Chinese conglomerate Evergrande Group is banking on its recently formed electric vehicle subsidiary, Evergrande Health, to boost its earnings in the coming years. The electric vehicle company vowed massive improvement in its business after reporting widening losses last year.
Evergrande Health, so-named due to its focus on the healthcare sector before its foray into new energy vehicles, reported a net loss of around 4.4 billion yuan last year. The losses it incurred in 2019 were three times that of what it had reported a year earlier.
Despite the losses, the company stated that it will still become Tesla's main challenger in China once it releases its new energy vehicles to the market. Evergrande Health revealed that it now has 14 new models in the pipeline and the mass production of the vehicles is expected to commence in the next few years.
The company's chief financial officer, Pan Darong, mentioned in a post-results conference that it is still in the early stages of establishing itself as a segment leader. For now, the company is still focusing on acquiring relevant stakes and constructing its manufacturing and R&D facilities. This apparently explains why it has only been reporting losses so far.
Pan assured investors that the losses will only be temporary as income is expected to flow once the first wave of their products hits the market sometime in 2021. So far, the company stated that it has spent more than 20 billion yuan in developing its next-generation products.
It plans to spend another 15 billion yuan this year and another 10 billion yuan in 2021 to ensure the success of its products. The added spending will likely result in continued losses in the next years but sales of its new models should offset the spending as sales ramp up.
Evergrande Health recently launched its EV brand called the "Hengchi," which translates to "run fast forever" in English. The first vehicle to be launched under the new brand will be called the Hengchi 1. The company plans to debut the new energy vehicle within this year with mass production to follow in 2021. Once the model goes into the market, mass production of the other 13 vehicles will then follow.
To hit its scheduled launches, Evergrande Health revealed that it has accelerated the construction of its two production facilities in Shanghai and Guangdong. The two manufacturing facilities are expected to go online during the second half of this year. Both facilities are expected to produce up to 200,000 vehicles per year.
