China Evergrande New Energy Vehicle Group Ltd, the electric vehicle (EV) subsidiary of the troubled China Evergrande Group, warned on Thursday that it might have to cease production if it cannot secure new funding.
The announcement comes after the company delivered over 900 units of its Hengchi 5 model. The firm is now focusing on cost-cutting measures, including reducing staff and enhancing management efficiency.
The EV unit stated, "In face of the inability to obtain additional liquidity, the Group is at risk of discontinuing production." However, it added that if it could secure more than 29 billion yuan ($4.2 billion) in financing "in the future," it would launch various flagship models and aim for mass production.
The company's projected cumulative unleveraged cash flow for 2023 to 2026 would range between a negative 5 billion yuan and a negative 7 billion yuan under this plan.
This development follows the China Evergrande Group's announcement on Wednesday regarding the restructuring of its $22.7 billion offshore debt. The move could serve as a model for other struggling firms in China's property sector. The EV subsidiary had previously planned to begin mass production of its second EV model in the first half of 2023 and a third later this year, with a goal of producing 1 million vehicles annually by 2025.
The EV unit, which has been essential to Evergrande's transformation strategy, has seen its shares suspended since April 2022 as the parent company faces a deepening debt crisis.
