Chinese electric car maker Evergrande was in the spotlight on the Shanghai Auto Show with nine models on display. The company's electric car was located in one of the largest booths opposite the German carmaker BMW. Its presence, as well as its cars, looks impressive. But the truth is somewhat strange: Evergrande has not sold a single car.
According to Bloomberg, in the last 12 months, its shares in the Hong Kong Stock Exchange have risen 1,000%, which has allowed it to raise billions of dollars. Its market capitalization of $87 billion, exceeds such American giants as Ford and General Motors.
Evergrande Shows Very Ambitious Plans, But Most Of them Are Repeatedly Delayed
In March 2019, Hui Ka Yan, president of Evergrande and one of China's richest men, pledged to beat Elon Musk and become the world's largest electric vehicle maker in the next three to five years. At that moment, the crossover Model Y from Tesla had just made its world debut. Two years later, Tesla has established a base in China, setting up its first plant outside the US and delivering about 35,500 cars in March, which strengthened its market position.
Despite his high ambitions, Hui has repeatedly lagged behind in achieving his car production goals. The production of cars is difficult and requires large amounts of capital. For example, Chinese Nio's results became positive only in mid-2020, after years of serious losses.
In late March, after Evergrande announced a 67% loss in 2020, Hui said the company will produce its electric cars later than originally planned. Deliveries are not expected to start until sometime in 2022. Expectations for annual production of 500,000 to 1 million electric vehicles by March 2022 have also changed and are now set for 2025. However, the company has released an impressive new forecast for 5 million cars by 2035.
Is Evergrande Just A Financial Bubble?
All these facts remind people of the situation with Tesla: the Chinese electric car company has delayed production plans but investors are still pouring money. Because of the same excitement of investors, the Tesla boss has become the richest man in the world and makes some people afraid that it can be just a bubble.
However, it is not possible to say for sure if Evergrande will end up as a financial bubble. It has all the opportunities to become a leading electric car manufacturer if it stops disappointing investors with its constant changes of plans.
Source: Bloomberg