AutoBeta(AutoBeta.net)10/12 Report--

On October 11, Evergrande Automobile Strategic Partnership Conference was held in Tianjin production base. At the meeting, Evergrande President Liu Yongzhao revealed the new progress of Evergrande car building, saying that Evergrande has launched a three-month battle to ensure that the first model, the Hengchi 5, will be offline at the Tianjin plant early next year.

Liu Yongzhao said that the company has mobilized core R & D teams and technical elites from Shanghai, Guangzhou, Shenzhen and other places to support, and the Tianjin base has been transformed into a domestic first-class industrial 4.0 high-end intelligent factory. With the full cooperation and strong support of partners, Evergrande vows to ensure the realization of Hengchi production goal with the greatest determination and maximum efforts.

Affected by the news, Evergrande bucked the trend today, rising more than 15% at one point in intraday trading, but by the end of the day it had shrunk to 4%, up 4.56% to HK $3.67, with a total market capitalization of HK $35.9 billion.

It is worth noting that on September 30th, Evergrande New Energy Automobile Investment holding Group Co., Ltd. changed its industry and commerce, and its registered capital increased from about US $2.015 billion to US $2.515 billion, an increase of about 24.81%. Data show that Evergrande New Energy vehicle Investment holding Group Co., Ltd. was established in January 2019, formerly known as Evergrande New Energy vehicle Co., Ltd., the scope of business is to invest in areas where foreign investment is allowed by the state (limited to foreign-invested enterprises). According to equity penetration information, the company is indirectly wholly owned by Evergrande New Energy vehicle Holdings (Hong Kong) Co., Ltd.

Why is the first offline model Hengchi 5? According to Evergrande auto production capacity planning, Hengchi 5 positioning A-class SUV, the price will be less than 200000 yuan, standard models include BMW X1, Audi Q3, Mercedes-Benz GLAs and other luxury entry-level models. Evergrande invited the media to test-drive the model at this year's Shanghai auto show. In September this year, a group of Hengchi No. 5 test spy photos taken in Shenzhen were exposed on the Internet, proving that the test of the new car is still in progress.

In addition, according to previous media reports, a number of Evergrande employees said that their department would continue to take a holiday until the end of October after notifying the National Day. Research and development personnel unrelated to Hengchi 5 and Hengchi 6, as well as most of the production staff from Shanghai and Guangzhou Nansha manufacturing bases, will take part in the rotation. Compared with other models, both Hengchi 5 and Hengchi 6 are positioned as entry-level models with a price of less than 200000 yuan. As the first listed models, it may be easier for consumers to accept them.

Why Tianjin factory? It is understood that Evergrande has factories and research institutes in Tianjin, Guangzhou, and Shanghai, but compared with Guangzhou and Shanghai, the Tianjin base has dual qualifications for new energy vehicle production issued by the National Development and Reform Commission and the Ministry of Industry and Information Technology, and has all the conditions needed for mass production, so Evergrande transferred its strategic center to the Tianjin base. Data show that in October 2018, the national energy new energy production project was approved by the Ministry of Industry and Information Technology, becoming a new energy vehicle enterprise with "dual qualifications" of the National Development and Reform Commission and the Ministry of Industry and Information Technology. After holding Tianjin Guoneng Automobile, Evergrande also obtained the automobile production double qualification, but this production qualification can only be used in Tianjin. The current production equipment of the Tianjin factory is designed according to the Guoneng "NEVS 93" model. If it is used to produce Hengchi 5, Hengchi may need to transform the production line.

However, although Evergrande threatened to "work hard for three months to ensure that Hengchi 5 will be offline early next year," the debt problem of Evergrande Group, the holding company, has also added a lot of uncertainty to Evergrande's mass production. In order to solve the debt crisis, China Evergrande announced that it is contacting several potential independent third-party investors to discuss the sale of some of its assets, including, but not limited to, the sale of some interests of the company's listed subsidiaries, China Evergrande New Energy Automobile Group Co., Ltd., and Evergrande property Group Co., Ltd., but so far no new progress has been made, and Evergrande also admitted that If no progress is made in the introduction of the above strategic investment or the sale of potential assets in the short term, it will lead to a lack of further capital investment in the company, which is expected to affect the daily operation of the company. The payment of wages or other expenses of the employees of the company continues to deteriorate, at the same time, it affects the progress of research and development of new energy vehicles, and has a significant negative impact on the mass production of new energy vehicles. In addition, Evergrande, which is regarded as a high-quality asset, has also been sold off by a number of allies due to the Evergrande Group debt crisis, including China reputation Group, Italian Horse International and so on.

According to the financial report in 2020, Evergrande's cumulative investment in new energy vehicles has reached 47.4 billion, of which 24.9 billion is used for the purchase of core technology and R & D investment, and 22.5 billion for plant construction. According to statistics, from 2018 to 2020, Evergrande's losses were 1.428 billion yuan, 4.426 billion yuan and 7.74 billion yuan respectively. In addition, in the first half of this year, Evergrande accumulated losses of more than 15 billion yuan.

Evergrande has said that Hengchi is in the stage of mass production, but the company still faces the challenge of cash flow and lacks further capital investment in the short term, so the timetable for mass production of new energy vehicles may need to be postponed. On September 24, Evergrande issued an announcement saying: "in the face of a serious shortage of funds." In view of the liquidity pressure, the Group has suspended some of its daily expenses and related suppliers have suspended supply. In view of the above difficulties, challenges and uncertainties in improving liquidity, the Group cannot guarantee that it will continue to meet its financial obligations under the relevant contracts. " As of the date of announcement, the Group has not made significant progress in resuming work for some projects. On September 26, Evergrande announced that it had decided to terminate the proposed issuance of RMB shares after careful consideration.

Xu Jiayin once summed up Evergrande's road of "changing lanes and overtaking" with "buy, cooperate, circle, big and well", hoping to become the largest and most powerful new energy automobile group in the world in 3-5 years. At this year's Shanghai Auto Show, Evergrande President Liu Yongzhao also said that "Hengchi will start trial production in the fourth quarter of this year and deliver it on a large scale next year." Evergrande aims to achieve annual production and sales of more than 1 million vehicles by 2025 and more than 5 million by 2035.

From the current point of view, Evergrande's goal to achieve there are still many variables. Fu Yuwu, honorary director of the Chinese Society of Automotive Engineering, once said that he is not optimistic about the entry of real estate companies into the automotive field, especially the inherent law of the development of automotive products, as a technology-intensive industry, whether electric or intelligent, when facing subversive technological changes, all enterprises are facing unprecedented challenges. in comparison, Evergrande lacks technology accumulation and does not have a deep understanding of the automobile industry. There is no innovation team, and at a time when there are big problems with capital, the chances of success are slim.

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