Evergrande’s NEV unit plunges on China’s order to refund US$262 million in state subsidies

China Evergrande New Energy Vehicle Group (NEV) plunged by the most in nearly three years, after the Chinese government ordered the unit of China Evergrande Group to return all its state subsidies, adding to the financial woes of the world’s most indebted developer.

Evergrande NEV’s shares plunged by as much as 26.7 per cent in recent trading to 31.5 Hong Kong cents in the city’s stock market, the lowest intraday level in almost a month.

The Guangzhou-based carmaker was ordered to return 1.9 billion yuan (US$261.9 million) it had received as subsidies from various local authorities because it failed to meet its contractual obligations, according to an overnight statement to the Hong Kong stock exchange.

A Hengchi electric car by China Evergrande New Energy Vehicle Group on display at the Auto Shanghai 2021 show in Shanghai on April 19, 2021. Photo: Bloomberg

The company failed to fulfil its obligation to set up a headquarters, and did not meet its production and sales goals, causing a local authority to terminate its April 2019 agreement with Evergrande NEV, according to the statement, which did not identify the authority.

Evergrande NEV has to return the subsidies within 15 days of the notice, or risk losing its assets, including the equipment, factory building and the land allocated to build its car assembly, the statement said.

A refund could “have a material impact on the financial position and operations” of Evergrande NEV or each of the relevant subsidiaries, the carmaker said, adding that it will apply for an administrative review on this decision.

Evergrande NEV’s quandary adds to the financial woes of its parent company, which was ordered to be liquidated by the Hong Kong High Court in January, leaving creditors with pennies on US$20 billion of defaulted offshore bonds.
Evergrande was fined 4.2 billion yuan in March for falsifying its revenue over the years, while its chairman and founder Hui Ka-yan was slapped with a 47-million yuan penalty.

A subsidiary of the carmaker in Tianjin received a separate order to stop producing and selling electric cars, according to a separate statement. Evergrande NEV said it has “actively rectified the issues after the inspection” and intends to appeal against the stop-work order.


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