Bloomberg
China’s $ 87 billion electric car giant has not yet sold a vehicle
(Bloomberg) – The expanded pop-up showroom of China Evergrande New Energy Vehicle Group Ltd. is in the heart of Shanghai’s National Exhibition and Conference Center. With nine models on display, it’s hard to miss. The start-up of the electric car has one of the biggest hurdles at China’s 2021 car show, which starts on Monday, against German carmaker BMW AG. Yet it is an uncomfortable truth that Evergrande did not sell a car under its own brand name. The largest real estate developer in China has a variety of real estate investments, from soccer clubs to retirement homes. But it is the recent entry into electric cars that is captivating investors’ imaginations. Shareholders have boosted Evergrande NEV’s listed shareholding in Hong Kong by more than 1,000% over the past twelve months, allowing it to raise billions of dollars in new capital. It now has a market value of $ 87 billion, larger than Ford Motor Co. and General Motors Co. This exuberance about a car manufacturer that has repeatedly pushed back the predictions for the manufacture of a car is indicative of the foam that has been built into it. EVs over the past year, with investors plowing money into a rally that has briefly made Elon Musk the richest person in the world and who is worried about a bubble. Nowhere is this more evident than in China, home to the world’s largest market for new energy cars, where a staggering 400 EV manufacturer is now attracting the attention of consumers, led by a cabal of startups that values more than established car players , but what Evergrande NEV was a relatively late participant in the scene. In March 2019, Hui Ka Yan, Evergrande’s chairman and one of the richest men in China, promised to tackle Musk and become the world’s largest manufacturer of EVs in threes. up to five years. Tesla Inc. ‘s Model Y crossover has just had its worldwide debut. In the two years that followed, Tesla gained an enviable foothold in China, established its first factory outside the US, and delivered about 35,500 cars in March. The Chinese competitor Nio Inc. reached a major milestone earlier this month when it rolled its 100,000th EV off the production line, prompting Musk to tweet its congratulations. Read more: Nine, Xpeng Exude Optimism as EVs Boom: Shanghai Auto Show Despite its high ambitions and Evergrande Hui’s rich valuation, Hui has repeatedly pushed back car production goals. The tycoon’s rich friends, among others, have raised billions, but making cars – electric or otherwise – is difficult and extremely capital intensive. Nio’s gross margins only moved to a positive area in mid-2020, after years of heavy losses and a bailout of a municipal government. At the end of March, he spoke on an earnings call after the full annual loss of Evergrande NEV for 2020 increased by a gaping 67%. Hui said the company plans to start trial production by the end of this year, delayed from the original timeline of last year September. Deliveries are not expected to begin until 2022. The expectations for the annual production capacity of 500,000 to 1 million EVs by March 2022 have also been pushed back to 2025. The company has nevertheless issued a lively new forecast: 5 million cars a year by 2035. By comparison, global giant Volkswagen AG is delivering 3.85 million units in China by 2020. It’s not just Evergrande’s delayed production schedule that is raising eyebrows does not light. A closer look under the company’s hood reveals practices that are causing veterans in the industry: from the sale of apartments to the KPIs of car drivers to an attempt to create a model range that will be ambitious even for the most established carmaker . ‘ Weird Company “This is a strange company,” said Bill Russo, founder and CEO of consulting firm Automobility Ltd. in Shanghai. ‘They’ve dumped a lot of money that did not really yield anything, plus they’re entering an industry in which they have very little understanding. And I’m not sure they have the technological edge of Nio or Xpeng, ‘he said, referring to the New York-listed Chinese EV manufacturers that already use intelligent features in their cars, such as laser-based navigation. The operations of Evergrande NEV show the extent of the unorthodox approach. Although it has established three production bases – in Guangzhou, Tianjin in northern China and Shanghai – the company does not have a general car range going on. According to people who have seen in the factories but do not want to be identified and discuss confidential matters, the equipment is still being adjusted. be able to make “one car per minute” once full production is reached. The company is aiming for mass production and delivery of four models next year – the Hengchi 5 and 6; the luxury Hengchi 1 (which will compete against Tesla’s Model S); and the Hengchi 3, according to people familiar with the matter. The company has told investors that they want to deliver 100,000 cars by 2022, one of the people said. Approximately the number of units owned by Nio, Xpeng Inc. and Li Auto Inc., the other U.S.-listed Chinese EV candidate, delivered last year, together The workers are also being asked to help sell real estate, the backbone of the Evergrande empire. New tenants are expected to undergo in-house training and attend seminars that they discuss in the history of the company’s property and have nothing to do with car manufacturing. In addition, employees from all departments, from production line workers to back office staff, are encouraged to promote the sale of apartments, either by placing ads on social media or bringing family members and friends to sales centers to make them look busy. According to people familiar with the measure, the performance bonuses of management-level staff have even been linked, but the ambitious goal is for Evergrande NEV to consider outsourcing and skipping procedures as normal industry practice, say people with knowledge of the situation. While he aggressively hired and recently hired Daniel Kirchert, a former BMW CEO, who was co-founder of start-up Byton Ltd., the firm did most of the design and development and development of its cars. contracted to overseas suppliers, some people said. Outsourcing the majority of design and engineering work is an unusual approach for a business that wants to achieve such a scale. 14 Models At Once One of the companies is the Magna International Inc. of Canada, leading the development of the Hengchi 1 and 3, one of the people said. Evergrande NEV has also partnered with Chinese technology giant Tencent Holdings Ltd. and Baidu Inc. developed a software system for the Hengchi series. It will allow drivers to use a mobile app to steer the car to drive to a certain location via a car driver and use artificial intelligence to turn on devices at home while on the road, according to ‘ a statement last month. is working with international partners, including Magna, EDAG Engineering Group AG and the Austrian parts manufacturer AVL List GmbH to develop ’14 models simultaneously ‘. Representatives of Magna declined to comment. A Baidu spokesman said the company had no further details to share, while a representative of Tencent said the software company was affiliated with a related firm called Beijing Tinnove Technology Co. which works independently. Tinnove did not respond to requests for comment. Instead of incredible model reports, Evergrande NEV seems to be rolling out every type of car under its Hengchi brand at the same time, carrying a roaring golden lion on the badge and loosely translating to ‘unstoppable’. gallop. ‘The nine models introduced cover almost all major passenger vehicle segments, from sedan to SUVs and multi-purpose vehicles. A celebrity said prices could range from about 80,000 yuan ($ 12,000) to 600,000 yuan, though the final cost may change. This is a very different product development strategy than EV pioneers like Tesla, which offers only four models. Nio and Xpeng also chose to concentrate on just a handful of marquises and even struggled to break into the black. “The market has proven that the effectiveness of the ‘one product in one fashion-fashion strategy’ has been proven,” said Zhang Xiang, a researcher in the automotive industry at the North Chinese University of Technology. “Evergrande offers a lot products and expect a victory. There’s a question mark over whether it’s going to work. ‘Without any long-term manufacturing problem, Evergrande has issued uncompromising instructions to achieve its latest production goals. Two models, including the Hengchi 5, a compact sports utility vehicle facing Xpeng’s G3 envisages mass production in just over 20 months. should be skipped, people familiar with the situation said, “Evergrande told Bloomberg that it was entering a” sprint phase toward mass production. ” case where the Hengchi 5 was publicly displayed, on photos and grainy material that Evergrande released in February when the cars were driving around. a snow-covered field in Inner Mongolia. Zhong Shi, a former car project manager, became an independent analyst, saying the company’s shares are unusual. It is a standard process for the development, validation and verification of products, which includes various laboratory and road tests. “In China and everywhere else,” Zhong said, “it’s hard to squeeze it into less than three years.” While there is no suggestion that the Evergrande approach violates any regulations, stock market share may be a reality check, and after similar solid market gains, some US start-ups have yet to prove their viability as revenue-generating, profitable entities. has lost its luster over the past few months due to concerns about valuations, and as established carmakers such as VW move faster to EV battle .. Read more: The end of Tesla’s dominance may be nearer than it seems. billions of dollars did not escape Beijing’s attention either, Evergrande NEV shares fell last month after an editorial by the state-run Xinhua news agency expressed concern about the development of the EV sector, worrying companies in particular about their responsibility for quality building cars, a blind race by local governments to attract EV projects, and high valuations deu r companies that have yet to deliver one mass-produced car, according to the mission, which the Evergrande specifically in this regard. “The large gap between production capacity and market value shows that there is hype in the NEV market,” he said. Nevertheless, Evergrande NEV’s share has risen 18% since then, threatened by the outlook for the Chinese electric car market. According to Bloomberg data, EVs currently account for about 5% of China’s annual car sales, with demand rising as the market declines and the price of electric cars falls. The research firm Canalys said in a February report that EV sales in China could rise just over 50%, but also remain skeptical outside the Evergrande NEV’s loyal shareholder base. “The market is getting busy, but unless it’s a preferred track, there’s not much chance of winning,” said Russo of Automobility. “Maybe there is synergy with the real estate business, but at the moment it’s an EV story and a pretty expensive one. ‘ 2021 Bloomberg LP