Evergrande Health warns first-half net loss of RMB2 billion in NEV business

Shanghai (Gasgoo)- Evergrande Health, a listed subsidiary of the Chinese property giant Evergrande Group, is expected to record a net loss for the first half of 2019 of approximately RMB2 billion, versus the net profit of around RMB200 million for the same period in 2018, the company announced on August 9.

The Group expects that the net loss recorded for the first six months is primarily ascribed to the development of the new energy vehicle (NEV) business, which is still in early investment stage and resulted in an increase in R&D and other relevant costs and interest payments.

The NEV business is expected to chalk up a net loss for the first half of 2019 of roughly RMB2 billion, while the group’s development of health management segment remained stable during the same period.

The net loss in NEV business should be associated with a huge amount of investments since Evergrande decided to tap this area. Unlike EV startups which are scrambling to raise money for their car development business, the real estate titan has built a complete NEV industrial chain ranging from dealership, complete vehicle, battery and other core auto parts by acquiring existing assets.

（Photo source: Evergrande Health)

For instance, in last September, Evergrande Group obtained 40.964% stake in Xinjiang Guanghui Industry Investment Group Co.,Ltd (Guanghui Group), China's largest auto distributor, after agreeing to plow RMB 14.49 billion in the latter. The transaction made Evergrande get the channel to sell cars.

On January 15, 2019, Evergrande Health's wholly-owned subsidiary paid $930 million for 51% of National Electric Vehicle Sweden (NEVS), a Sweden-headquartered electric vehicle maker.

On January 24, 2019, Evergrande New Energy Power Technology (Shenzhen) Company Limited (the purchaser), a wholly-owned subsidiary of Evergrande Health, entered into an agreement with Shenzhen Clou Electronics Co., Ltd. (the seller) and the guarantor to acquire 58.07% equity interest of Shanghai CENAT New Energy Company Limited (the target company) for a total consideration of RMB1,059,777,500.

Founded in China, the target company focuses on ternary pouch type power battery. It was co-founded by China Automotive Technology and Research Center and ENAX, Inc. in Japan, with technology originating from Kazunori Ozawa, known as the “Father of Lithium Battery”, and his R&D team.

(Photo source: NEVS)

On January 29, 2019, NEVS inked a joint venture agreement with Koenigsegg Automotive AB (KAAB), a supercar company based in Sweden. According to the announcement released by Evergrande Health, KAAB owns various world-leading technologies in the fields of lightweight, engine-powered systems, electrification and AI driving etc., possessing one of the most leading NEV technologies in the world.

On March 15, 2019, Evergrande Health claimed that one of its subsidiaries (the purchaser) entered into an equity transfer agreement with Tianjin Tianhai Group Co.,Ltd (the seller), TeT Drive Technology Co.,Ltd. (TeT) and a guarantor. Pursuant to the agreement, the purchaser agreed to acquire and the seller agreed to sell its 70% equity interest in TeT at the consideration of RMB500 million. Upon completion of the acquisition, TeT would become a subsidiary of Evergrand Health.

It is noteworthy that TeT wholly-owns e-Traction, a Netherlands-headquartered R&D and production enterprise in in-wheel motors and electric automobile powertrain systems.

On May 30, 2019, Evergrande Health said that its subsidiary National Electric Vehicle Sweden AB (NEVS) has acquired Protean Holdings Corp., the world's leading in-wheel electric motor technology for passenger cars, by effecting a merger of Protean with and into Virtue Surge Limited, a subsidiary of NEVS.

In July, Evergrande Health's wholly-owned subsidiary signed an agreement with German powertrain supplier hofer Aktiengesellschaft (“hofer AG” and “hofer powertrain”) to set up a joint venture in Germany (“German JV”).

In the same month, Evergrande Group and State Grid announced a 50/50 joint venture that focuses on constructing and operating smart charging piles for communities and selling charging facilities. Reportedly, the group has developed its own EV charging cloud platform.

（Photo source: China Evergrande Group)

Moreover, the property developer struck agreements in June with municipal governments of Guangzhou and Shenyang to set up NEV production bases, which involve RMB280 billion worth of investment in total.

Considering the above cash-burning moves, the 2 billion of net loss is a rather normal result for Evergrande Health.