SHANGHAI/HONG KONG—At the Shanghai Auto Show in April, the booth for China Evergrande Group’s new energy vehicle (NEV) was hard to miss.
One of the largest exhibits at the event, in a prime spot opposite BMW, the property developer-backed unit showed off nine concept vehicle models under its brand “Hengchi,” which translates to “eternally speeding.”
“There has never been a car company that has been able to deliver such a diversified product line in such a short amount of time,” Daniel Kirchert, who joined Evergrande NEV days before the auto show as vice president, told industry executives and reporters in a speech at the event.
Analysts and industry executives say there have long been questions about how Evergrande NEV, founded in 2019, would meet its ambitious goals. Chairman Hui Ka Yan had declared that the company wanted to sell one million EVs a year by 2025, a level Tesla Inc. is only expected to hit this year after 18 years of operation.
Six months after the auto show, doubts are stronger than ever as the company’s parent wrestles with more than $300 billion in debts.
“Those targets would be really aggressive, nearly impossible to achieve, even for established, well-managed automotive companies because of the capital and human resources required to even attempt executing the plan,” said Tu Le, an auto analyst at Sino Auto Insights.
From 2019 to 2021, Evergrande’s NEV arm raised more than $7.78 billion from its parent, as well as investors such as Sequoia Capital China, ride-hailing giant Didi Global Inc., and Alibaba-linked fund Yunfeng Capital.
It has announced 14 models and plans to have 10 factories across China and Sweden. So far, it has built or is constructing six plants, including one in Shanghai. A recent Reuters visit there found about 20 Hengchi electric vehicles for testing parked outside. But the company has yet to reveal a production model or sell a single vehicle.
In comparison, Nio and Xpeng, two of China’s most successful NEV startups according to sales, struggled to raise money in their early years, and raised a combined $7.3 billion through stock market listings and pre-IPO fundraising.
Nio has four models and is building its second factory. Xpeng has three models and is expanding production sites to four from its current two. Tesla sells four models and has four car plants.
Evergrande NEV did not immediately respond to a request for comment.
‘Make Cars’ on Paper
Lofty goals and investor bullishness in March helped push Evergrande NEV’s market capitalization to over $89.99 billion—a value greater than that of Ford Motor Co. Its market capitalization has since slumped to about $4.9 billion.
The company has managed to lure top executives from auto giants, such as designer Walter De Silva and battery scientist Junesoo Lee from SK Innovation. Danial Kirchert was chief executive at Byton, another Chinese EV startup struggling in a crowded sector. He did not respond to a request for comment.
But the rapid expansion also prompted criticism from Beijing, including Chinese state news agency Xinhua, which in March singled the company out as an example of the problems with the industry.
“The vast market potential has given birth to some ‘powerpoint car companies’ that ‘make cars’ on paper,” Xinhua said in a report on the high valuations of electric carmakers.
Evergrande NEV warned in stock exchange filings last month that it was still seeking new investors and asset sales, and that without either it might struggle to pay salaries and cover other expenses.
It also ended plans to issue shares in China’s mainland and said in an exchange filing that it had failed to pay some plant construction suppliers. A memo seen by Reuters also showed that it has instructed contract workers to stop working at the Shanghai factory from September.
But three sources familiar with the matter say the company is not abandoning the project, and is in talks with external investors to pay for the project, and leverage precious production licenses it obtained through an acquisition and land linked to the auto projects.
On Monday, the company told suppliers and local authorities in the coastal city of Tianjin, where it is building a car plant, that management would make sure it began mass production next year.
Last week, its Swedish vehicle unit, National Electric Vehicle Sweden AB, told Reuters it is in talks with U.S. and European venture capital firms and industrial partners to find new owners. A source familiar with the situation told Reuters the unit could be valued at as much as $1 billion.
By Yilei Sun and Zhang Yan in Shanghai, Julie Zhu and Kane Wu in Hong Kong