New blow for the Chinese giant. The boss of Evergrande NEV, the automotive branch of the real estate group with astronomical debt, is detained by the authorities, the subsidiary announced on Monday January 8.
The Evergrande conglomerate, former number one in real estate in China and present in a multitude of sectors, is strangled by an abysmal debt, estimated in June 2023 at some 328 billion dollars (300 billion euros today). The group, which is fighting for its survival, is supposed to present a restructuring plan acceptable to its creditors before a hearing scheduled for the end of January in Hong Kong.
Its subsidiary Evergrande NEV gave itself “three to five years” when it was created in 2019 to become the “most powerful” manufacturer in the world in the field of electric cars. But the situation of its parent company has seriously damaged its projects and its cash flow, while sales are struggling to take off.
Evergrande NEV, whose shares have lost half of their value in five years, was suspended from trading for several hours at its request on the Hong Kong Stock Exchange on Monday morning. The firm subsequently announced that its boss was being interviewed by the authorities. “Liu Yongzhuo was placed in detention in accordance with the law because he is suspected of having committed offenses,” Evergrande NEV said in a press release without further details. The stock lost more than 13% when trading resumed in the early afternoon.
Excessive ambitions
Evergrande NEV, penalized by the financial situation of its parent company, indicated in March 2023 that it was fighting for its survival and seeking liquidity to stay afloat. In China, the electric car market is particularly lucrative and many innovative local manufacturers have emerged there in recent years. As such, the Evergrande group had significant ambitions for its automobile subsidiary.
Its founder, Xu Jiayin, wanted to transform his group into an electric champion within 10 years and make this sector his core business, local media reported.
Heavily in debt, Evergrande had notably offered its creditors a stake in its ambitious electric vehicle subsidiary to get its head above water. The conglomerate, now threatened with liquidation, obtained respite from the Hong Kong courts until the end of January to present a restructuring plan.
Its founder, billionaire Xu Jiayin, is under house arrest, according to information published in September by the Bloomberg agency. He is “the subject of coercive measures due to suspicion of a crime or offense in violation of the law” Evergrande immediately indicated, without however specifying the nature of the facts alleged against its founder.
The term “coercive measures” generally refers in China to a form of deprivation of liberty in order to guarantee the smooth running of criminal proceedings.