Now they are dreaming again in Sweden. The hope for an automobile production in Trollhättan is reversed. Following the entry of Evergrande Health Industry Group Limited at NEVS, which is nothing more than a takeover. Evergrande now owns 51% of the shares and represents the majority on the board.
930 million US dollars (818 million €) will be settled in two tranches. The first Payment over 430 million US dollars was on 15. January due, the rest to the 31.01.2019. Thus, NEVS is valued at around 1.6 billion €. Is the company worth this amount?
Yes, says a friend who is closer to the auto industry than I am. On the plus side, there is the plant in Tianjin, which should be almost finished. The production and sales licenses and an electric car, which is at least close to production capability. Also the real estate in Sweden, with a development center and a no longer productive automobile factory. In addition, there would be the announced plant in Shanghai; its status, however, is unclear.
Who is Evergrande?
Founder Hui Ka Yan (also called as Xu Jiayin) is considered to be one of the richest people in China, and Evergrande is believed to be the second largest real estate developer. Around 7 million Chinese live in the company's 30 million apartments. 140.000 people work for Evergrande. The company is successful, but also makes headlines. The Evergrande Group is heavily in debt. According to information from SvD 94 billion in liabilities are expected to have accrued. Tricky: Half of the debt is of a short-term nature and must be refinanced within the next 12 months.
That hits Evergrande in a bad phase. The Chinese real estate market is in icy conditions and the major players are suffering from high levels of debt. In this environment, it is becoming increasingly difficult for the group to raise fresh capital. The company therefore pays high risk premiums, as 2018 pays 13.75% interest on 5-rated bonds.
In October 2018, Evergrande drew attention to itself with an unusual step. Founder Xu Jiayin had to buy $ 1,8 billion from a new $ 1 billion bond draw yourself, to ensure further financing of the group.
The numbers sound disastrous to European ears and doubts arise. However, we have learned that China is playing by its own laws. In addition to facts, the usefulness for the system, networking with the rulers and access to covert financing by government agencies also play an equally important role. And what applies to Evergrande is probably what is valid all over the world: “too big to fail".
The Evergrande Group stands for spectacular investments, as well as for the spontaneous withdrawal from investments. In 2015, the company launched a $ 12 billion investment in solar power plants in China. But she ended her engagement abruptly - pointing to a changed market environment.
Evergrande is pushing into the automotive business
The most spectacular demolition so far was the investment in Faraday Future, In the absolute luxury e-car segment Evergrande 700 wanted to invest millions of US dollars, but withdrew completely unexpectedly the commitment. Since then, the parties are arguing in court. It is about the theft of intellectual property, the allegedly planned cold takeover of the US company FF by Chinese. And FF wants to force Evergrande to the pledged investment. The project itself is initially made of ice.
The investment in FF was one of the building blocks of the diversification strategy of the Evergrande Group announced in 2018. On September 23, 2018, the company announced the strategic cooperation with the Guanghui Group, one of the largest car dealers in the country. Guanghui is expected to sell 6 million new cars annually. Evergande has since become the second largest shareholder in the Guanghui Group.
On the 17. February, shortly after the acquisition of NEVS, the Evergrande High Technology Group also announced the 2. January took place Foundation the Evergrande Smart Charging Technology. A charging technology company to build charging infrastructure for electric cars. Strategic diversification is vigorously pursued.
The two investments in Faraday Future and NEVS AB could not be more different. Farday is anchored in the prestigious and profitable luxury segment. NEVS wants to supply the fleet business with much lower revenue. The futuristic FF91 is a visibly more conservative electric car concept of NEVS.
It begs the question what NEVS stands for, and what Evergrande wants to see in NEVS? In retrospect, the profile of NEVS is blurred. You already wanted to be so much. From Saab's successor to Tesla Jäger, contract manufacturer, hardware supplier to global provider of sustainable mobility.
Hope for Trollhattan?
In the Swedish media they are now dreaming of a production in Trollhättan again. It should be possible before 2020, you can read. But the factory in Stallbacka was looted and parts were shipped to Tianjin. Large investments would be necessary, and the question arises of what should really be done with the historic walls in the age of Industry 4.0. The factory was once the most modern in the GM network. But that was a good 10-15 years ago and no longer relevant today.
Times could get better for NEVS AB. For the first time in a long time there is the missing clear shareholder structure with a simple majority. Evergrande has the leadership, founder Kai Johan Jiang is from now on only in the second row. This could speed up processes, be useful for targeting, and finally a well-defined profile.
300 million US dollars is said to have already been transferred by Evergrande. The group has committed to another billion. The liquidity crisis is over, but not the crisis in the stablebacka. The departure of the Head of development and other service providers in recent weeks can be seen in the context of the acquisition by Evergrande. NEVS founder Kai Johan Jiang has overseen wages and salaries over the past week 3% increased, As a sign that the crisis is over now. Is that enough?
Everything is possible. Nothing is safe.
The consequences of the acquisition of NEVS AB by Evergrande and Xu Jiayin are difficult to assess. For our European understanding, several facts speak against it. However, our Western incomprehension for China and the rules of the system certainly plays a part in this. It may not be wrong to recall another takeover a few years ago.
On the 28. March 2010, a certain Mr. Li Shufu bought the Volvo brand from Ford. He was given little chance in Sweden at the time. He was a blank slate, his background was considered doubtful. He was assumed to be unaffected, incomprehensible to Sweden and to the brand.
The allegedly poor Mr. Li Shufu has invested around 13 billion US dollars in Gothenburg since then. Today the Geely Group is the most successful private car manufacturer in China and with the highest growth rates worldwide. Volvo has gained new strength with Chinese money, London Taxi, Lotus, Proton, Lynk & Co and 9.7% of Mercedes also belong to Li Shufu's empire 9 years later.
One has to wait and see what the time brings. The next weeks, months, years. For NEVS, Evergrande and Trollhättan, everything is possible. Nothing is safe.