Property Giant Evergrande Drives Further Into Car Industry

China Evergrande Group plans to pay 14.5 billion yuan ($2.1 billion) for a minority stake in Guanghui Group, deepening the property developer’s involvement in the car industry.

Evergrande will hold a 40.96% stake in the Xinjiang-based conglomerate, after buying 23.87% from existing shareholders for 6.68 billion yuan and providing an additional capital injection of 7.81 billion yuan, the Hong Kong-listed company said in a statement over the weekend.

“In order to promote better corporate development, the Group will commence full strategic cooperation with Guanghui Group to promote the Company’s development in the areas of vehicle sales, energy, real estate and logistics,” Evergrande said.

Evergrande is China’s third-largest property developer by sales, with total assets of 1.77 trillion yuan as of June.

Founded in 1994, the Guanghui Group has businesses in many sectors including energy and real estate, but its biggest revenue generator is the Shanghai-listed unit China Grand Automotive Services Co. Ltd. It operates nearly 800 car dealerships across the country, which sell new and used vehicles in addition to offering car services. In 2017, Guanghui posted a net profit of 3.94 billion yuan on revenue of 176 billion yuan.

The deal is Evergrande’s latest move to diversify its business amid a murky housing market environment as Beijing steps up efforts to cool the sector.

In June, Evergrande announced it would pump $853 million through a health care subsidiary to take a controlling stake of the debt-ridden U.S. electric-car maker Faraday Future. Last month, it said it would fully take over the embattled startup’s China business and open a new operating headquarters in the southern metropolis of Guangzhou.

Evergrande’s Chairman Hui Ka Yan, who in September was named China’s richest man by Forbes, claimed in August that Faraday Future would aim to produce 5 million electric vehicles in the next 10 years. That figure is more than six times the number of new-energy vehicles sold in China last year.

China is the world’s largest auto market and by far the largest electric car market. The government has relentlessly promoted the development of new-energy vehicles, which also include those using hybrid and hydrogen technologies, although it has recently scaled back subsidy support for the industry.

Contact reporter Mo Yelin (yelinmo@caixin.com)