Evergrande joins charge to make electric cars

Debt-laden property developer Evergrande has changed gears from property into the electric vehicle market.

The Evergrande Center building in Shanghai. China's troubled property giant is struggling under a mountain of debt. Picture: Hector Retamal/AFP

Plans to reorientate the debt-laden property developer China Evergrande Group’s business away from property and towards the electric vehicle market drove its shares up to 6 per cent higher.

The share price of Evergrande’s electric vehicle division, which was only founded in 2019, jumped 11.4 per cent, after the statement by the company’s chairman. According to state media, Hui Ka said that the group intended to make its electric vehicle division its main business within a decade.

Last month, the division warned that it was seeking new investors and asset sales, and that without either it might struggle to pay salaries and cover other expenses.

While the move would help Evergrande reduce its debt by gradually scaling down its massive undeveloped land holdings, Raymond Cheng, the head of China research at CGS-CIMB Securities, said that it was unclear how it would affect the company’s planned disposals including stakes in the electric vehicle unit.

Evergrande is one of the largest property developers in China and its shares have fallen dramatically this year because of its indebtedness. The group has liabilities of about dollars 300 billion and invests in property and media production in addition to electric vehicles.

Fitch and S&P Global, the credit rating agencies, have said that the group is likely to default but Beijing appears committed to preventing a collapse because of the risk to domestic investors and creditors and the potential risk of contagion.

Other property developers such as Fantasia, Sinic and China Property in China, the world’s second largest economy, have all recently failed to meet debt payment obligations.

Last week Evergrande avoided default by meeting its interest obligations on a bond, providing hope for investors and creditors alike. According to Bloomberg the group has $US337.5 million remaining in interest payments that fall due in the final two months of the year, while the developer needs to find $US47.5 million by the end of this week.

The Times