Evergrande Automobile's operating conditions in recent years have attracted widespread attention. The company has accumulated losses of more than 110 billion yuan in the past five years, and the revenue from its automotive business has not been enough to support its huge investment.
Evergrande has lost more than 110 billion yuan in 5 years, and the risk of "car fever" needs to be vigilant
In the past five years, Evergrande Automobile's dream of building a car does not seem to have come true. According to the latest financial report, Evergrande Automobile's total revenue in 2023 will be 1.34 billion yuan, of which more than 1.1 billion yuan will come from property sales, which accounts for more than ninety percent of the overall revenue. Last year's full-year loss was 11.995 billion yuan, compared to a loss of 27.664 billion yuan in 2022. The cumulative loss reached a staggering 110.841 billion yuan, while the cumulative delivery volume was only 1,389 units. Such a terrifying rate of burning money has made people inside and outside the industry sound the alarm again about the bubble risk of China's "car-making fever".
This loss figure is rare in the global automotive industry. In contrast, Tesla faced huge losses in its first decade, but its market performance and technological innovation have proven the viability of its business model. Evergrande's losses do not seem to have brought corresponding market returns or technological breakthroughs.
As of the end of last year, Evergrande Automobile's total assets were 34.851 billion yuan, and its total liabilities were as high as 72.543 billion yuan. Among them, borrowings amounted to RMB26.484 billion, trade and other payables amounted to RMB43.012 billion, and other liabilities amounted to RMB3.047 billion. This financial situation shows that Evergrande Auto has a heavy debt burden and its financial stability is seriously challenged.
Some new car-making forces are mired in blind expansion
In fact, in recent years, there has been a "car-making fever" in China, and many companies have set foot in the field of car-making. According to incomplete statistics, in 2022 alone, more than 30 emerging EV manufacturers will emerge in China. However, the vast majority of emerging automakers are still in the pre-project and product development stages, with high costs for R&D and marketing and advertising, and limited revenue streams.
2021.4.19 Evergrande Automobile Source: Interface News
According to Bloomberg statistics, by the end of 2022, the overall loss of China's emerging electric vehicle companies had exceeded 200 billion yuan (about 29.4 billion US dollars). For example, Xpeng Motors will lose 9.14 billion yuan in 2022 (data source: 21 Finance: https://m.21jingji.com/article/20230317/herald/e7506e5438e32bd74ac971e57447f5b1.html), and NIO will have a net loss of 14.56 billion yuan (data source: The Paper https://www.thepaper.cn/newsDetail_forward_22290762). Even Tesla, China's leading electric vehicle company, will only have a capacity utilization rate of about 70% in China in 2022.
Global car companies' profits are under pressure, and the industry pattern may be reshaped
It is worth noting that Evergrande Automobile's money-lending losses are far from an isolated case, and the performance of traditional car companies continues to be under pressure on a global scale. Germany's Volkswagen Group's net profit in 2023 fell by 16.5% year-on-year, and Nissan's net profit plummeted by 51.4%, due to the combination of factors such as rising raw material prices, rising labor costs, and slowdown in vehicle production.
Evergrande's first batch of electric vehicles
Globally, the automotive industry is undergoing a profound transformation. The rise of electric vehicles (EVs) and autonomous driving technologies is reshaping the industry landscape. According to Deloitte's report, China's NEV market will continue to grow steadily, with the mainstream market and the high-end market becoming the main source of new energy vehicle market. In addition, China's auto exports will grow at a high rate against the trend, and policy guidance will continue. In this context, Evergrande Automobile's future development strategy will be crucial.
Evergrande's operating difficulties reflect the high-risk nature of the automaker's industry. Whether the company will be able to turn things around in the future depends not only on the effectiveness of its financial restructuring, but also on its ability to position itself in the global automotive industry revolution. Evergrande Auto needs to make wise choices in terms of product innovation, market positioning, and technological upgrading, in order to find space for survival and development in the highly competitive market.