The electric vehicle (EV) unit of embattled real estate developer China Evergrande Group is being pursued by local governments to repay 1.9 billion yuan (US$262 million or RM1.24 billion) in subsidies after failing to start mass-production of its long-awaited car. 

Evergrande New Energy Vehicle Group Ltd had signed a series of investment agreements with local authorities since 2019, and after not performing to the terms of the deals, received a letter to terminate the arrangements and seek the return of the incentives and subsidies, the company said in an exchange filing late on Wednesday.

Complying with the demands could have a “material adverse impact on the financial position and operations” of the company, the filing said. Shares in Evergrande NEV were suspended from trading from May 17, and will remain halted until further notice. 

The move is the latest blow for Evergrande NEV, which once held grandiose plans to take on Tesla as the world’s biggest EV maker, but instead was caught up in the implosion of its parent company. It had produced only 1,700 of its Hengchi EVs as of the end of last year, and delivered just 1,389. It reported a loss of 12 billion yuan for 2023. Valued at more than Ford Motor Co and General Motors Co combined at its peak, the company was worth just US$528 million when the shares were suspended. 

The ordeal also sheds light on the generous government support China has doled out to the EV industry, and the excess and waste that can occur as the market matures and growth slows. Beijing phased out national EV purchase subsidies by the end of 2022, and growth of EVs and plug-in hybrid sales is expected to slow to 25% this year, down from 36% in 2023 and 96% in 2022.

Other manufacturers on the brink include WM Motor, which filed for restructuring last year, while premium EV brand HiPhi’s producer Human Horizons Group suspended production for six months starting in February. 

  - Bloomberg