China Auto Roundup: Creditors of Evergrande EV Units Start Bankruptcy Process, Electric Cars Drain Auto Insurers

China’s rapidly growing new-energy vehicle (NEV) market is presenting a challenge for the country’s insurance industry. Insurers are losing money on NEVs due to strict pricing regulations that prevent them from setting premiums high enough to cover the risk. NEVs, such as Xiaomi Corp.’s SU7, retailing for 215,900 yuan ($29,735), cost about the same to insure as significantly more expensive combustion-engine vehicles. This is because NEV owners are about twice as likely to file a claim [para. 1].

Seres Group Co. Ltd. is set to become the second Chinese automaker to invest in Huawei Technologies Co. Ltd.’s smart car unit. The details of this investment, including its size and the specifics of the transaction, are still being finalized. This investment will see Seres take a stake in Yinwang Intelligent Technology Co. Ltd., a Huawei subsidiary, to support its goal to become a leader in automotive intelligence driving systems and components [para. 2].

Creditors of two subsidiaries of China Evergrande Group’s electric vehicle unit have started bankruptcy proceedings. Evergrande New Energy Vehicle (Guangdong) Co. Ltd. and Evergrande Smart Automotive (Guangdong) Co. Ltd. received a notice from a local court about a bankruptcy and reorganization application. This development led to a 9% plunge in the stocks of their parent company, Hong Kong-listed China Evergrande New Energy Vehicle Group Ltd. [para. 3].

WeRide Inc., a driverless technology startup, has filed for what could be the largest U.S. IPO by a Chinese company since Didi Global Inc.’s listing in 2021. This IPO comes with potential legal and operational risks linked to its operations primarily based in China. Although WeRide provided no specifics on the number and price range for its American depositary shares, Bloomberg News reported that the company plans to raise up to $500 million. This move follows a period of reduced U.S. listings by China-based companies due to regulatory crackdowns [para. 4].

China is boosting subsidies via a 300 billion yuan stimulus program to encourage consumers to trade in old vehicles for new ones. The program, financed through ultra-long-term special government bonds, aims to stimulate consumption by encouraging the replacement of outdated industrial equipment and consumer goods, including automobiles. The initiative also targets the replacement of other items like shipping vessels, trucks, agricultural machinery, new energy buses, and power batteries [para. 5].

China Grand Automotive Services Group Co. Ltd., one of the country’s largest auto dealers, has responded to claims that it is reluctant to rescue its stock from delisting. Critics argue that with over 10 billion yuan in monetary capital available, Grand Automotive should be able to repurchase shares to boost its stock price. However, the company explained that approximately 85% of its cash is restricted capital used as margin deposits and for bank loans. Grand Automotive’s stock, suspended from trading on the Shanghai Stock Exchange since July 18 after closing at 0.78 yuan per share, risks forced delisting if its share price remains below 1 yuan for 20 consecutive trading days [para. 6].