China’s electric vehicle manufacturer Evegrande Group has failed to pay a number of employees and is behind in paying factory equipment suppliers, sources tell Bloomberg News.
The China Evergrande Group’s electric car unit has missed salary payments to some of its employees and has fallen behind in paying a number of factory equipment suppliers. its core activity.
The cash flow problems mean that China Evergrande New Energy Vehicle Group Ltd. likely miss its target of starting mass deliveries next year as pilot production of electric vehicles at its factories in Shanghai and Guangzhou has been called back, people said, asking not to be identified as they are not authorized to use publicly. to speak.
Most employees at Evergrande NEV are paid at the beginning of each month and again on the 20th, but for some mid-level executives, the second term for September has not arrived, people said. Several equipment suppliers, meanwhile, began withdrawing their on-site personnel from the Shanghai and Guangzhou sites as early as July after payments for machines at Evergrande NEV’s plants were not made.
Those people were there to adjust the production equipment in a timely manner and to solve any problems, according to the people. Now gone, Evergrande NEV is forced to rely on its own employees, who are not that familiar with the equipment, making only a small handful of test cars a day.
Representatives of Evergrande NEV did not immediately respond to requests for comment.
The financial stress of Evergrande’s parent company has reached epic proportions in recent weeks, leading some to describe the potential contagion as the Lehman moment in China as the risks associated with Evergrande threaten to freeze global credit markets. The giant real estate developer, whose assets also include banks and media companies, has $300 billion in debt and is expected to default on bond payments. Whether Beijing will come up with a solution rather than allow a chaotic collapse into bankruptcy is something investors around the world are now looking at.
Evergrande NEV noted during its half-year results last month that it may have to postpone car production unless it can secure more capital in the short term. The company reported a loss of 4.8 billion yuan ($744 million) for the six months ended June 30.
The startup, which pledged in March 2019 to compete against Elon Musk and become the world’s largest maker of EVs within five years, has unveiled nine models under the Hengchi brand, but has yet to mass-produce a single car. It made a big impression at this year’s Shanghai auto show, with all nine prototypes on display and promises of 5 million cars a year by 2035.
However, four models, the Hengchi No. 1, 3, 5 and 6, are still in the so-called Engineering Trial (ET) phase, a preparatory phase that calibrates the standards and quality checks of a car while it has an all-white body. the people said. It typically takes at least six months from completion of the ET stage to mass production.
Like investors in China Evergrande Group, Evergrande NEV shareholders have quickly become disillusioned. Its Hong Kong-listed stock is down 90% this year, a huge drop, as the company used to have a market value greater than Ford Motor Co. and General Motors Co.
Officially founded when Evergrande Health changed its name to Evergrande NEV in July last year, while the company bills itself as an automaker, most of the money it brings in still comes from community health services and aged care facilities.
The EV unit is a small part of Evergrande’s sprawling empire, which includes financial services and a bank, but relies primarily on residential apartment sales.