China Evergrande’s EV unit warns it may halt production amid funds shortage

HONG KONG (Reuters) -China Evergrande New Energy Vehicle Group Ltd said on Thursday it may have to halt production of electric vehicles (EVs) if it could not obtain fresh funding, after delivering more than 900 units of its flagship Hengchi 5 model.

The EV manufacturing unit of the embattled developer China Evergrande Group said it was aiming to cut costs through measures such as reducing staff numbers and improving management efficiency.

“In face of the inability to obtain additional liquidity, the Group is at risk of discontinuing production,” it said.

If, however, it could obtain financing of more than 29 billion yuan ($4.2 billion) “in the future”, it aimed to launch a number of flagship models and hoped to achieve mass production, the company said in a statement.

Under that plan, the cumulative unleveraged cash flow from 2023 to 2026 was expected to reach negative 7 billion yuan toa negative 5 billion yuan.

The news comes after its parent, China Evergrande Group, on Wednesday announced plans for the restructuring of its $22.7 billion in offshore debt, which could set a template for distressed rivals in the country’s property sector.

The unit previously said it would start mass production of its second EV model in the first half of 2023 and a third in the latter half of this year.

It had also said it aimed to make 1 million vehicles a year by 2025.

In December, the unit said it was laying off workers and cutting the salaries of some employees as a part of its cost-reduction measures.

The EV unit is key for the transformation plans of Evergrande, once China’s top-selling property developer and now at the center of a deepening debt crisis.

Shares of the unit have been suspended since April 2022.

($1 = 6.8802 Chinese yuan)

(Reporting by Donny Kwok and Anne Marie Roantree; Editing by Stephen Coates)