On January 8, Evergrande Auto announced a temporary trading suspension in Hong Kong Stock Exchange following the detention of its executive director, Liu Yongzhuo. The company revealed that Liu has been criminally detained on suspicion of illegal activities, although specific details surrounding the allegations remain undisclosed.
The news sent ripples through the market, as Evergrande Auto’s stock price plummeted by over 10% after trading resumed at 1 pm on the same day.
Liu Yongzhuo, who had been with the company since 2003, held numerous key positions within Evergrande, including overseeing Guangzhou Evergrande Taobao Football Club, Evergrande Cultural Industry Group, Evergrande Agriculture and Animal Husbandry Group, Evergrande Internet Finance Group, and Evergrande High-Tech Group. Prior to his detention, Liu served as the Executive Vice President of Evergrande Group, President of Evergrande New Energy Vehicle Group, and Chairman of Evergrande New Energy Technology Group, as well as the Dean of the Vehicle Research Institute.
Liu Yongzhuo played a pivotal role in the development and promotion of Evergrande Auto’s Hengchi brand. The company made a splash at the 2021 Shanghai Auto Show, showcasing nine cutting-edge Hengchi models that boasted advanced technologies such as intelligent connectivity and smart cabins. During the event, Liu also announced ambitious plans for trial production and large-scale deliveries of Hengchi vehicles.
However, Evergrande Auto’s journey has been marred by challenges. In early 2022, the company faced a trading suspension that lasted nearly 16 months due to various reasons, including the inability to disclose financial performance for the years 2021 and 2022. This suspension put Evergrande Auto at risk of delisting, creating uncertainty about its future in the market. The company eventually resumed trading on July 28, 2023, after navigating through a complex process.
Evergrande Auto’s interim performance report for 2023 revealed a mixed financial picture. While the company achieved increased revenues of 155 million yuan, representing a significant 540.98% year-on-year growth, thanks to the sales of Hengchi 5, it also faced challenges. Rising prices of core components, such as batteries and chips, coupled with high manufacturing costs, resulted in a gross loss of 60.88 million yuan, marking a 531.54% increase in losses compared to the previous year. The company’s net loss totaled a substantial 6.873 billion yuan, reflecting a 48.6% reduction in losses year-on-year. Additionally, Evergrande Auto’s total liability stood at a staggering 75.692 billion yuan.
The recent detention of Liu Yongzhuo, coupled with Evergrande Auto’s financial struggles, raises concerns about the company’s future operations and financial stability.
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