able to withstand extremely hot and cold temperatures, exciting investors.
At the start of this year, Evergrande Auto’s valuation jumped to $ 87 billion, more than Ford and General Motors.
Mass production would begin in 2021, said the company, which announced three more models in April.
But he still hasn’t sold a single car. Evergrande Auto said in June that auto production was “in its home stretch.” Yet as its parent company recovers from a $ 305 billion debt crisis, its factories are at a standstill and the fate of the burgeoning auto company remains uncertain.
Its stock price fell 96% of its value on Tuesday since its peak in April, and it is heading for a year-over-year loss of $ 740 million for the first half of 2021.
Experts told Insider that while these losses aren’t monumental for Evergrande Group given the sheer scale of its debt, they illustrate how the Chinese developer’s wanton ambition has led it to the precarious situation it is in. found today.
Evergrande boasted of delivering twice as many cars as Tesla when it launched
Each of Evergrande’s nine car models is nicknamed “Hengchi”, followed by a number from 1 to 9. Hengchi combines Evergrande’s name in Mandarin and the Chinese character for “spread quickly” or “speed”.
The concept reflects how quickly Evergrande and its billionaire chairman Hui Ka Yan expected to dominate the global auto market. The company said in June 2020 that it aims to become “the world’s largest and most powerful new energy automotive group” within three to five years.
Six months later, it announced that it would deliver 1 million cars per year by 2025 and 5 million by 2035. By comparison, Elon Musk’s Tesla produced and sold around 500,000 cars in 2020.
Evergrande burst into the auto industry in 2019. Without a functioning auto business at the time, Evergrande used its healthcare arm, Evergrande Health, to buy out a Swedish auto maker.
That year, it spent $ 23 billion to build auto production facilities, according to public tabloid The Global Times.
Now the company has said it has halted projects after failing to pay its suppliers. One of its facilities, just outside Shanghai, showed little sign of activity and had only a few workers hanging around last week, the South China Morning Post reported.
Evergrande’s bold announcements have formed “crazy bubble stories” in the electric vehicle industry, said Zhiwu Chen, director of the Asia Global Institute and professor of economics at the University of Hong Kong.
“Businesses that are good at storytelling and often boast of growing and expanding without limits in China,” Chen told Insider, adding that this was due to the lack of discipline that investors and lenders impose on them. those who manage their funds.
“It’s not just Evergrande that has done this. Many other Chinese companies are doing it too,” he added.
Chen cited HNA Group, Anbang, Alibaba, DiDi, and Bytedance as examples of other Chinese companies that tend to overestimate their capabilities.
Paul Schulte, founder of Hong Kong-based financial analysis firm Schulte Research, said Evergrande’s foray into the electric vehicle business screamed a ‘fear of running out’ as the auto industry boomed .
Both analysts said Evergrande will likely look to sell its auto business in the future, but will likely have difficulty doing so because its investment has not paid off.
“They are going for pennies on the dollar now, and there are still no takers,” Schulte told Insider, noting that Evergrande would likely miss the opportunity to sell to a well-positioned rival,
“If China got along better with the West, a company like Tesla, KKR or Blackstone, or Apollo could come in and see which assets were salvageable. But that’s not going to happen.”