In a recent development that underscores the ongoing turmoil within China's real estate sector, Evergrande NEV, the electric vehicle subsidiary of the beleaguered property giant Evergrande, disclosed the detention of its president, Liu Yongzhuo. This incident marks the latest setback for a corporation that once stood as China's preeminent real estate developer but has since become emblematic of the country's protracted property crisis, with reported liabilities exceeding $300 billion.
Liu's detention, announced on Monday without explicit details, follows the company's earlier revelation in September regarding the investigation of its chairman, Xu Jiayin, for alleged crimes. The legal framework in China often leads to conviction for those placed under investigation, suggesting a grim outlook for the detained executives. Born in 1981, Liu not only helmed Evergrande NEV but also chaired the board of an Evergrande-owned football team based in Guangzhou.
This unfolding saga adds to the challenges faced by Evergrande NEV, which, despite its ambitious goal to lead the global electric vehicle market within three to five years of its 2019 establishment, has struggled under the weight of its parent company's financial distress. The EV unit's aspirations were significantly hampered by liquidity issues, which it publicly battled in March 2023 in a desperate bid for survival.
The company's precarious position was further highlighted on Monday when its shares were briefly halted on the Hong Kong Stock Exchange before plummeting 13% less than an hour after trading resumed. This market reaction coincided with the announcement of Liu's detention and the failure of a critical deal with NWTN, a Dubai-based clean-energy vehicle firm, intended to sell a stake in Evergrande NEV.
The company, whose share value has halved over the past five years to approximately $570 million, faced a suspension from April 2022 to July 2023 due to its failure to publish financial results. The commencement of production of its first EV model, the Hengchi 5, in 2022, provided a glimmer of hope, but this was not enough to reverse its fortunes.
As Evergrande grapples with its myriad challenges, a Hong Kong court recently granted it an extension until late January to formulate a restructuring plan, postponing a deadline that looms over the potential liquidation of the conglomerate. This extension represents a critical juncture for the firm, as it seeks to navigate a path through its complex financial and legal troubles.
