Ambitious goals are good. They inspire us to peak performance. Evergrande, majority shareholder at NEVS, is planning big things. In June, finally, the first electric car from the tape run. And in the next 3 years, one would then like to build between 500.000 and 1 million electric cars per year. Our view today goes to China, into the future.
Has big plans EvergrandeBut what is the substance behind it? A look at the works lets us count. Trollhättan has a possible capacity of 150.000 vehicles, Tianjin as well. The unconfirmed plant in Shanghai should be able to produce a comparable volume. That would put annual capacity at 450.000 vehicles. In theory.
Because Tianjin is scheduled to go into operation from June, but it still looks bad for Trollhattan. There would be a lot of investment needed to make the plant ready for production. And that should not be immediately realizable in time. Unless Evergrande - in the style of Tesla - electric vehicles only for final assembly in Sweden deliver. In order to produce one million vehicles a year in 3, Evergrande would have to double the number of plants.
Does Evergrande have the necessary resources?
Much is being written about the high level of indebtedness of China's third largest real estate developer. It is clear that financial figures work well except for very short term liabilities. Core earnings rose 2018, also due to revaluations, by 93.3% to 11,87 billion USD. At the same time, debt at the beginning of the year fell from 109 billion at the beginning of the year to 100 billion at the end of the year. For 2019, Evergrande plans to generate revenues that will lead to sustainable debt reduction. The 2 billion USD that the company wants to invest in electromobility as a first step seems to be low.
The market is in transition
Why is a real estate developer investing in the mobility business? The huge real estate boom in China is considered finished. The housing shortage is largely eliminated, the consequences of the 1 child policy are now noticeable. Not only Evergrande, but also other real estate giants, are looking for the next, big coup.
As such, the future mobility business will be, even if things get more difficult. The administration in Beijing is pulling the strings in promoting vehicles. Subsidies that used to be wasteful are being radically cut by up to 75%. There are reasons for that, because the subsidies brought with them remarkable excesses. Manufacturers cashed for small electrical vehicles that were barely fit for everyday life. Electric cars were sold to fleet operators, but never moved. Again and again the press reports on such "ghost fleets" that are supposed to be everywhere in the country. No wonder, because it is estimated that e-mobility in China between 2009 and 2017 with 36,5 billion USD was subsidized. And that creates desires.
Now everything should be more targeted. The Administration demands more quality from the manufacturers. Greater ranges, lower energy consumption and a top speed of more than 100 km / h. With higher minimum requirements you finally want to get into the 1. League of suppliers and act with manufacturers such as Tesla on equal terms.
Perhaps a key to the success of NEVS and Evergrande lies in Sweden? Gothenburg demonstrated how it works. With the Polestar 2 2020 is the first Swedish-Chinese electric car that could score against Tesla. The development partnership with Koenigsegg could lead in the medium term to a similar success as it CEVT for Volvo and the Geely group. Construction and company headquarters in Sweden, production in China and in Trollhättan. The perspective for the old Saab factory, it would be there.
There are many imponderables. There would be free access to markets, which is no longer as safe today as it was a few years ago. A slowing economy in China, high corporate debt, a weak market for new vehicles. The unresolved question of whether the battery electric car will be the measure of all things in the medium term. It is not without reason that the Chinese administration annually invests large sums in the research and development of fuel cell vehicles.
However, the first proof of seriousness for NEVS under Evergrande is June. Production start, yes or no? And this time please, really, and no staging for the media.