The head of Evergrande's electric vehicle (
EV
) arm, Liu Yongzhuo, has been detained by authorities, the company confirmed on Monday. Evergrande, once China's largest real estate developer, faces over $300 billion in liabilities, symbolizing the nation's prolonged property crisis.
Liu's detention follows the company's September announcement that Chairman Xu Jiayin faced "mandatory measures" from Chinese authorities over "crimes." Evergrande NEV, the EV unit, disclosed the news in a filing to the Hong Kong stock exchange without providing specific details about the alleged illegal activities.
Established in 2019 with ambitions to be a leading electric car manufacturer in three to five years, Evergrande NEV faced significant challenges as its parent company grappled with severe financial difficulties, impacting the EV unit's cash flow and growth prospects.
In March 2023, Evergrande NEV revealed its struggle to secure liquidity to sustain its operations. On Monday, trading of the firm's shares on the Hong Kong Stock Exchange was briefly halted at the company's request. Upon resuming, the EV firm's share price experienced a five percent decline.
These developments coincide with the collapse of a deal to sell a stake in Evergrande NEV to NWTN, a Dubai-based firm specializing in clean-energy vehicles. Despite launching its first EV model, the Hengchi 5, in 2022 after significant delays, Evergrande NEV faced challenges, including a 15-month suspension of its shares from April 2022 to July 2023 due to a failure to publish financial results.
Currently valued at approximately $570 million, Evergrande NEV has seen nearly a 50% decline in value over the past five years. With Evergrande's real estate troubles escalating, a Hong Kong court granted the company an extension until late January to formulate a restructuring plan, potentially avoiding liquidation.
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