evergrande’s ev unit to sell new shares worth us$64 million to drive hui ka-yan’s pivot away from property sector

China Evergrande New Energy Vehicle Group, the electric vehicle (EV) arm of embattled developer China Evergrande Group, said on Wednesday that it would sell HK$500 million (US$64.2 million) worth of new shares to fund the production of its Hengchi EVs.

In a filing to the stock exchange, the Hong Kong-listed company said it would sell 174.83 million new shares, or 1.76 per cent of its enlarged share capital, in a top-up placement to its controlling shareholder, Evergrande Health Industry Holdings. At HK$2.86 apiece, the new shares will be at a discount of about 20 per cent on its closing price of HK$3.57 a share on Tuesday.

“The proceeds received … will be dedicated to the research and development and production of the company’s new energy vehicles, paving the groundwork for putting Hengchi new energy vehicles into production,” the company said in its filing.

Wednesday’s announcement follows a speech made to staff by Evergrande founder Hui Ka-yan last month, in which he said the company would move away from property development and make its EV venture its primary business within 10 years.

China Evergrande New Energy Vehicle Group has filed for a sales approval for its Hengchi 5 sport-utility vehicle, its first EV, according to data released by China’s Ministry of Industry and Information Technology on Wednesday.

The carmaker has previously said it planned to start producing EVs in the fourth quarter of this year and delivering them to customers early next year. It has so far unveiled nine models under the Hengchi brand, which means “never stop’, but none are in production yet.

In September, even as China Evergrande’s liquidity crisis was escalating, a fleet of 53 cars comprising five EV models – the Hengchi 1,3,5,6 and 7 – is said to have completed a 70-day road test covering half a million kilometres. The tests were carried out in Turpan in China’s northwestern Xinjiang province and in Qionghai, in the southern island province of Hainan, according to a post on the company’s official WeChat account.

China Evergrande, which owes 1.97 trillion yuan (US$305 billion) in debt, loans and contractual obligations to suppliers, faces the risk of default and legal action. Its carmaking subsidiary reported a first-half loss of 4.8 billion yuan on the heels of a US$75 billion decline in market capitalisation in July.

The company said in March this year that it aimed to sell more than 1 million vehicles by 2025 and more than 5 million by 2035.

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