The beleaguered auto unit of China Evergrande Group, Evergrande Auto, has dismissed its employees without cause. According to interviewed employees, from July 29th, positions including auto manufacturing, R&D, quality control, and administrative personnel have all been affected.
HR stated that employees must pay their social insurance, implying they have been considered laid off. Reports indicate Evergrande Auto ceased operations at the end of last year with the total employees being reduced from 6000 to less than 500.
Evergrande Auto
Evergrande Auto has been navigating a series of setbacks since 2021, including suspension from trading, executives being arrested, and the liquidation of its assets.
In 2020, Evergrande initially revealed six new concept cars under the Hengchi brand consisting of sedans, coupes, SUVs, and MPV. Hengchi originally announced that mass production would start in 2021 and aimed to sell 1 million EVs in 2025.
However, in 2021, Evergrande Group was exposed to be massively leveraged and defaulted on its debt payments. The company tried to sell its EV business to Xiaomi, but the deal fell apart for unknown reasons.
Evergrande Auto was somehow able to overcome its setbacks and launched the Hengchi 5 in July 2022. Production began at its Tianjin plant in September 2022. Production was sporadic, however, stopping and starting on and off in 2023. The company saw dismal sales of less than 1000 units in 2023.
President of Evergrande Auto and Hengchi brand was arrested in January 2024 due to suspected illegal activities. There were talks in May 2024 of a potential buyer buying a 29% stake, but no additional developments have been reported.
Evergrande Autoβs stock (0708.HK) sits at 0.285 HKD (0.4 USD) per share with a market cap of 3.09 billion HKD (400 million USD).
End of Evergrande Auto
Reports indicate that Evergrande Auto ceased operations at the end of last year. The remaining employees dismissed were mostly contract workers, most of them having more than a year remaining on their contracts.
Reports of employee dismissals come after Chinese authorities ordered Evergrande Auto to repay government subsidies due to failure to meet contractual obligations. Local authorities asked the company to repay 1.9 billion RMB (262 million USD) of subsidies and incentives it received from local governments.
The company said in a filing that Chinese authories asked its Tianjin plant to stop producing and selling vehicles. Evergrande Auto faces repossession of land, buildings, and equipment obtained via local government incentives.
On July 2024, Evergrande Auto announced its subsidiaries Evergrande New Energy Vehicle and Evergrande Smart Vehicle filed for bankruptcy. The wholly-owned subsidiaries have registered capitals of 2.5 billion yuan (350 milllion USD) and 5 billion yuan (700 million USD), respectively. Data shows Evergrande Auto has accumulated losses of up to 110 billion yuan (15 billion USD) over the last five years.
The parent company, Evergrande Group, was ordered to liquidate in January 2024 by the Hong Kong courts after the company failed to reach a restructuring plant with creditors. Evergrande Auto has been on its last legs in 2023 and 2024 and the company seems to nearing the end as it dismisses its Β remaining employees.
Sources: MyDrivers, Yiche, Sina
