The president of Evergrande’s electric vehicle unit, Evergrande New Energy Vehicle Group (NEV), Liu Yongzhuo, has been detained, according to the company. This marks the second high-profile executive from Evergrande to face investigation in recent months.
Evergrande, once China’s largest real estate developer, has reported over $300 billion in liabilities, becoming a symbol of the nation’s long-standing property crisis. The troubles of its electric vehicle arm, NEV, have been exacerbated by the parent company’s dire financial situation, impacting its cash flow and growth outlook. In September, Evergrande announced that its chairman, Xu Jiayin, was “subject to mandatory measures” by Chinese authorities.
Liu Yongzhuo, born in 1981, also served as the chairman of the board for an Evergrande-owned football team in Guangzhou. The electric vehicle unit, established in 2019 with ambitions to become a leading EV manufacturer, has faced challenges securing liquidity amid its parent company’s financial struggles. Shares of Evergrande NEV were briefly halted on the Hong Kong Stock Exchange on Monday before trading resumed, resulting in a 13% decline in the share price.
The company recently faced the failure of a deal to sell a stake to Dubai-based firm NWTN specializing in clean-energy vehicles. Evergrande NEV began production of its first EV model, the Hengchi 5, in 2022. The company’s shares were suspended for 15 months between April 2022 and July 2023, and its current valuation is approximately $570 million, having lost nearly half of its value in the past five years.
As Evergrande’s financial challenges persist, a Hong Kong court has granted an extension until late January for the company to develop a restructuring plan, potentially leading to liquidation.
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