The one with a short suspension of trading for a few days$EVERG VEHICLE (00708.HK)$Finally, the specific reason for the suspension of trading was revealed: Recently, the subsidiary Evergrande New Energy Vehicle Investment Holding Group Co., Ltd. was requested by the relevant local government to cancel the investment cooperation agreement and refund the various rewards and subsidies already issued totaling about 1.9 billion yuan.

Regarding this emergency, Evergrande Motor said that currently the relevant subsidiary plans to send a letter to the relevant local administration department to coordinate. At the same time, Evergrande Motor admits that if the requirements in the above letter are finally implemented, it will have a significant adverse impact on the financial status and operations of the company or various related subsidiaries. The company will actively communicate and handle it properly.

Meanwhile, Evergrande Auto Co., Ltd. will continue to suspend trading until further notice.

The late-night announcement was actually a request to refund 1.9 billion in subsidies and rewards

A thousand cries began. Evergrande Auto, which announced the suspension of trading on May 17 and was awaiting the publication of insider information, finally announced the inside information on the evening of May 22.

Evergrande Motor announced that recently, Evergrande Motor received a letter from the relevant local administration, showing that since April 29, 2019, Evergrande Auto's subsidiary Evergrande New Energy Vehicle Investment Holding Group Co., Ltd. and other subsidiaries have signed a series of investment cooperation agreements with relevant local administrative departments.

Since Evergrande Motor has not fulfilled its contractual obligations in accordance with the relevant provisions of the relevant agreement, the relevant local administrative departments intend to request the relevant subsidiary to cancel the relevant agreement and return the various rewards and subsidies already issued to the relevant local administration departments totaling about RMB 1.9 billion. The relevant subsidiaries are also jointly and severally liable to each other in accordance with the relevant provisions of the relevant agreement.

A reporter from the brokerage firm China inquired about Evergrande Motor's financial reports over the years and found that the company had revealed that it has mainly built production bases in Tianjin, Shanghai, and Guangzhou. After Evergrande announced that it signed a cooperation agreement with the local government to build cars in 2019, Evergrande Motor's government subsidy increase data actually soared sharply, and then went back to zero after the subsequent outbreak of debt risk.

According to the data, in the “deferred revenue” government subsidy section of previous annual reports, government subsidy increases in 2018, 2019, 2020, 2021 and 2022 were: 0 yuan, 1,363 million yuan, 1,194 million yuan, 409 million yuan, and 0 yuan, respectively.

Regarding this emergency, Evergrande Motor said that currently the relevant subsidiary plans to send a letter to the relevant local administration department to coordinate. At the same time, Evergrande Motor acknowledged that if the requirements in the above letter were finally implemented, it would have a significant adverse impact on the financial status and operations of the company or related subsidiaries.

Evergrande Motor said that the company will fulfill its disclosure responsibilities in due course in accordance with the provisions of the listing rules, and require relevant subsidiaries to actively communicate and properly handle it in accordance with the guidelines in the letter.

Experienced deployment failures, losses, and discontinuation of production

On May 17, Hong Kong stock “Evergrande” stocks strengthened, and Evergrande Property rose more than 23%; previously, Evergrande Auto once rose more than 70%, which attracted market attention. Evergrande Motor opened at HK$0.285/share. Before announcing a brief suspension of trading at 10:56 a.m., the price was HK$0.38 per share, up 53.23%.

According to information, Evergrande Group directly holds 58.54% of Evergrande Motor's shares. The predecessor of Evergrande Auto was Evergrande Health. Following the strategic adjustment of Evergrande Group, the company officially changed its name to Evergrande Auto in August 2020; in April 2023, Evergrande Motor completely divested 47 internal health and wellness programs to focus on the car building sector.

Evergrande Motor's 2023 report revealed that by the end of the year, the Tianjin manufacturing base had produced the Hengchi 5 in accordance with market demand. Mass production was carried out in September 2022. A total of 1,700 vehicles were discontinued, falling short of the relevant requirements. By the end of 2023, Evergrande had delivered more than 1,389 vehicles.

Meanwhile, Evergrande Motor said that due to financial reasons, the company arranged a holiday for some personnel and suspended production at the Tianjin plant.

Earlier, after the Evergrande Group debt crisis broke out, Evergrande Group hoped to introduce external capital to activate Evergrande Auto.

On August 14, 2023, the electric vehicle company Newton Group announced that the company will invest 500 million US dollars in Evergrande Motors. However, due to a series of variables in Evergrande Group, the controlling shareholder of Evergrande Auto, the transaction directly prevented the transaction from going smoothly to the end.

On January 8 of this year, Liu Yongzhuo, president and executive director of Evergrande Automobile Company, was taken into criminal detention in accordance with the law on suspicion of breaking the law and committing a crime. On April 5, Evergrande Motor said that the company had not made any further progress in revising the terms of the deal and debt-for-share swaps previously, and the transaction was terminated.

According to the 2023 results, Evergrande Motor's revenue last year was 1.34 billion yuan, an increase of 900.04% year on year; the total net loss was 11.995 billion yuan, a year-on-year decrease of 56.64%. As of the end of 2023, Evergrande Auto had total assets of 34.851 billion yuan and total liabilities of 72,543 billion yuan.

Editor/Somer