Xu Jiayin made a car, and Huangliang was a dream

On the left is Liu Yongzhuo, and on the right is Xu Jiayin

Author | Chai Xuchen

Two weeks ago, Liu Yongzhuo, the president of Hengchi, who was still presiding over the delivery of the car, was suddenly arrested, and the Evergrande Automobile at the helm of him was already in turmoil.

On the afternoon of January 8, Evergrande Automobile announced that Liu Yongzhuo had been detained in accordance with the law on suspicion of violating the law and committing crimes. Not long ago, on December 26, Liu Yongzhuo also held a "key customer delivery ceremony" for Hengchi 5 at the Tianjin production base. This was his rare appearance after the Evergrande thunderstorm, and it was also his last public appearance before being detained.

Liu Yongzhuo, who was born in the 80s, has been reused by Xu Jiayin before, and before he took charge of Evergrande Automobile, his greater aura came from being in charge of Evergrande football. In 2010, Evergrande became the owner of Guangzhou Football Club, Liu Yongzhuo invested heavily in recruiting players, and in the next few years, he completed the goal of winning the Chinese Super League and the AFC Champions League proposed by Boss Xu, and entered the peak moment.

Later, he was promoted to vice president of Evergrande Group, and was regarded by Xu Jiayin as his right-hand man, and people familiar with the matter said that he was inevitably involved in Evergrande's various financial capital operations, especially when Evergrande Automobile was listed.

In addition, from 2016 to 2018, Liu Yongzhuo was also in charge of Evergrande Financial Services. Evergrande Financial Services, the predecessor of Evergrande Financial Wealth Management (Shenzhen) Co., Ltd., was established in November 2015, and its advertising logo appeared on Evergrande football stadiums.

Before Liu Yongzhuo was taken away, many Evergrande executives, including Xu Jiayin, Xia Haijun, Ke Peng, etc., had been controlled, and Liu Yongzhuo could not be left alone.

The dragons have no leader, and Evergrande Automobile, which Xu Jiayin has high hopes for, seems to be even more unsustainable.

After the news of Liu Yongzhuo's arrest was disclosed, Evergrande Automobile's share price continued to fall, and as of the close of trading on January 9, it had fallen to HK$0.36 per share, and its market value fell below HK$4 billion. This is a glorious moment of 400 billion Hong Kong dollars, which has shrunk a hundred times and has become a veritable "penny stock".

At present, Evergrande Auto urgently needs to increase sales in exchange for market confidence. According to the data of the passenger association, from January to November last year, the Hengchi 5, priced at 179,000 yuan, only sold 935 units, which is the only mass-produced model at present.

Misfortune is not a one-way street, and Hengchi, which has poor sales, was "abandoned" by the financier at the beginning of the year and lost the key "life-saving money".

On January 1, Evergrande Automobile announced that the Newton Group share subscription agreement and debt-to-equity swap subscription agreement had expired on December 31, 2023. This means that the $500 million investment and 600 million yuan of borrowing agreed upon by the two sides are in vain.

In the past few years, as the majority of Evergrande's diversified layout, Evergrande's car manufacturing has basically been burning money like crazy, and finally became one of the factors that triggered the crisis of Evergrande Group's capital chain.

According to the financial report of Evergrande Automobile, in the middle of last year, the company's gross loss recorded 60.88 million yuan. The total loss from 2020 to 2022 is about 91.7 billion yuan, and as of the end of the first half of 2023, Evergrande Automobile's total liabilities are as high as 75.6 billion yuan, and it also involves about 9.341 billion yuan of unpaid due debts and about 3.591 billion yuan of overdue commercial bills.

Today's Evergrande Automobile has no money to burn. According to the interim report, Evergrande Automobile's cash on hand plummeted from 1.61 billion yuan in the first half of 2022 to 96.89 million yuan in the first half of 2023.

In March last year, Evergrande Auto warned that it would face the risk of suspension of production if it could not obtain new liquidity. At the same time, a new "pie" was drawn, saying that if the company can seek more than 29 billion yuan of financing in the future, it plans to launch a number of flagship models and hope to achieve mass production.

Five months later, Evergrande announced that it would introduce Newton Group as a strategic investment, which will subscribe for about 6.18 billion new shares of Evergrande Automobile, equivalent to about 27.5% of the total issued shares after expansion, at a total consideration of about US$500 million, and provide 600 million yuan of transitional financial support.

According to the plan, all the funds of Newton Group will be used in the Tianjin factory to ensure the normal production of Hengchi 5 and the mass production of Hengchi 6 and 7. Newton Group also pledged to assist Evergrande Automobile in exploring overseas markets and exporting 30,000-50,000 vehicles to the Middle East market every year.

However, due to the compulsory measures taken by Xu Jiayin and other reasons, the process of Evergrande's debt restructuring was interrupted, which was one of the preconditions for Newton Group to request the transaction to proceed, and on the other hand, the share price of Evergrande Automobile has also quickly fallen below the subscription price of HK$0.6297 per share agreed in the original agreement. For Newton Group, this is undoubtedly not cost-effective, and Evergrande Automobile has also become a "hot potato".

Although Evergrande Automobile stated that it still intends to adjust the plan and restart negotiations. However, Shen Meng, executive director of Xiangsong Capital, pointed out that "the value of Evergrande Auto's license plate or assets is very low, and Evergrande Auto needs to inject huge capital to revitalize, and the investment risk is too great."

From the perspective of the industry, even if Newton Group's investment of 500 million US dollars and 600 million yuan of borrowing are successfully received, it will not allow Evergrande Automobile to turn over, but only "continue its life" to a certain extent.

With the arrest of the president, the obstruction of financing, poor sales, and high debts, the countdown to the withdrawal of Evergrande Automobile sounded in its ears, and the giant ship that was put together by "buy, buy, buy, buy" was also on the verge of sinking.

Xu Jiayin began to build high-profile cars in early 2019, attracting industry giants such as Tencent, Sequoia, and Didi to invest in the platform, and merged the automobile business into a listed company in the same year, and officially changed its name in 2020 (formerly known as Evergrande Health), and its market value once surpassed that of its parent companies Evergrande Group and BYD.

Under the operation of Liu Yongzhuo, Evergrande Automobile was almost the "most valuable new force in car-making" at that time, and Xu Jiayin also vowed to make Evergrande Automobile the world's largest and strongest new energy automobile group, and sprint to the Science and Technology Innovation Board.

Looking at it now, this is almost a dream.

In the turbulence of China's new energy market, even BYD, Tesla, Huawei, etc. have to work hard, Wei Xiaoli is also struggling to survive, and Evergrande Automobile is even less able to parry.

Investors and the capital market have long since disbelieved that Evergrande can continue to build cars, and the slogan "Achieve annual production and sales of more than one million vehicles by 2025 and exceed 5 million by 2035" that once hung high on Evergrande's official website has also been quietly removed.

For the current situation of Evergrande Automobile, Ren Zeping, a former "military advisor" macroeconomist of Evergrande, can be described as a prophecy.

"Frankly speaking, under the circumstances at that time, it was difficult to say absolutely right or wrong by borrowing money to build new energy vehicles." He believes that compared with going down in person, if you invest in a leading car company with experience and foundation, and let professional people do professional things, the results may be very different.

"Shopping malls are like battlefields, and success or failure is in a thought." Xi to high leverage, under the leadership of the thinking mode of "krypton gold" to solve everything, the script of Evergrande Auto's fate may have been written at the beginning.