China Evergrande’s EV unit caught unawares by demand for US$268 million of subsidies by local governments

Name: SCMP
Telephone: +852-2680-8888

Evergrande NEV said local governments want to terminate investment cooperation contracts signed in April 2019 and are demanding repayment of subsidies

The company’s total loss in 2023 stood at 12.3 billion yuan (US$1.7 billion) and liabilities at 72.5 billion yuan, according to its financial report

Reading Time:2 minutes

Why you can trust SCMP

Evergrande NEV’s Hengchi 5 electric vehicle is displayed at the Shanghai car show in April 2021. Photo: Bloomberg

Yuke Xiein Beijing

Published: 2:10pm, 23 May 2024

The carmaking unit of troubled property giant China Evergrande has been asked by China’s local governments to return 1.9 billion yuan (US$267.7 million) of subsidies after the company failed to produce cars.

China Evergrande New Energy Vehicle Group (Evergrande NEV), which entered into a series of investment cooperation agreements with local authorities in April 2019, said the governments want to terminate the contracts and are demanding repayment, according to a filing to the Hong Kong stock exchange late on Wednesday night. The company’s shares have been suspended from trading since May 17 until further notice.

If the requests are implemented, they could have an adverse impact on the financial position and operations of the company and its relevant subsidiaries, the filing said, adding that Evergrande NEV was coordinating with local governments to resolve the issue.

08:36

A vanishing fairyland dream: how China Evergrande rose, then crashed

Evergrande NEV is in deep financial trouble, according to its latest annual report. Total comprehensive loss for 2023 stood at 12.3 billion yuan, while liabilities were 72.5 billion yuan. The company produced a total of 1,700 cars and sold only 1,389 units last year.

The troubles at China Evergrande have worsened since it was ordered by a Hong Kong court to liquidate in January. In March, the China Securities Regulatory Commission said the Guangzhou-based developer had inflated its sales by 564 billion yuan (US$78 billion) and profits by 92 billion yuan in the years leading up to its collapse.

China’s securities watchdog slapped a 47 million yuan fine on founder Hui Ka-yan and barred him from taking part in the country’s financial markets for life.

This was followed by a letter from whistle-blowers who alleged that the mainland China and Hong Kong branches of PwC were involved in Evergrande’s auditing fraud, which the accounting firm vehemently refuted. Regulators in mainland China and Hong Kong have both initiated investigations into PwC’s auditing practices tied to Evergrande.