Shares of Evergrande’s EV Unit Slide After Order to Repay Subsidies
Evergrande Auto said that a local Chinese authority had asked it to repay subsidies and incentives it previously received from local governments
China Evergrande EGRNF 0.00%increase; green up pointing triangle New Energy Vehicle’s shares fell sharply after Chinese authorities ordered the company to repay government subsidies due to its failure to meet contractual obligations, adding to its woes.
Shares of the electric-vehicle unit of property developer China Evergrande Group slid 21% to 34 Hong Kong cents (4 U.S. cents) on Wednesday morning, on track for their largest one-day loss in almost a year.
The selloff came after the company, also known as Evergrande Auto, said late Tuesday that a local Chinese authority asked it to repay about 1.9 billion yuan (US$262.2 million) of subsidies and incentives it previously received from local governments, within 15 days after the company received the official notice.
The Guangzhou-based company said it intends to apply for an administrative review of the decision.
If implemented, the company may face compulsory repossession of the land of some plants, buildings and equipment, which could put further pressure on the company’s finances, Evergrande Auto said.
Evergrande Auto had entered into a series of investment partnerships with local Chinese authorities since April 2019, which helped the company to obtain a few billion yuan worth of incentives and subsidies between 2019 and 2021.
Further, the company said in the filing on Tuesday that another Chinese authority asked its Tianjin unit to stop producing and selling electric vehicles and related products.
The company’s Tianjin factory ceased production at the beginning of the year, and has yet to resume production.
In late May, Evergrande Auto said a potential unnamed buyer could buy a 29% stake in the company. The buyer would also have the option to purchase an additional 29.5% stake.
Evergrande Auto, which once had ambitions of surpassing Tesla and becoming the world’s top EV maker, boasted a market capitalization of more than $80 billion at its peak in April 2021. Evergrande Auto reported a net loss of CNY12.24 billion for 2023.
Parent company Evergrande Group was ordered to liquidate in late January by a Hong Kong court after the property developer failed to reach a restructuring plan with creditors.