Evergrande, EV unit shares climb on signals business shift

by Jonathan Adams
Shares in China

Evergrande gained 6% while China Evergrande New Energy Vehicle Group Ltd rose 17%

Shares in China Evergrande Group and its electric vehicle (EV) unit gained on Monday as the embattled property developer announced a shift to growth of its electric vehicles business from its troubled core real estate operations.

Evergrande, reeling under more than $300 billion in liabilities, averted a costly default last week with a last-minute bond coupon payment, buying it more time to head off a looming debt crunch with its next major payment deadline on Friday.

An announcement by its chairman, Hui Ka Yan, reported by state media on Friday, that it would make its new electric vehicle venture its primary business, instead of property, within 10 years, cheered investors on Monday.

Evergrande gained 6% while China Evergrande New Energy Vehicle Group Ltd rose 17%, although both later trimmed their gains. The benchmark Heng Seng Index jumped 0.1%.

Raymond Cheng, CGS-CIMB Securities’ head of China research, said the business shift makes sense given Beijing’s growing support for EVs and its increased tightening of the frothy real estate sector.

This is the best outcome, if it just focuses on existing developments and maintains the operation, Cheng said.

While the move would help Evergrande deleverage by gradually scaling down its massive landbank, Cheng said it was unclear how it would affect the company’s asset disposal plan.

Founded in 2019, Evergrande’s new vehicle business has yet to reveal a production model or sell a single vehicle. Last month, the unit warned it was still seeking new investors and asset sales, and that without either it might struggle to pay salaries and cover other expenses.

Hui expects property sales will slow to nearly 200 billion yuan ($31.31 billion) per year within the 10-year period, compared to more than 700 billion yuan last year, China’s Securities Times reported on Friday.

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