Is it over before it really started? Evergrande Auto's share price currently only knows one way. And that leads south. Since the high in February, the share price has more than halved. Gone are the days when Evergrande was worth more than GM or Ford. And there are other worrying developments.
Evergrande presented 9 models for the first time at the Shanghai Auto Show. It could have been the first big appearance of the Hengchi brand, there were 3 world premieres alone. Hengchi numbers 7, 8, 9 were shown, two sedans and one SUV. The media response in China remained strangely muted. There was a Hengchi live show on TV that lasted about 30 minutes. Selected interested parties were allowed to drive an electric SUV on a set course and dutifully praised the product and its qualities.
Share price more than halved
There were no details on the three world premieres, technical data, prices or even statements on market entry. The press largely ignored the appearance, which must always be seen as a bad sign in China. Evergrande Auto's share price has only found its way down since April, hitting a new low of 35 Hong Kong dollars (approx. € 3,70) yesterday.
The imagination of a possible Tesla challenger has given way to skepticism. Will Evergrande Auto take over with the development of 14 model series in the same period? An undertaking that not even the established competition dares to undertake. Will it be possible to bring Hengchi 1 onto the market in the targeted quality at the beginning of 2022? Because the company has no expertise whatsoever in the production of cars. And how do you intend to finance the expansion that will require billions in the medium term?
Meanwhile, Evergrande's parent company remains under the scrutiny of the authorities and under pressure to reduce debt. As before, the group has to send regular business data to the central bank report, the scope for investments and excursions into new business areas is limited. The administration has put a stop to speculation with real estate and living space, the situation is uncomfortable.
Investigation at the wrong time
Authorities are currently investigating a US$15,63 billion transaction between Evergrande and Shengjing Bank. The bank is small and actually insignificant, but the transaction is strikingly high. Explosive: Evergrande holds a 36,4% stake in the institute, the authority does not provide any details about the type of transaction.
The news of the investigation into the transaction alone was enough to cause the Evergrande Auto share (HK 708) to plummet by 7,89% yesterday. Has the Evergrande Auto hype been over before the first product has found its way to the customer?
In Sweden the development is being followed closely. NEVS is dependent on the flow of money from China, the company does not generate any significant amount of its own funds. Ongoing costs and investments are covered by transfers from Evergrande, a marketable business model or product is not within reach even in year 9. The further development at Evergrande Auto is also crucial for the future at Stallbacka. If Evergrande wobbles, a storm can approach in Sweden.