On the evening of May 22, Evergrande Auto (0708.HK) issued an announcement revealing that it had received a notice from the local administrative department requiring it to terminate a series of investment cooperation agreements previously signed and return approximately 1.9 billion yuan in rewards and subsidies it had received.

Evergrande Hengchi New Energy Vehicle (Tianjin) Co., Ltd.

The announcement stated that its subsidiary Evergrande New Energy Vehicle Investment Holding Group Co., Ltd. recently received a letter issued by the relevant local administrative department. The main content is that the relevant subsidiaries have signed a series of investment cooperation agreements with the relevant local administrative departments since April 29, 2019. Due to failure to perform contractual obligations in accordance with the relevant terms of the relevant agreements, the relevant local administrative departments intend to require the relevant subsidiaries to terminate the relevant agreements in accordance with the provisions of the "Civil Code of the People's Republic of China" and other laws and regulations: return to the relevant local administrative departments the various rewards and subsidies that have been issued, totaling approximately 1.9 billion yuan, and the relevant subsidiaries are required to bear joint and several liability.

Evergrande Auto said that currently, the relevant subsidiaries plan to write to the relevant local administrative departments for coordination. If the above letter requirements are finally implemented, it will have a significant adverse impact on the financial status and operations of the company or the relevant subsidiaries. The company's shares will continue to be suspended from trading until further notice.

The annual report shows that Evergrande New Energy Vehicle (Tianjin) Co., Ltd. officially started mass production in September 2022. As of December 31, 2023, it had produced a total of 1,700 Hengchi 5 vehicles, which did not meet the relevant requirements.

In its annual report, Evergrande Auto said that due to financial reasons, the group arranged for some employees to take holidays and the Tianjin plant suspended production. The group will go all out to introduce strategic investors to actively raise funds to maintain the group's survival and future development plans.

In 2023, Evergrande Auto's revenue was 1.34 billion yuan, up 900.04% year-on-year. The increase in revenue was mainly due to the increase in sales of automobiles and auto parts from 60.63 million yuan as of 2022 to 146 million yuan in the reporting period; the revenue from property sales increased by 1.136 billion yuan.

As of December 31, 2023, Evergrande Auto's accumulated losses and shareholders' losses were RMB 110.841 billion and RMB 37.693 billion, respectively; cash and cash equivalents were RMB 129 million, and RMB 220 million at the end of 2022; the group's total assets were RMB 34.851 billion, and total liabilities were RMB 72.543 billion.

On May 17, Evergrande Auto announced a temporary suspension of trading, pending the release of relevant inside information. As of May 17, Evergrande Auto's share price was HK$0.38 per share, with a total market value of HK$4.121 billion, which was about 0.5% of its peak period.