Two people who know about the situation say that the company will stop making its one model because it isn’t getting any new orders. This is the latest problem for the company, which is already in debt.
China Evergrande New Energy Vehicle Group said in mid-September that it had started mass production of the Hengchi 5 model at a plant in the northern city of Tianjin. At the end of October, it said it had delivered its first 100 cars.
People who did not want to be named because they were not allowed to talk to the media said that the company has stopped making the electric SUV because there are not enough new orders.
Related:Â Evergrande wants to get approval for its plans to restructure by the beginning of next year.
The two people also said that many workers haven’t gotten their pay for October and November yet.
Evergrande didn’t answer right away when asked for a comment.
Some work was still going on, according to two other people. One of these two said that the unit was planning to fire 10% of its workers and stop paying 25% of its workers’ salaries for 1–3 months.
It wasn’t clear right away how long mass production would be stopped.
Evergrande was once China’s best-selling real estate developer, but it is now in the middle of a growing debt crisis. Over the past year, other developers have defaulted on offshore debt obligations, leaving many to negotiate to restructure.
The group had said that the EV unit was a key part of its plans to change. Chairman Hui Ka Yan promised that the group’s main business would switch from real estate to the car business within 10 years and that 1 million cars would be made each year by 2025.
In July, the unit said that it had received pre-orders for more than 37,000 Hengchi 5s that were not legally binding.
The suspension at Evergrande’s EV arm comes at a time when automakers and investors are preparing for a drop in sales in the world’s largest car market due to a slowing economy. This is happening even though the government is offering incentives like tax cuts and subsidies starting in June to boost sales.
Related: Evergrande wants to use onshore assets as a sweetener for reorganising its offshore debt.
The competition in the electric vehicle (EV) market has also been heating up. For example, Tesla (NASDAQ: TSLA) has been cutting prices and offering incentives in China, which hurts other companies that are losing money.
