Evergrande Auto confirms talks - warns of record loss

The Evergrande Group today confirmed the talks on the sale of the auto division. It remains to be seen whether it will be a complete sale. Evergrande seems to prefer partners and partial sales to further develop the auto business. It is unclear whether Evergrande can enforce its own ideas. Because the company is not in a good negotiating position. Regardless of this, the development was positively received by the stock exchange.

Ceremony at the start of the summer test drives in front of the Evergrande plant
Ceremony at the start of the summer test drives in front of the Evergrande plant

Record loss in the first half of the year

The share (HK 0708) went out of the market with a plus of over 8% and continued the positive development of the previous days. Simultaneously warns Evergrande faced a record loss for the Auto Department. For the first half of 2021, the group expects a loss of US $ 740 million. The numbers would be a significant increase in losses from last year when a deficit of $ 377 million was incurred over the same period.

Confirmation of the sales negotiations of the Auto Group
Confirmation of the sales negotiations of the Auto Group

The losses are generally not a surprise. Evergrande invests significantly in modern car factories and new models. Money is also flowing to Sweden, where NEVS provides development services for Evergrande Auto. Against this background, the record loss is impressive with regard to the future, assuming that the funds are mainly used for research, development and the construction of new plants.

Research and development are not the biggest item

A closer look at how the losses were made up is helpful. He puts the sums in a different light.

The numbers for the last year (2020) are revealing. The losses, which were already high at that time, are made up as follows: The costs for research, development and advertising add up to US $ 351 million. Depreciation was reported at US $ 160 million. But the biggest item is different. Interest payments on shareholder loans are the most significant at $ 423 million.

3 thoughts on "Evergrande Auto confirms talks - warns of record loss"

  • No car has been produced or sold yet, and that's the big drama. I take bets if a hengchi will ever be produced.

  • What a thriller ...

    Interesting ratio of interest payments to the rest. Apart from that, a surprisingly small 2020 budget for R&D. In view of Hengchi's large model range in the pipeline and full-bodied announcements that it wants to become the technology and at least national market leader, I would have expected a real blockbuster.

    If you announce around 1.000 sales centers and build up appropriate production capacities, the annual amount of US $ 351 million corresponds to only a few hundred dollars per vehicle. That's a mess and not a mess when it comes to R&D ...
    Especially for a startup that is currently working on the market maturity of its first but broadly diversified generation of vehicles.

    Is it all just a backdrop for high interest rates and capital gains? Really exciting ...

    China, quo vadis? ? ?

  • That reminds of the early days of Tesla. High investment needs meet sales that are still too small. But Tesla also had a different market situation ahead of them - so acted as a pioneer. Hmm, other Chinese brands are a lot further and more established.

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