Evergrande New Energy Auto has suspended mass production of its sole model, the Hengchi 5, as reported by Reuters. According to two trusted with access to China Evergrande Group’s EV unit, it is assumed to be caused by a lack of new orders. However, the duration of the suspension was not initially apparent.
How does the sputtering economy affect Evergrande New Energy Auto?
Beginning with a positive outlook
Evergrande Group had hailed Evergrande New Energy Auto as essential to its transformational goals. Even the company’s chairman, Hui Ka Yan, promised to make the vehicle project the company’s major line of business in ten years rather than real estate.
By 2025, he forecasted that a million vehicles should be produced annually.
The Chinese property developer announced that mass production of the Hengchi 5 model had begun at a facility in the northern city of Tianjin in the middle of September. It was followed by the company news that it had delivered its first 100 cars in late October.
Notably, a non-binding pre-order for over 37,000 Hengchi 5 units were recorded, the company reported in July.
Encountering hurdles
Mass production suspension
Unfortunately, the mass production of the electric sport-utility vehicle is now halted. The trusted sources, who preferred to remain anonymous because they were not permitted to address the media, stated that the remuneration for October and November has not yet been given to many workers.
Lay off of employees
Two additional sources mentioned that some work was still in progress. According to one of these two, Evergrande New Energy Auto intended to fire 10% of its workforce and stop paying salaries to 25% of its employees for one to three months.
Debt crisis
Evergrande, formerly China’s top-selling property developer, is at the forefront of a worsening debt crisis that has seen a number of developers fail on offshore debt obligations over the past year. In fact, several of them were forced into restructuring discussions.
Starting in June, the Chinese government provided tax breaks and subsidies to encourage the purchase of electric vehicles. Nevertheless, a stuttering economy has contributed to a decline in the largest automobile market in the world.
Consequently, this has a detrimental impact on Evergrande New Energy Auto and its investors.
