Welcome to the Hyperdrive daily briefing, decoding the revolution reshaping the auto world, from EVs to self-driving cars and beyond.
News Briefs
- U.S. safety regulator probes another Tesla crash.
- London bus fleet will go electric faster than planned.
- GM will overhaul its chip supply chain, CEO says.
China’s Evergrande Has an EV Problem, Too
A little over two years ago, Hui Ka Yan, the billionaire founder of China Evergrande, brimmed with confidence as his company’s electric-vehicle arm vowed to challenge Tesla as an industry leader. As recently as April, the unit was worth more than Ford — and all before it had sold a single mass-produced car under its own brand.
Now the parent company’s debt woes have roiled markets and triggered protests at some of the property developer’s offices as regulators grapple with potential solutions for a $300 billion pile of liabilities.
Colleagues at Bloomberg News have been detailing the contagion from Evergrande’s descent, and assessing the prospects for what would be one of China’s biggest debt restructurings.
The crisis got me thinking about what the unraveling tells us about China’s bubble in EV stocks, and whether there’s any prospect the unit will find a savior.
Evergrande warned investors last week that it had made “no material progress” in efforts to sell stakes in the electric-car unit, which had once been among its most valuable assets before a slump that’s seen more than $80 billion wiped from its market capitalization since April.
Even after pouring about 50 billion yuan ($7.7 billion) into car development, Evergrande New Energy Vehicle Group has encountered repeated setbacks. The firm said last month it may have to delay the start of manufacturing again if it can’t find new funding, having previously missed targets to begin some trial production by last September.
Losses in the first six months of 2021 were 4.8 billion yuan, and that’s not the only thing worrying auto sector veterans. A lineup of nine different models displayed in April looked ambitious even for a established manufacturer, as did a forecast to be delivering 5 million cars a year by 2035. Workers have been encouraged to promote the sale of apartments — the parent company is a real-estate developer — and managerial-level staff have had bonuses linked to that task.
Into Reverse
Evergrande NEV has tumbled since April amid setbacks to production plans
Source: Bloomberg
All that puts a question mark over the chances of Evergrande NEV wooing new investors, or receiving a lifeline similar to local rival Nio, which has thrived since a 7 billion-yuan investment last year led by the municipal government of Hefei.
China’s government has also made clear the nation’s EV sector needs consolidation to root out the least viable among more than 300 producers or aspiring manufacturers. “We have too many EV firms on the market right now,” Xiao Yaqing, the minister for industry and information technology, told a press conference in Beijing last week.
And electric-only entrants are facing increasing competition from legacy companies. Walking around a mall recently in downtown Beijing’s Wangfujing street, I spotted a car showroom under construction for IM, the brand set up by SAIC Motor, China’s top manufacturer, and Alibaba. Zhejiang Geely’s Zeekr EV unit last month raised $500 million from investors including battery giant CATL.
Even if Evergrande finds a path out of its current turmoil, the prospects for its car unit and flagship Hengchi brand, which translates loosely to unstoppable gallop, remain hugely uncertain.
Before You Go
China’s dominant EV battery industry is pressing ahead on the next developments that promise cheaper components, Bloomberg Opinion’s Anjani Trivedi writes. Ningde-based CATL, the top producer, said in July it plans to add products that use sodium in the place of more expensive lithium, while the country’s Ministry of Industry and Information Technology is promoting a wider drive to accelerate development. Performance will need to improve to challenge lithium technology, and sodium’s main role may be in energy storage rather than transportation. Still, the potential cost savings mean automakers will monitor progress closely. Sodium-ion batteries could be about 30% to 50% cheaper than existing options.
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Electric Car Struggles Are Yet Another Problem for Evergrande - Bloomberg
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