Evergrande's EV unit loses $80bn in market value as first-half loss spooks investors

Evergrande New Energy Vehicle Group shares slumped as much as 22 per cent on Thursday

Evergrande’s subsidiaries are being punished by investors on concern that the world’s most indebted developer will need to sell assets at a steep discount. Reuters

Shares of China Evergrande Group’s electric vehicle unit are collapsing in Hong Kong, wiping about $80 billion from what was the property developer’s most valuable listed asset.

China Evergrande New Energy Vehicle Group sank as much as 22 per cent on Thursday after its parent said the unit lost 4.8 billion yuan ($740 million) in the first half of 2021.

The EV business’s market value was about $87bn at its April 16 peak, greater than that of Ford Motor and almost four times the capitalisation of China Evergrande itself at the time. Evergrande NEV shares are down 92 per cent since then, the worst performance in the Bloomberg World Index and lagging behind even China’s tutoring stocks.

Evergrande’s subsidiaries are being punished by investors over concerns that the world’s most indebted developer will need to sell assets at a steep discount amid mounting pressure from Beijing. Shares of listed businesses – including the 65 per cent stake it owns in Evergrande NEV – are the most liquid if Evergrande needs to generate cash quickly. Evergrande in May raised $1.4bn from the unit in a heavily discounted share sale.

“It’s very obvious that Evergrande New Energy is short of money,” said Castor Pang, head of research at Core Pacific-Yamaichi International. “Now that the parent company has a liquidity problem, it’s impossible for Evergrande New Energy to meet previous targets for car production.”

The electric car upstart was already a capital-intensive project for Evergrande chairman Hui Ka Yan, who funnelled billions of yuan into the business in an attempt to make it “the world’s largest and most powerful new energy vehicle group” by 2025. Previously known as Evergrande Health Industry Group before a name change last year, the company still generates the majority of its revenue from its health business.

Speaking on an earnings call in late March after Evergrande NEV’s full-year loss for 2020 widened by 67 per cent, Mr Hui said the company planned to begin trial production of cars at the end of this year, delayed from an original timeline of last September.

This month, Evergrande said it was in talks with “several independent third-party investors” to sell stakes in the electric vehicle and property services subsidiaries. It is selling a Hong Kong development project at a loss, sources said this week.

Almost 93 million Evergrande NEV shares changed hands on Thursday, about seven times this year’s daily average. The stock closed down 19 per cent at HK$5.18 ($0.66), the lowest price since March 2020.