By Paul Whiston, September 20, 2022
China’s current car industry resembles the British auto industry from the early 20th century in so far as that there was an explosion, a big bang if you will, of dozens and dozens of small, medium to large manufacturers. Many were destined to fail unnoticed and fail they did. Today the British car industry, with exception of a few specialist car manufacturers, evolved to become smaller. The larger institutions are either foreign or under foreign control. As the world unconsciously enters the Chinese century, China which will surpass America as the world’s biggest economy is seeing an explosion of car manufacturers seeking to earn fortunes and glories.
The China Evergrande Group under its Hengchi automotive brand is one such newly established electric car manufacturer. Seemingly sprung from new shoots in 2020 it had early ambitions to sell 1 million cars by 2025. As the Hengchi 5 is about to start mass production, the China Evergrande Group revealed reality had finally set in. The company revealed it had amassed a total of 37,000 non-binding pre-orders for its first model.
The China Evergrande Group is the second-largest property developer in China with a net annual income of over $1.2BN. However, the company has a big problem, a $300BN debt pile problem. Put simply, China Evergrande Group spends significantly more than it earns. The Chairman, Hui Ka Yan is engaged in shifting the company from real estate to focusing on making electric cars over the next 10 years.
The Hengchi 5 is the first strategic step and is priced from circa $27,000 or 175,000 Yuan. Although China Evergrande Group is well financed and has lured top auto executives to join from around the world, the real question is, with a $300BN debt pile in the background, and low pre-orders, how long will the company last?