HONG KONG – Shares in China’s Evergrande Group property electric vehicle unit have plummeted following reports that it will be the subject of an industry investigation by China’s top economic planning body.
China Evergrande New Energy Vehicle Group, also known as Evergrande Auto, fell 11% in Hong Kong before closing 5.2% lower at HK 22.80.
According to an official document obtained by the Chinese business publication Yichai, the National Commission for Development and Reform has asked local branches to provide investment and production information for electric vehicle projects in their territories over the past five years.
In particular, the Commission requested details of projects involving Evergrande Auto and the Shenzhen-based Baoneng Group conglomerate, including the amount of land they occupied, development progress and overall investment.
Industry insiders say the investigation is a signal that Beijing wants to curb the booming but troubled sector.
“China seems to be trying to regulate the EV sector,” said Zui Dongshu, secretary general of the China Passenger Car Association.
EV companies have multiplied in China in recent years thanks to generous government subsidies during Beijing calls to fight air pollution and reduce fossil fuel use. Local authorities have competed to host EV projects, hoping to nurture domestic champions in the Beijing-promoted industry.
In October, China set a target to boost sales of new energy vehicles – including EV-only batteries, plug-in hybrids and hydrogen cars – to 20% of total car sales by 2025.
However, China’s desire to develop the segment has led to many chaotic practices. Some companies survive only on government subsidies or are accused of acquiring low-priced land in the name of developing EV projects.
Evergrande, founded and controlled by Xu Yiayin, China’s third richest man, has positioned itself as a serious contender for the EV race in China.
Despite investing in the sector just two years ago, the real estate investor has spent tens of billions of dollars on acquisitions, research and construction, aiming to become “the world’s largest and most powerful group” of new energy vehicles in three to five years.
In August, the Evergrande NEV introduced six models covering all major categories of passenger cars, including sedan, SUV and multi-purpose vehicle. The first model is expected to appear on the market in the second half of 2021.
The company also plans to issue shares in the STAR market in Shanghai, hoping to profit from the growing interest of investors in green vehicles.
Shares of Tesla and Chinese startups Xpeng Motors, Li Auto and Nio have risen in the United States this year, putting their market capitalization above that of much larger, traditional carmakers.