Evergrande's 5-Year Car Making Venture Ends with Over $110B Loss and No Last-Ditch Funding
When it comes to the hottest investment industry at present, new energy vehicles must be considered one of them. Recently, the strong sales of Lei Jun's Xiaomi cars have brought the industry back into the public spotlight. At this time, Xu Jiayin and his Evergrande Auto, who have been silent for a long time, have returned to people's vision in a different way, attracting much attention. So, what exactly happened to Evergrande Auto? And what made the investors who had agreed to lend a helping hand leave disappointedly?
Foreign capital terminates strategic investment
In the emerging field of new energy vehicles that has developed to today, I think we can clearly see that there are already several joys and sorrows among the new forces in car manufacturing today.
Unlike other manufacturers, Xu Jiayin did not follow the path of everyone else, but instead took his own path, always appearing to be independent.
Different from Lei Jun's Xiaomi car sales recently, which have attracted public attention, Xu Jiayin has relied on the "life-saving money is gone" to return to the hot search again, which reminds everyone that Xu Jiayin is also a member of the car manufacturing army.
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Of course, in terms of attracting attention and spreading effects, Xu Jiayin and Evergrande Auto are still quite explosive existences, not losing to Lei Jun who sold 90,000 SU7s in one day.
Just recently, they first issued an announcement stating that their important cooperation with Newton Group has been temporarily terminated.
Then they said that there is no further plan to proceed with the transactions they were preparing to do with this group, and the matter of converting bonds into stocks.This news is no joke for Evergrande Auto. It's important to remember that Newton Group was once seen by many as the savior for Evergrande Auto, with the belief that they could help them turn things around. However, it now appears that this seemingly beautiful expectation has been brought back to reality.
In that announcement, Evergrande Auto was very vague about why Newton Group would completely abandon the cooperation. Nevertheless, we can still discern some clues from it, and this matter is indeed worrying for what Evergrande Auto will do next.
I recall that in August last year, Evergrande Auto was excited to announce that they had received the first strategic investment of $500 million from Newton Group, with an additional 600 million yuan in transitional funds also about to be in place.
Now, these important funds have gone down the drain, leaving people with no confidence in the future of Evergrande Auto at all. Looking back, Evergrande Auto originally planned to invest this money into their manufacturing plant in Tianjin to ensure the normal production of the Hengchi 5, as well as the gradual mass production of the Hengchi 6 and Hengchi 7.
Moreover, Newton Group also intended to help Evergrande Auto expand into foreign markets, aiming for them to export 30,000 to 50,000 Hengchi cars to the Middle East region annually. Unfortunately, this grand plan ultimately failed due to various reasons.
Although people in the market had high expectations for Newton Group, thinking it could become the savior for Evergrande Auto, the reality is that this might just be wishful thinking.
The cooperation between Newton Group and Evergrande Auto was actually quite rocky, which eventually led to the complete abandonment of that strategic investment. This is indeed very detrimental to the future of Evergrande Auto, causing many people to be concerned about their prospects.Internal Issues Hamper Investment
This news is bad for Evergrande, but it also indirectly shows that Newton Group indeed has a unique vision in investment. The prerequisites they proposed for investment have been confirmed one by one by subsequent events, almost like a prophecy.
Remember on the evening of September 28, 2023, China Evergrande suddenly issued an announcement on the Hong Kong Stock Exchange, stating that their boss and chairman of the board, Xu Jiayin, had been taken away by the relevant authorities due to some wrongdoing.
This news shocked everyone and directly led to the temporary suspension of Evergrande's stock trading for the time being, until they issue another notice.
Moreover, not long after Xu Jiayin's incident, other senior management personnel also began to have problems one after another, which all became negative factors for Newton Group's investment.
On the very day Xu Jiayin was taken away, which was exactly six days ago, China Evergrande also had a hiccup. They said that their negotiation meeting with the creditors was postponed indefinitely.
The reason they gave was that the income from selling houses did not reach the previously estimated amount. Therefore, based on the current situation of the company and discussions with the creditors, they felt the need to carefully review the restructuring terms again to better accommodate the company's current situation and what people want.
This change has made the future of China Evergrande's debt restructuring increasingly unclear.
However, unfortunately, the story is not over yet. At the beginning of this year, the Hong Kong High Court officially confirmed that China Evergrande had gone bankrupt.
This is undoubtedly a double blow for Evergrande and its founder Xu Jiayin. Then, that night, another announcement was made, stating that Evergrande and its main responsible person were punished by China's Securities Regulatory Commission for fraudulent financial issues, including fines and delisting.In the case, Evergrande was fined 4.175 billion yuan, Xu Jiayin and others suspected of serious illegal activities were also punished accordingly, and were banned from entering the stock market for life.
With this series of events, Newton Group began to consider abandoning their investment decision, started to re-evaluate their investment risks, and then the transaction with Evergrande was temporarily halted.
Subsequently, Evergrande Auto announced that they were willing to renegotiate some details of the original transaction plan with Newton Group.
However, just nine days later, Evergrande Auto announced that the share subscription agreement and debt-to-equity subscription agreement signed with Newton Group had expired automatically at the end of last year.
Although the agreement was gone, Evergrande Auto still stated that they were discussing the important terms of the transaction with Newton Group and there was still a chance to find a new agreement or revise the original one.
Until recently, Newton Group officially confirmed that they would no longer be involved in Evergrande's mess.
Not only Evergrande
Last year, the domestic new energy vehicle field was full of twists and turns. In addition to Evergrande mentioned above, two well-known joint venture car brands also plan to withdraw from the Chinese market, one is GAC Acura, and the other is the famous Mitsubishi Motors.
It should be noted that these two companies, which originally held an important position in the domestic market, are now waving goodbye.
Moreover, as Honda's luxury sub-brand, GAC Acura was actually very popular in the market before, but unexpectedly, in the end, they had to withdraw from the Chinese market.Let's talk about Mitsubishi Motors. Its performance in the Chinese market has been less than satisfactory, and with the pressure of strategic adjustments, it's reasonable for them to choose to leave completely.
In addition to these companies that were once thriving in the market, some domestic brands from their own countries have also failed to escape this storm.
For example, Skyline Auto, Ziyoujia, Aiways, and WM Motor, among others, have all encountered various problems, with some even on the brink of collapse.
Firstly, let's talk about Skyline Auto, which has faced a severe shortage of funds, to the point where they had to halt their production lines; then there's the brand Ziyoujia, whose official website has been shut down, most likely indicating that their dream of manufacturing cars is unlikely to continue.
There's also Aiways, a newcomer that could have become a leader in the industry, but now it's facing a huge crisis, with some employees' salaries being delayed for a long time.
Lastly, WM Motor has filed for bankruptcy restructuring, even earlier than Evergrande Auto.
In addition, there's the once-famous Evergrande Auto, which was hailed as "wealthy and powerful" and "newcomer in car manufacturing."
Since their boss was arrested, the company has been in chaos, with high-level executives facing issues one after another, coupled with their losses of hundreds of billions of funds, making the future of Evergrande Auto very uncertain.
Although the company is still trying to find solutions, new car production has now come to a standstill, which worries many people about how they will cope with the more severe market environment in the future.
You might wonder what's going on here. In fact, it's quite simple: it's because the competition in the new energy vehicle market is becoming increasingly fierce, and consumers' demands for vehicles have undergone significant changes.If businesses that cannot keep up with these changes do not quickly enhance their competitiveness, they will face the elimination of the times. On the contrary, this may provide a new opportunity for automobile brands that are both powerful and innovative. As long as they can continuously improve product quality and service levels, they can capture the hearts of consumers.
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