By Greg Gao
(JW Insights) Aug 15 -- China’s embattled property developer Evergrande Group said on August 14 that its listed electric-vehicle arm has agreed to issue new shares and sell a roughly 28% stake to Dubai-based startup NWTN Inc. to ease loan burden and improve liquidity.
NWTN will invest $500 million in China Evergrande New Energy Vehicle Group (Evergrande NEV) in exchange for shares and a majority of the EV maker’s board, the companies announced. The transaction is subject to conditions including Evergrande Group’s debt restructuring, as well as regulatory and shareholder approvals.
Evergrande Group has stated that after the completion of the debt-to-equity conversion of its EV unit and the subsequent subscription of shares, the Group’s equity stake in the EV arm will be diluted to approximately 46.86%. Subsequently, Evergrande NEV will no longer be considered a non-wholly-owned subsidiary of the Company, and its financial performance will no longer be consolidated into the Group’s overall performance.
The subscriber is NWTN Inc, a limited liability company registered in the Cayman Islands, with its shares listed on NASDAQ. It primarily engages in the development and commercialization of passenger-centric premium intelligent transportation products and green energy solutions. As of the date of this announcement, Alan Nan Wu indirectly holds 76.98% of the voting rights of the company.
In its announcement, Evergrande NEV expressed that it is currently facing tight cash flow conditions but is striving to maintain its operations. However, if it is unable to secure a new round of significant financing, the Group will be at risk of halting production. To sustain operations and continue executing its vehicle delivery plans, the Group requires fresh funding support. The proposed transaction is a critical measure for the Group’s expansion in the new energy vehicle sector and the enhancement of its financial performance. As a strategic investor, the subscriber NWTN will also provide the Group with support to its operations and business, as well as management expertise.
Evergrande EV unit has a manufacturing facility in Tianjin, northern China, with an annual planned capacity of 50,000 units, and holds the necessary EV production license. The Hengchi 5 crossover SUV model achieved mass production at the Tianjin plant in September 2022.
As of the end of May 2023, the company has delivered over 1,000 units of the Hengchi 5, which shows strong comprehensive product competitiveness in powertrain systems, intelligent driving, and handling. The company plans to further enrich its product lineup with other Hengchi series SUVs and sedans, according to the Group and NWTN.
Industry insiders pointed out that by leveraging Evergrande’s EV platforms, NWTN can significantly shorten its time to market, reduce risks associated with developing intelligent EVs, and benefit from Evergrande’s local expertise. Evergrande’s Hengchi products can complement NWTN’s planned Ada and Muse series EV models effectively. This strategic alignment will further allow Evergrande NEV to expand its share in the global EV market.
The net proceeds from the share subscription will be intended for the research, development, production, and sales operations of the Group’s vehicles, as well as for repaying transitional support funds, according to Evergrande NEV.
Last month, Evergrande NEV posted its long overdue financial results with a combined net loss for 2021 and 2022 at nearly $10 billion. The electric vehicle maker has been under pressure since its parent group descended into a debt crisis in mid-2021.
