China Evergrande Group’s first electric vehicle rolled off the assembly line on Wednesday, an important step for the world’s most indebted property developer as it doubled down on its biggest cash-burning bet to transform itself.
The Hengchi 5 all-electric compact sports-utility vehicle (SUV), with a driving range of about 700 kilometres (435 miles) on a single charge, is ready for delivery after coming off the assembly in Tianjin, Evergrande New Energy Vehicle said.
The model, priced at less than 200,000 yuan (US$31,440), is cheaper than the 300,000-yuan price point where Tesla’s fiercest Chinese competitors NIO, Xpeng Motors and Li Auto compete at. Hengchi 5 may also offer itself as a substitute for compact SUVs powered by internal combustion engines (ICEs) like Audi’s Q3 and BMW’s X1.
“If the Hengchi 5 vehicles sell well, it will be a ray of hope for Evergrande after months of efforts to keep its businesses afloat,” said Eric Han, a senior manager with Shanghai-based business advisory firm Suolei. “It was an important step taken by Evergrande to wade through its funding crisis.”
The roll-out of the much-delayed SUV bookmarked more than a year of anxious wait for Evergrande’s shareholders, who poured HK$30 billion (US$3.85 billion) – on top of an initial public offering – into the company to fund founder Hui Ka-yan’s aspiration to “beat Tesla” in the world’s largest market for electric cars. The company missed its second-half 2021 launch target set a year earlier.
Hui, also known as Xu Jiayin in China, is betting on electric vehicles – a key part of the Made in China 2025 industrial master plan and China’s 2060 carbon neutrality pledge -to diversify the business of this real estate empire, with more than US$300 billion in liabilities.
To get there, Evergrande had to burn through a lot of cash. In mid-2021, the company’s electric car unit halted some of its operations after failing to pay suppliers. It had to find new funding to resume development, handing out share options to keep engineers and other employees on board, even as its Shanghai car plant – one of three assemblies in the country – sat idle.
To be sure, Evergrande’s Tianjin assembly may struggle at least in the near future to get production up to speed, as the port city near the Chinese capital struggles to contain a fresh outbreak of the Omicron variant of Covid-19. A round of mass testing on Sunday found 77 positive infections out of 12.5 million samples, according to local media reports.
Evergrande unveiled six Hengchi models in August 2020, adding three more to the line-up in February 2021. The company pledged to assemble between 500,000 and 1 million electric cars a year with plants in Shanghai, Tianjin and Guangzhou.
For now, the company is likely to focus on the Hengchi 5 and Hengchi 6 models, due to its funding constraint.
China, the world’s largest automotive and EV market, is home to up to 200 carmakers looking to tap the mainland’s accelerated pace of electrification on the roads.
In 2021, the country’s reported sales of 2.99 million new-energy vehicles (NEVs) – which comprise pure electric, plug-in hybrid and fuel-cell cars – 169 per cent higher than the previous year.
The penetration rate of NEVs hit 14.8 per cent, while analysts expected it to top 20 per cent this year, three years ahead of Beijing’s agenda.