On the evening of August 27th, Evergrande Auto released a profit warning announcement stating that it is expected to record a comprehensive net loss of approximately 20.254 billion yuan in the first half of this year, compared with a net loss of approximately 6.873 billion yuan during the same period, with the loss expanding by 194.7% year-on-year. Evergrande Auto said that the increase in losses was mainly due to the fact that the Evergrande Group has been ordered to be liquidated by the High Court of Hong Kong. The company has increased the impairment provisions for receivables from subsidiaries and associated companies of the Evergrande Group. In the first half of 2024, the full provision of approximately 16.737 billion yuan was made. Currently, Evergrande Auto is experiencing the most difficult survival crisis in its history. Affected by a series of events such as factory shutdowns, bankruptcy reorganization of subsidiaries, and continuous financial losses, it has attempted to complete self-rescue by introducing potential third-party investors, but there has been no result so far. On the evening of June 11th, Evergrande Auto announced that relevant affiliated companies have recently received further administrative decision documents issued by relevant local administrative departments as follows: (1) Three related agreements were terminated; (2) Relevant affiliated companies shall return various rewards and subsidies totaling approximately 1.9 billion yuan that have been issued to relevant local administrative departments within 15 days from the date of receiving the administrative decision. At the same time, Evergrande Auto said that its affiliated company, Evergrande New Energy Vehicle (Tianjin) Co., Ltd., recently received a notice from another relevant department. After verifying the maintenance of production access conditions for new energy passenger vehicle products of Tianjin Evergrande, the department proposed three issues that need to be rectified and proposed to order Tianjin Evergrande to stop the production and sale of new energy passenger vehicle products and carry out rectification. During the rectification period, the department will suspend the acceptance of new product declarations for new energy passenger vehicles from Tianjin Evergrande and the electronic information transmission of product certificates for new energy passenger vehicles, and resume after the rectification is completed and the production access conditions are met through review. On August 5th, Evergrande Auto announced that the relevant local people’s court held a hearing on the bankruptcy reorganization of relevant affiliated companies on August 2, 2024. The relevant local people’s court ruled that the relevant affiliated companies enter the bankruptcy reorganization process. It is understood that the above two companies that were applied for bankruptcy reorganization are the main companies of Evergrande Auto’s vehicle production base in Nansha, Guangzhou. The base was basically completed in 2020, but it has never obtained the vehicle production qualification and has not started production and operation. Evergrande Auto, which has encountered a serious crisis, has attempted to complete self-rescue by introducing potential third-party investors. On May 26th, Evergrande Auto announced that 29% of its shares are about to be acquired by a potential buyer, and the potential buyer will provide a credit line to Evergrande Auto to fund the company’s continued operation and development of the electric vehicle business. However, up to now, the white knight of Evergrande Auto has not yet appeared. On August 26th, Evergrande Auto said that discussions among the potential seller, the potential buyer, and the company are still ongoing, but the potential seller and the potential buyer have not yet entered into a purchase and sale agreement, and the potential buyer and the company have not yet entered into a credit agreement. Evergrande Auto particularly emphasized that this potential transaction is uncertain. Currently, Evergrande Auto has not disclosed its interim results report. As of December 31, 2023, Evergrande Auto has accumulated losses of 110.841 billion yuan, of which it lost approximately 12 billion yuan in 2023. As of the end of 2023, Evergrande Auto’s total assets were 34.851 billion yuan, and its total liabilities were 72.543 billion yuan, with a serious insolvency. Affected by relevant news, the latest share price of Evergrande Auto is HK$0.275, and its market value is only HK$2.98 billion. Since its establishment, only one model of Evergrande Auto, the Hengchi 5, has achieved mass production, with a cumulative delivery of only 1,389 units.
Profit Warning! A certain automaker expects a loss of 22 billion.
