(Bloomberg) -- China Evergrande New Energy Vehicle Group Ltd. warned it may have to stop making electric cars if it can’t obtain new financing, having delivered just 900 of its much-delayed flagship model.
The company said it is seeking to cut costs by reducing staff numbers and improving management efficiency. However, “in face of the inability to obtain additional liquidity, the group is at risk of discontinuing production,” it said in a statement to the Hong Kong Stock Exchange.
While Evergrande had flagged as early as August 2021 that it was running short of cash, this is the starkest warning yet that founder Hui Ka Yan’s dream of taking on Elon Musk’s Tesla Inc. as the world’s biggest maker of electric vehicles is unlikely to be realized. Once one of China’s richest and most influential titans, Hui has lost most of his wealth after his property empire became embroiled in a debt crisis.
Having touted the car as early as 2019 and pledging to rival Tesla within three to five years, Evergrande NEV has been plagued by production delays and setbacks. At its peak, the fledgling automaker was valued at more than Ford Motor Co., before being caught up in the crisis engulfing its parent company China Evergrande Group. Evergrande NEV shares have been suspended since April last year, and will remain suspended until further notice.
Read more: Evergrande EV Stock Loses $80 Billion in World’s Worst Rout
The warning of the automaker’s shaky future came as China Evergrande laid out details of a multi-billion dollar restructuring plan that calls for its offshore creditors to swap their debt for new securities, 15 months after the developer first defaulted on its public dollar bonds. The restructuring would allow it to focus on returning to normal operations, the firm said.
Read more: China Evergrande Will Swap Defaulted Debt in Court Restructuring
Evergrande NEV said in the statement that if it can obtain financing of more than 29 billion yuan ($4.2 billion) that it plans to launch a number of flagship models and hopes to achieve mass production. However, it gave no details on when or where it could raise those funds, and said under this plan it would still have cumulative negative cash flow of 5 billion yuan to 7 billion yuan from 2023 to 2026.
In the meantime, it is considering the sale of residential and property development projects.
A balance sheet attached to the statement showed Evergrande NEV has almost 59 billion yuan of liabilities, and total equity of just 691 million yuan as of Dec. 31, 2021.
(Adds China Evergrande debt restructuring in fifth paragraph.)
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