The nearly bankrupt EVERG VEHICLE (00708) exposed another huge loss.

On September 9, after a 4-day trading halt, EVERG VEHICLE (00708) resumed trading, and the stock price fell by over 8% on the first day of trading, reflecting investors' widespread pessimistic expectations. On the news front, after market close on September 5, EVERG VEHICLE announced that another subsidiary of the company had applied for bankruptcy liquidation, and the total liabilities of the company now exceeded 70 billion yuan. Since reaching a phase-high point of nearly 70 Hong Kong dollars in April 2021, EVERG VEHICLE's stock price has been continuously declining, closing at 0.23 Hong Kong dollars on September 10, a decrease of 99%. The company has been struggling to find a buyer since last year, and as of now, there is still no concrete financing news. With dreams of "making cars" shattered and tight cash flow, EVERG VEHICLE on the brink of bankruptcy, what will be its future? Net loss in the first half of the year exceeds 20 billion In 2017, Evergrande Group announced its entry into the new energy vehicle market, at a time when new energy vehicles were a potentially huge emerging field. However, after 5 years of car manufacturing, EVERG VEHICLE failed to achieve profitability as planned, with accumulated losses exceeding 100 billion yuan. The financial reports show that in the first half of 2024, EVERG VEHICLE's performance declined significantly, with revenue of about 38.377 million yuan, a year-on-year decrease of 75.17%; the company's net loss attributable to shareholders for the period was about 20.255 billion yuan, an increase of nearly 2 times year-on-year; basic loss per share was 186.789 cents. The announcement indicated that as Evergrande Group (in liquidation) was ordered to be liquidated by the High Court of Hong Kong on January 29, 2024, the company prudently increased impairment provisions for receivables from Evergrande Group's subsidiaries and joint ventures. In the first half of 2024, full impairment provisions of approximately RMB 16.737 billion were provided. The company admitted in the financial report that the company's financial situation in the first half of the year was more tense than in 2023. As of June 30, EVERG VEHICLE had total assets of RMB 16.369 billion and total liabilities of RMB 74.350 billion. Among them, loans were 26.59 billion yuan, trade and other payables were 46.695 billion yuan, and other liabilities were 10.65 billion yuan. The company stated, "During the reporting period, the group was affected by external and internal factors, sales did not meet expectations, the company faced operational difficulties, research and development and production were suspended, and all business activities and the stability of the workforce were affected." It was learned that since the beginning of this year, several affiliated companies of EVERG VEHICLE, such as Evergrande New Energy Automobile (Guangdong) Co., Ltd. and Evergrande Intelligent Automobile (Guangdong) Co., Ltd., have entered bankruptcy reorganization. On September 5, the company announced that certain creditors of the subsidiary company Evergrande Hengchi New Energy Automobile (Shanghai) Co., Ltd. had applied to the relevant local people's court for bankruptcy liquidation of the relevant subsidiary company. Previously, EVERG VEHICLE had set the target of achieving annual production and sales of over 1 million vehicles by 2025 and over 5 million by 2035. However, by 2024, this "small target" clearly could not be achieved as scheduled. In terms of financial results, the company's revenue from new energy vehicles in the first half of the year was recorded at 104.35 million yuan, further decreasing from 279.78 million yuan in the same period last year. As of June 30, EVERG VEHICLE had delivered over 1,429 new energy vehicles, with 1,700 Hengchi 5 vehicles produced at the Tianjin manufacturing base. The Tianjin, Shanghai, and Guangzhou manufacturing bases conducted equipment maintenance and management according to stoppage management plans. In May of this year, EVERG VEHICLE's only qualified factory, Tianjin Evergrande, was ordered to stop production and undergo rectification. According to the announcement, after the local government department checked the production access conditions of Tianjin Evergrande's new energy passenger car products, three rectification issues were raised, and Tianjin Evergrande was ordered to stop production and sales of new energy passenger car products. At the same time, administrative decision documents and notices issued by the local government department pointed out that the relevant affiliated companies had breached the contract and requested the company to return approximately 1.9 billion yuan in awards and subsidies, which undoubtedly added to the company's financial pressure. According to media reports such as "Daily Economic News", as of August this year, EVERG VEHICLE's Tianjin factory has been halted and production has stopped, with only over 40 employees working in the park, and the stamping workshop has been rented out by a company called Tianjin Motor Dies for production. For EVERG VEHICLE, which is currently deeply mired in a debt crisis, can the struggling new energy vehicle business become a card for turning the tide? As the price war in the auto market cools down, will EVERG VEHICLE still have a long way to go? In the first half of 2024, driven by intelligentization and the general price reduction of car companies, the penetration rate of new energy vehicles continues to rise. Data from the China Association of Automobile Manufacturers showed that in the context of a slight increase of 3.3% in overall passenger car sales, the retail sales of passenger cars by Shanxi Guoxin Energy Corporation reached 4.1 million vehicles in the first half of the year, a year-on-year increase of 33%; the penetration rate of new energy vehicles reached 41.7%, an increase of 9.3 percentage points year-on-year, and the monthly penetration rate of new energy in June reached 48.5%. Huacheng Securities pointed out that in the first half of 2024, the new energy car price war continued, coupled with the inclination of the automotive industry's old-for-new subsidy quota towards new energy vehicles, the average price of new energy vehicles decreased by 6% in June compared to January, while fuel vehicles increased by 0.5% during the same period, with the price reduction of new energy vehicles significantly higher than that of fuel vehicles. Although the new energy vehicle industry still maintains rapid growth, the continued smoke of the "price war" has also led to a situation in which car companies generally show signs of "increased revenue but not increased profits" in the first half of the year. According to statistics, only a few car companies have performed well in terms of revenue and profit, while most of the "new car forces" continue to incur losses, with only one profitable company. However, Cui Dongshu, Secretary-General of the China Passenger Car Association, pointed out that as the autumn price war gradually stabilizes, the auto market will gradually return to a normalized competition situation of promoting sales increases. Meanwhile, the intensification of national scrappage and update incentives will also reduce the pressure of price wars. With light optimism, the year-end car market is expected to enter a period of sustained strength.According to reports, the first mass-produced model of EVERG VEHICLE, the Hengchi 5, was launched in 2022, positioned as a compact SUV with a price of 179,000 yuan. When it was first launched, many media outlets referred to this new car as a competitor to the Tesla Model Y, but compared to the recently launched Hengchi, Tesla's Model Y has already achieved sales of 209,082 units in the first half of this year, ranking first in the SUV segment market. Recently, there were reports that the new generation of Tesla Model Y is about to be launched, with a possible appearance and interior design similar to the Model 3, and an expected range of over 800km. Faced with many competitors, EVERG VEHICLE appears to be lagging behind in the "car-making" industry. On the other hand, even if EVERG VEHICLE chooses to continue to compete in the new energy vehicle race, cash flow will also be a huge challenge facing the company. In the high-investment, high-risk field of new energy vehicles, from production to sales, from research and development to services, every aspect requires sufficient financial support. With the overall pressure on the automotive industry in terms of growth and cost competitiveness among companies, many new energy vehicle companies like WM Motor and NIO have been reported to face compulsory enforcement by the courts and encourage employees to resign, highlighting the severe situation in the industry. In fact, EVERG VEHICLE has been looking for many potential investors before. For example, in August last year, the company issued a statement announcing that it had received a $500 million strategic investment from Newton Group, a listed company with shares held by the sovereign fund of the United Arab Emirates, and an additional RMB 600 million in transitional funds. However, just 2 months later, Newton Group suspended the funding, and the strategic investment agreement signed between EVERG VEHICLE and Newton Group in April this year was officially terminated. In May of this year, the company again announced that a potential buyer may provide the company with a credit line, and approximately 3.145 billion shares (about 29% of all issued shares) may be acquired. However, as of now, there have been no new developments in the share acquisition project. As of now, EVERG VEHICLE lacks deep technological and resource accumulation, and its models have not undergone large-scale production verification, which raises doubts among market investors about the company's competitiveness in the new energy vehicle industry. Looking ahead, EVERG VEHICLE will still need to continue to invest a large amount of capital to sustain the operation and development of its new energy vehicle business, and whether the company can find suitable investors will be a key focus for market investors.