Creditors of Two Evergrande EV Units Start Bankruptcy Process

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What’s new : The electric vehicle (EV) unit of debt-ridden property developer China Evergrande Group was hit by a fresh blow after creditors of two of its subsidiaries asked a court to start bankruptcy proceedings.

Evergrande New Energy Vehicle (Guangdong) Co. Ltd. and Evergrande Smart Automotive (Guangdong) Co. Ltd. received a joint notice from a local court regarding a bankruptcy and reorganization application covering both companies that was submitted by their creditors on July 25, their parent said in a stock exchange filing dated Sunday.

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Creditors of two Evergrande EV subsidiaries initiated bankruptcy proceedings, impacting production and operations.
Evergrande NEV's shares dropped 9% after the bankruptcy application, reflecting investor concerns.
Founded in 2019, Evergrande NEV has faced significant financial difficulties, halting production in early 2023 due to a liquidity crunch.

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Who’s Who

China Evergrande Group: China Evergrande Group is a debt-ridden property developer facing severe financial difficulties. Its electric vehicle unit, Evergrande New Energy Vehicle Group Ltd. (Evergrande NEV), has been hit by bankruptcy proceedings for two subsidiaries. Evergrande's debt crisis deepened in 2021, leading to halted EV production and a Hong Kong court ordering liquidation in January 2023. Evergrande NEV’s shares plunged 9% following the recent developments.

Evergrande New Energy Vehicle (Guangdong) Co. Ltd.: Evergrande New Energy Vehicle (Guangdong) Co. Ltd. is a subsidiary of China Evergrande New Energy Vehicle Group Ltd. Founded in 2019, the company aimed to become a top EV-maker but halted production in early 2023 due to financial troubles stemming from its parent company's debt crisis. Creditors recently asked a court to start bankruptcy proceedings against it.

Evergrande Smart Automotive (Guangdong) Co. Ltd.: Evergrande Smart Automotive (Guangdong) Co. Ltd. is a subsidiary of China Evergrande New Energy Vehicle Group Ltd. The company, along with Evergrande New Energy Vehicle (Guangdong) Co. Ltd., received a court notice regarding a bankruptcy and reorganization application submitted by creditors. This development has significantly impacted their production and operations.

China Evergrande New Energy Vehicle Group Ltd.: China Evergrande New Energy Vehicle Group Ltd. (Evergrande NEV) is an EV unit of China Evergrande Group, once valued higher than Ford and GM. Despite starting EV deliveries in late 2022, it halted production in early 2023 amid a liquidity crisis. Recently, creditors sought bankruptcy proceedings for two subsidiaries, severely impacting operations. The Tianjin plant has been idle since early 2024.

Ford Motor Co.: Ford Motor Co. is a major American automaker, established in 1903. It is known for its influential role in automobile manufacturing and innovation. Ford produces a range of vehicles including cars, trucks, and SUVs. At its peak valuation in April 2021, China Evergrande New Energy Vehicle Group Ltd. was worth more than Ford, highlighting the financial enthusiasm around the EV sector.

General Motors Co.: The article mentions that, at its peak valuation in April 2021, Evergrande NEV was worth more than General Motors Co., even before sales had begun. This comparison highlights the ambitious valuation of Evergrande NEV despite its early stage in production.

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What Happened When

Early 2023：: Evergrande NEV halted production due to liquidity issues.

January 2024：: A Hong Kong court ordered Evergrande to be liquidated after failing to present a debt restructuring plan acceptable to offshore bondholders.

May 2024：: Evergrande Auto mentioned a potential buyer considering taking a 29% stake and extending a new line of credit; the Tianjin plant had been idle since early 2024.

June 2024：: Evergrande was ordered by Chinese authorities to repay about 1.9 billion yuan ($262.2 million) in government subsidies.

July 25, 2024：: Evergrande creditors submitted a bankruptcy and reorganization application for Evergrande New Energy Vehicle (Guangdong) Co. Ltd. and Evergrande Smart Automotive (Guangdong) Co. Ltd.